Disappointment from campaigners at Powell renomination

US climate campaigners have expressed disappointment at President Joe Biden’s decision to renominate Jerome Powell for a second term as Federal Reserve chair, while welcoming the elevation of governor Lael Brainard to the position of vice chair.

Announcing his decision today, President Biden emphasised the importance of stability and of the Fed’s independence. He added that Powell and Brainard “share my deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system”.

Widely criticised for his failure to recognise climate risks to US financial stability, Powell’s fate has been the subject of intense speculation in recent months with calls for his replacement from congressional representatives, senators, economists and civil society groups. Brainard, currently chair of the Fed’s financial stability committee and a strong climate voice on its board of governors, had been seen as the leading alternative candidate to replace Powell.

While climate campaigners were disappointed at Powell’s reappointment, there was also hope for further climate action from the Fed during his second term. David Arkush, managing director of Public Citizen’s Climate Program, said that Powell’s re-nomination “doubles down on reckless Wall Street deregulation and dangerous dawdling on climate-related threats to the financial system, flouting Biden’s own whole-of-government approach to stemming climate threats”. However he also called Brainard’s promotion a “silver lining”, saying she has influenced Powell for the better.

350.org campaign specialist Brooke Harper criticised Powell’s incrementalism on climate, but focused on demands for Fed climate action. “The Federal Reserve must steer the economy away from high-risk fossil fuel investments, incorporate a climate stress test across policies and lending, and prioritise racial justice, including through full employment,” he said. “Powell’s mandate to protect our economy includes protecting our communities from climate catastrophe. We look forward to working with Powell in his continued tenure as Fed chair, as well as Lael Brainard.”

Senator Sheldon Whitehouse applauded Brainard’s promotion, but criticised Powell for consistently refusing to take climate-related financial and economic risks seriously. “I sincerely hope that, if confirmed, Powell will reassess his past opposition to utilising the Fed’s regulatory tools to minimize climate-related risks to the financial sector, and follow the prudent path blazed by the Bank of England and other leading central banks.”

President Biden still has three vacant seats on the Fed’s board of governors to fill this year, including the important position of vice chair for supervision. Former Fed governor Sarah Bloom Raskin is seen as a potential nominee for one of these vacancies, along with economists Lisa Cook and William Spriggs. Raskin, who has also served as deputy secretary of the Treasury, has been a forceful advocate for a precautionary approach to climate change from central banks and financial supervisors.