Top Republican warns Biden against picking Brainard for Fed chair

Sen. Pat Toomey (Pa.), the top-ranking Republican on the Senate Banking Committee, on Thursday warned President Biden against picking Lael Brainard to serve as the next chair of the Federal Reserve, signaling a Senate fight over her nomination if she’s selected.

“I have a lot of serious concerns about Governor Brainard if she were to be nominated to be chair,” Toomey said after emerging from a Banking Committee hearing Thursday morning.

Biden is expected to announce his decision on who should chair the Fed in the next few days. The two leading candidates for the job are Brainard and current chairman Jerome Powell, who was appointed by former President Trump.

Brainard is the only Democrat currently serving on the central bank’s seven-member board. 

Toomey has made it clear that he does not think the Federal Reserve should be basing its monetary policy and other decisions on concerns about future climate change, which he views as a political debate. 

Brainard said last month that she believes the central bank has a responsibility to address climate change.

She said in comments prepared for a Fed conference that the Fed was working to project how climate-related economic impacts would affect the financial system.

“I anticipated it will be helpful to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor and manage material climate-related risks, following the lead of a number of other countries,” she said in her prepared speech.   

In a letter to Fed Chairman Jerome Powell, Toomey expressed concern over the possibility that the Federal Reserve Board would soon use its huge power over the economy to attempt to combat climate change, which some experts believe could have a major impact on future economic conditions. 

Toomey in his letter said he is “concerned that the Federal Reserve Board may be preparing to use financial regulation and supervision to further environmental policy objectives.”

“That would be beyond the scope of the Federal Reserve’s mission. We urge you to refrain from taking any additional actions with respect to climate-related risks that would impose certain costs for uncertain benefit,” he wrote. 

Brainard has also come under scrutiny for being an advocate of a Fed-backed digital dollar.

Toomey at a hearing in June said that Congress should encourage the development of private digital currencies but raised concerns about the creation of a central bank digital currency.

“Some say a central bank digital currency is needed to enable the Fed to provide retail banking accounts to Americans. In my view, turning the Fed into a retail bank is a terrible idea. Our retail banks do a great job of serving the needs of consumers because they compete with one another in the private sector,” he said.

Brainard’s stock has risen in recent days as leading progressives have pushed Biden to pick her over Powell.

Sen. Elizabeth Warren (D-Mass.), a leading progressive on the Banking Committee, has praised Brainard for making “a good case for why it is the job of the Federal Reserve to be that cop on the beat and to make sure the largest financial institutions are not putting our economy at greater risk.” 

She has also come out strongly against Powell’s candidacy to serve another term as chairman, calling him “a dangerous man to head up the Fed.” 

She criticized Powell’s leadership at a hearing in September, when she argued that the Fed had weakened stress tests, softened the Volker Rule and eased liquidity requirements at financial institutions.