WASHINGTON – Two Democratic senators said Friday that they oppose the nomination of Jerome Powell to a second term as chair of the Federal Reserve, saying Powell has been insufficiently committed to fighting climate change, an issue that the world's central banks are increasingly confronting.
Their opposition comes as President Joe Biden is expected to announce within days whom he will choose for the nation's most powerful economic position. Many Fed watchers expect Powell to be offered a second term, though Lael Brainard, a member of the Fed’s Board of Governors, has emerged as the leading alternative.
“President Biden must appoint a Fed Chair who ... shares the Administration’s view that fighting climate change is the responsibility of every policymaker,” Sens. Sheldon Whitehouse from Rhode Island and Jeff Merkley from Oregon said in a prepared statement. "That person is not Jerome Powell.”
Including Whitehouse and Merkley, three Democratic senators have publicly said they will vote against Powell, a former private equity executive who was elevated to the Fed chairmanship by President Donald Trump and whose term expires in early February. The other is Sen. Elizabeth Warren of Massachusetts, who has called Powell “a dangerous man” to lead the Fed because of his support for loosening some bank regulations.
Powell has broad support among Senate Republicans, however, and if nominated would likely receive bipartisan backing. He was approved as Fed chair in early 2018 by an 84-13 vote, with 39 Democrats voting in favor, including Whitehouse. Merkley voted no, as did Vice President Kamala Harris, then a senator from California.
Brainard is seen as slightly more dovish than Powell, meaning she generally supports keeping interest rates low to support more hiring. With inflation running at three-decade highs, her nomination would likely rely more on Democratic support.
On Tuesday, Biden said he would announce a decision within several days.
Whitehouse and Merkley did not say whom they would prefer instead of Powell. Brainard, a favorite of many progressives, has expressed more willingness than Powell to use the Fed's tools, principally its supervision of banks, to address global warming.
Climate change is a tricky issue for the Fed, because the central bank has already come under criticism from Republicans in Congress for the limited steps that Powell has taken on the issue. He has set up two committees to analyze the impact of rising temperatures on the financial system and last December the Fed joined an international group of central banks and financial regulators that are monitoring the impact of climate change on banks.
Environmentalists warn that extreme weather, worsened by global warming, will increasingly create major losses for banks and insurance companies. Bank loans to commercial and residential properties near the coasts are at risk from rising ocean levels and other climate impacts, potentially threatening banks' financial health, the groups say.
And lending to oil and gas companies carries additional risk as the world transitions to clean energy, environmentalists add. That suggests that banks should be more cautious before making loans to drilling and other companies in the energy sector.
Such concerns have raised objections from conservatives, however, that the Fed could respond by taking steps to discourage bank loans to such companies.
Powell said at a press conference earlier this month that “we do think we have a role in climate change."
But when it came to issues such as regulating what industries banks could lend to, Powell said, “that’s not a decision for bank regulators or for any agency. That's a decision for elected representatives."
In a speech last month, Brainard said the Fed will likely provide guidance to the banks that it supervises on how they can better assess the risks that climate change poses to their loan portfolios, though she did not provide a timeline.
“Climate change,” she said, “is projected to have profound effects on the economy and the financial system, and it is already inflicting damage.”