WASHINGTON – President Joe Biden will soon have a unique opportunity to leave a mark on the Federal Reserve when he names his picks for key leadership posts at the central bank. But his ability to remake the Fed will ultimately be determined by Congress.
There is already one vacant seat on the Fed’s Board of Governors. In addition, Fed Vice Chair of Supervision Randal Quarles’ term expires in October (though he can serve as a Fed governor until 2032), followed by Fed Chair Jerome Powell’s term expiring in February. Fed Vice Chair Richard Clarida’s term expires in January.
Biden will likely feel pressure from the left to use the upcoming appointments to push the Fed to be tougher on the industry, focus on consumer protection, narrow racial inequity in the financial system and address climate-related risks.
The administration will likely seek to replace Quarles, who has been criticized by Democrats for many of his stances on capital rules and other issues. Though Powell has received bipartisan praise for his handling of the financial impact of the coronavirus pandemic, some might urge the White House also to name a more daring pick for the head of the central bank.
“I think there’s going to be a significant amount of pressure put on the president, vice president and the folks that help them nominate to choose someone that’s more aligned philosophically with where the progressive wing of the Democratic Party is,” said Chris Campbell, former assistant secretary of the Treasury Department for financial institutions and chief strategist at Kroll, a corporate consulting firm. “That would significantly rearrange the relationship with Washington and Wall Street.”
The term of Randal Quarles, left, as Federal Reserve vice chair of supervision expires in October. Fed Chair Jerome Powell’s term expires in February.
But it still remains to be seen if Biden will side with progressives or opt for the status quo. The appointment process will be complicated by the razor-thin majority in the Senate. The chamber is split evenly between the Democratic and Republican caucuses, but Vice President Kamala Harris can cast a tie-breaking vote.