A group of progressive lawmakers led by Reps. Alexandria Ocasio-Cortez and Rashida Tlaib urged President Joe Biden on Tuesday to replace Federal Reserve Chair Jerome Powell—a Trump appointee—with a leader committed to tackling systemic climate risk and strictly regulating Wall Street banks.
“Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system.”
—Letter
In a joint statement, five progressive lawmakers argued that Biden should not take the advice of commentators and lawmakers urging him to reappoint Powell, a Republican who has won praise from some progressive economists for keeping interest rates low in the pursuit of full employment.
Reps. Ayanna Pressley (D-Mass.), Mondaire Jones (D-N.Y.), Jesús “Chuy” García (D-Ill.), Ocasio-Cortez (D-N.Y.), and Tlaib (D-Mich.) acknowledge that with Powell at the helm, the Fed “has made positive changes to its approach to full employment reflected in the new monetary policy framework.”
But they contend that Powell’s track record on climate and financial regulation should disqualify him from staying on as Fed chair past February 2022, when his term is set to expire.
“Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system,” the lawmakers said. “At a time when the Intergovernmental Panel on Climate Change is warning of the potential catastrophic and irreversible damage inflicted by a changing climate, we need a leader at the helm that will take bold and decisive action to eliminate climate risk.”
According to a report released last week by Oil Change International, the Fed under Powell has “worked to maintain and increase fossil fuel finance from the United States” even as the central bank’s leaders have made gestures toward the importance of reducing climate risk in recent speeches.
With Powell in charge, the Democratic lawmakers continued, the Fed “has substantially weakened many of the reforms enacted in the wake of the Great Recession regulating the largest banks, including capital and liquidity requirements, stress tests, the Volcker Rule, and living will requirements.”
“Weakening financial regulations that were specifically created to prevent such a disaster from happening again risks the livelihoods of Americans across the country,” they added.
The progressive lawmakers’ statement echoes concerns that watchdog organizations and climate advocates have raised in recent months as Biden is poised to decide whether Powell will remain in his post for another term.
Last week, after Powell delivered a closely watched address in which he did not once mention the climate crisis, Public Citizen’s Yevgeny Shrago warned that the Fed is “sleepwalking through climate chaos” and refusing to use the myriad tools at its disposal to mitigate risk.
“The European Central Bank (ECB) released a report that highlights both the immediacy and magnitude of the climate threat to the financial system and how far behind the Fed under Powell is in addressing it,” Shrago wrote. “The Fed’s lack of action in response to these threats should eliminate any question about whether Powell will take the climate crisis seriously. Biden must choose a new Fed chair who will.”
While the progressive lawmakers did not mention any preferred candidates to replace Powell, the Revolving Door Project’s Max Moran offered several suggestions in a blog post last month, including Michigan State University professor Lisa Cook and attorney Sarah Bloom Raskin, who previously served on the Fed’s Board of Governors.
“Cook, who has been endorsed by Senator Sherrod Brown, is a strong supporter of full employment policies, and has testified against deregulatory proposals,” Moran noted. “It’s also wild that almost seven months into the new administration, Sarah Bloom Raskin still lacks a job. There might be no one better suited to lead the Fed’s too-long-delayed work to purge the financial system of systemic risks caused by climate change.”
“It’s important for Biden to not settle for Powell merely because he’s been strong on monetary policy in the last few years,” Moran argued. “Biden can choose someone more deeply devoted to full employment, and who doesn’t push him into a false choice between being strong on monetary policy and strong on regulatory policy. The president can have his cake and eat it too here, so he should. Because if he doesn’t, it’s average people who will suffer the most.”
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