Joe Biden is getting a lot of things right early in his presidency. But his first steps with regard to the Federal Reserve? Not so much.
For one thing, Biden isn’t attempting to affect monetary policy by making either public or private statements aimed at Fed Chairman Jerome Powell. Instead, he’s touting the Fed’s independence from presidential influence as a virtue. It’s true that several presidents prior to Donald Trump had established a tradition of keeping quiet about monetary policy. This is a rare case where Trump was basically correct. Yes, there’s definitely value to the Fed’s independence — but that’s something that the central bank’s governors can establish by themselves. The only thing wrong with presidential attempts at influence is that they might not work.
That said, Biden gains nothing by renouncing any interest in persuasion. He could’ve said nothing. Or he could’ve simply lauded the Fed’s independence while reserving his right to disagree with its decisions.
Which raises a more direct way that presidents can influence the Fed: by aggressively filling vacancies on its board of governors. Biden inherited one vacancy but has yet to nominate anyone for it. He’s been doing a better job overall of naming people for Senate-confirmed positions; he has now reached 87 nominees, not counting the two he withdrew (and by the way, where’s the replacement nominee for the key position of director of the Office of Management and Budget?). That’s not great, but it’s not terrible. He’s also off to an unusually fast start in nominating judges. But he’s now passed 11 weeks without nominating anyone to the Fed Board, one of the more consequential selections any president can make. That’s not good at all.
To be sure: Biden likely couldn’t be happier with the Fed’s current course of boosting economic recovery and downplaying any inflation worries. Given his legislative agenda, he’s likely especially pleased with Powell’s support for running up current budget deficits. So he has no need to rush anyone in to push for change. Still, especially after Barack Obama was very slow to fill his own Fed vacancies, it would be nice to see evidence that Biden understood their importance to his administration.
Bloomberg
