Stiglitz calls for Fed Chair Powell to go

September 9, 2021|Written by |Federal Reserve

Nobel Prize-winning Economist and former White House Advisor Joseph Stiglitz has called on President Joe Biden not to re-nominate US Federal Reserve Chair Jerome Powell because of his reticence to act on climate change. In a Reuters interview published yesterday, Stiglitz called on Biden to choose a candidate willing to push the Fed to account more fully for climate risks.

Stiglitz’s comments intensify an already lively debate over Powell’s future following similar calls this week from Democratic Senator Sheldon Whitehouse and from a group of progressive members of Congress. Civil society groups have also expressed growing concern about the Fed’s lack of substantive climate action under Powell’s leadership.

Addressing climate change has been a core goal of Biden’s administration, and Stiglitz argued that the President should bear this and other values in mind when making his decision. The matter is under active discussion, but the White House has yet to reveal a timeline for when a decision will be made.

Although Powell has taken some tentative steps towards improving the Fed’s management of climate risk, making a long-awaited entry into the Network for Greening the Financial System last year and setting up two internal committees to develop its approach, the Fed still lags behind its counterparts in Europe, China and the UK.

The Green Central Banking Scorecard compiled by advocacy group Positive Money ranks the Fed 13th out of all G-20 countries assessed. Unlike the European Central Bank and Bank of England, the Fed has no plans to integrate climate considerations into its monetary policy framework and no firm plans to begin stress testing banks for climate-related risks.

Stiglitz told Reuters that current Fed Governor Lael Brainard is “one obvious candidate out there,” who would take a stronger regulatory stance and push the Fed to account more fully for climate risks. He also pointed to Powell’s loose approach to financial regulation and questionable commitment to full employment as further grounds for the administration to find an alternative nominee.

Warning Biden against reappointing Powell on the basis of promoting bipartisanship and stability, Stiglitz said that the decision to retain Alan Greenspan on similar grounds during his tenure in the Clinton White House turned out to be “wrong-headed”, ultimately setting the stage for the housing market crash.

“In my view we made a big mistake reappointing Greenspan,” Stiglitz said. “I hope Biden does not do the same.”

 

This page was last updated September 21, 2021

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