President Joe Biden has nominated Federal Reserve chair Jerome Powell to serve a second four-year term in the role, banking on continuity as the country navigates a course out of the economic devastation caused by the COVID-19 pandemic.

Biden also nominated Lael Brainard, a governor of the Federal Reserve backed by a number of progressives to replace Powell, to serve as Vice Chair.

What You Need To Know

  • President Joe Biden nominated Federal Reserve Chair Jerome Powell to serve a second four-year term in the role and tapped Lael Brainard, a Democrat and a governor of the Federal Reserve, to serve as Vice Chair

  • The decision by Biden reverts back to a tradition of presidents keeping their predecessor's Fed chair in place for a second 

  • If picked for a second term, Powell will face a precarious point for the U.S. economy; The nation is still about 4 million jobs shy of pre-pandemic levels, despite record job growth under President Biden, but inflation, coupled with supply chain issues and a labor shortage nationwide, is causing hardship for millions of Americans

  • The move potentially sets up up a showdown with progressives in his own party, who have criticized the Trump appointee

Biden's decision to back Powell appears to be an endorsement of his stewardship of the economy, which helped reinvigorate the job market and boost consumer confidence, though rising inflation threatens to upend some of that recovery.

The president explained his choice clearly on Monday, responding to the question of why he would keep a chair chosen by a Republican predecessor.

"At this moment of both enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve. Jay has proven the independence that I value in the fed chair," he said at the White House Monday afternoon.

Despite concerns about inflation and other gaps in recovery, President Biden on Monday emphasized the economic progress made since he took office, calling it partly a "testament to the Federal Reserve."

"When you remember the depths of the crisis we faced, it's all the more amazing the progress that we've made since," he said. "If you look at my presidency so far, it's a jobs presidency, and it's a small business presidency."

"America is the only major economy, the only one in the world, where the economy is bigger today and families have more money in their pockets today than before the pandemic hit," he continued. "We know we still are fac[ing] challenges, serious challenges. We know there's a lot of fear and uncertainty in the country. We know we know it's tough for families to keep up with a rising cost of gasoline, food, housing and other essentials. It's not just an American problem. It's a worldwide problem."

Stocks soared on the news of Powell's re-nomination: As of 2:00 p.m. ET, the Dow Jones went up 228 points, or 0.6%, to 35,830, and the S&P 500 rose 0.4%. Bond yields and bank stocks rose, as did stocks from companies that make personal care and hosuehold items. The dollar rose against other currencies, while the price of gold fell, usually good signs, per economic forecasters.

Powell on Monday called it a "privilege" to serve inside the Federal Reserve.

"We understand that our decisions matter for American families and communities," he said at the White House. "I strongly share that sense of mission and am committed to making those decisions with objectivity and with integrity, based on the best available evidence in a long-standing tradition of monetary policy independence."

Biden also said he would fill the three vacant seats on the Federal Reserve Board of Governors, including Vice Chair for Supervision, a key position relating to banking regulations, beginning in early December.

The decision by Biden reverts back to a tradition of presidents keeping their predecessor's Fed chair in place for a second term; this trend was bucked by former President Donald Trump, who replaced then-Federal Reserve chair Janet Yellen with Powell.

Powell was confirmed in 2018 with a strong bipartisan vote, winning 84 senators approval. He remains supported by lawmakers on both sides of the aisle.

But the move potentially sets up up a showdown with progressives in Biden's own party, who have criticized the Trump appointee.

During a hearing in September, Sen. Elizabeth Warren, D-Mass., called Powell a "dangerous man" and pledged that she would oppose his re-nomination, claiming that he made the United States' banking system less safe.

"Your record gives me grave concerns," the former presidential candidate said of Powell. "Over and over, you have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed, and it’s why I will oppose your renomination."

Warren said that Powell has acted to weaken financial regulations that were enacted after the 2008 financial crisis.

“So far you’ve been lucky. But the 2008 crash shows what happens when the luck runs out,” Warren said. “The seeds of the 2008 crash were planted years in advance by major regulators like the Federal Reserve that refused to rein in big banks. I came to Washington after the 2008 crash to make sure nothing like that would ever happen again.”

Sure enough, on Monday, Warren said in a statement that she would vote against Powell's nomination, though she said she'd support Brainard, and urged Biden to nominate someone to serve as Vice Chair of Supervision quickly.

"It’s no secret I oppose Chair Jerome Powell’s renomination, and I will vote against him," Warren, who proposed and created the Consumer Financial Protection Bureau, wrote on Monday. "I will support the President’s nomination of Lael Brainard as Vice Chair. Powell’s failures on regulation, climate, and ethics make the still-vacant position of Vice Chair of Supervision critically important. This position must be filled by a strong regulator with a proven track record of tough and effective enforcement - and it needs to be done quickly."

"American taxpayers have bailed out large financial institutions enough times," she continued. "It’s the job of the Federal Reserve to ensure large financial institutions do not put our economy at risk. As we move forward, I will use every oversight tool within reach to make sure that the Federal Reserve works for American families and not Wall Street."

In a letter released in early September, a group of progressive House Democrats encouraged the president to “re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice" by selecting a new person to lead the Federal Reserve instead of reappointing Powell.

Reps. Alexandria Ocasio-Cortez, D-N.Y., Rashida Tlaib, D-Mich., Ayanna Pressley, D-Ohio, Mondaire Jones, D-N.Y. and Jesús G. “Chuy” García, D-Ill., went on to cite similar concerns to those mentioned by Warren. The group expressed concern that Powell had “substantially weakened many of the reforms enacted in the wake of the Great Recession,” in part by changing the Volcker Rule, which prevents banks from using taxpayer-insured deposits to make risky trades or investments on Wall Street. The rule was enacted in the wake of the 2008 financial crisis.

Powell twice eased the rule’s restrictions, first by offering more exemptions to short-term trading holdings, and a subsequent change allowing banks to invest more of their assets into high-risk trades and/or hedge funds.  

Last week, Sens. Sheldon Whitehouse, D-R.I., and Jeff Merkley, D-Ore., claimed that Powell "ignored climate change and then resisted calls for the Fed to use its tools to fight it," and urged Biden to pick a Fed Chair who would make climate change a priority.

“President Biden must appoint a Fed Chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the Administration’s view that fighting climate change is the responsibility of every policymaker," they wrote in a statement. "That person is not Jerome Powell.”

Powell will require confirmation by the Senate in order to serve another four-year term, which appears likely; despite some opposition from Democrats, he will likely enjoy Republican support.

Lawmakers from both sides of the aisle applauded Biden's pick on Monday, confirming another reason the president decided to renominate him.

"I believe having Fed leadership with a broad bipartisan support is important. Especially now in such a politically divided nation," he said at the White House.

Rhode Island Sen. Jack Reed, a Democrat who chairs the Armed Services Committee, "strongly" backed Biden's choice to re-nominate Powell.

"Chair Powell and Governor Brainard are the right team to lead the Fed through these uniquely challenging headwinds and the ongoing economic pandemic," Reed wrote in a statement. "No one can look at Chair Powell's staunch defense of the Federal Reserve's independence with anything other than respect."

Ohio's Democratic Sen. Sherrod Brown, who chairs the Senate Banking Committee, celebrated Biden's choices of Powell and Brainard.

"They’ll continue to steer our recovery in the right direction – toward an economy that empowers workers and their families," Brown wrote.

Pennsylvania Sen. Pat Toomey, the ranking Republican on the Banking Committee, also hailed the pick of Powell, but said he has "concerns" about Brainard.

“When the pandemic hit in 2020, Chairman Powell acted swiftly and took extraordinary and necessary steps to help stabilize financial markets and the economy. He also worked constructively with those of us developing the CARES Act," Toomey wrote. "During his tenure, he implemented a number of sensible regulatory reforms that helped spur economic growth while preserving the best capitalized banking system in American history."

"While I have strongly disagreed with Chairman Powell’s decision to continue the Fed’s emergency accommodative monetary policy — long after the economic emergency had passed — Chairman Powell’s recent comments give me confidence that he recognizes the risks of higher and more persistent inflation and is willing to act accordingly to control it," he added. "I look forward to supporting his confirmation."

"While I have concerns about regulatory policies that Governor Brainard would support as Vice Chair, I look forward to meeting with her to discuss these and other matters," Toomey continued.

"I join in congratulating Jay Powell and Lael Brainard on being appointed as Chair and Vice Chair of the Federal Reserve," House Majority Leader Steny Hoyer, D-Md., wrote in a statement. "Together, they will help guide the Fed through a challenging period and help ensure that our economy remains stable and growing during our recovery, particularly as we work to keep inflation under control."

"In selecting this team, President Biden is recognizing that continuity is critical, even while making changes to reflect that we must be forward-looking as we emerge from the pandemic," Hoyer continued, adding: "I hope the Senate will confirm them both in a timely manner and prevent any unnecessary uncertainty at the Fed during this critical time."

Dr. Brainard on Monday said she was "deeply honored" by the nomination and committed to putting "working Americans" at the center of her work, while also pointing to the need to focus on equity and diversity inside the Federal Reserve.

If picked for a second term, Powell will face a precarious point for the U.S. economy, including whether to raise or lower the interest rate. The nation is still about 4 million jobs shy of pre-pandemic levels, despite record job growth under President Biden, but inflation, coupled with supply chain issues and a labor shortage nationwide, is causing hardship for millions of Americans as the holiday season approaches.

Raising interest rates too fast could be a detriment to hiring, but raising them too slowly could increase inflation further.

The Associated Press contributed to this report.