The Federal Reserve lifted interest rates from near-zero in 2015 after years of holding them at rock bottom following the 2008 global financial crisis. Transcripts from their policy discussions, released Friday, show just how fraught that decision was.The debate that played out then is especially relevant at a time when the central bank has again slashed interest rates practically to zero, this time to fight the pandemic-induced economic downturn. The concerns that officials voiced over lifting rates in 2015 — that inflation would not pick up, and that the labor market had further to heal — proved prescient in ways that will inform policy …
WASHINGTON — As Jerome H. Powell, the Federal Reserve chair, rang in 2020 in Florida, where he was celebrating his son’s wedding, his work life seemed to be entering a period of relative calm. President Trump’s public attacks on the central bank had eased up after 18 months of steady criticism, and the trade war with China seemed to be cooling, brightening the outlook for markets and the economy.Yet the earliest signs of a new — and far more dangerous — crisis were surfacing some 8,000 miles away. The novel coronavirus had been detected in Wuhan, China. Mr. Powell and his colleagues were …
The Fed is also low on new tricks, but not entirely out of them. Officials could, as early as this week’s meeting, change the way they are buying bonds in order to have more of an economic impact.Policymakers are mulling whether to shift toward longer-term debt and away from short-term notes. That wonky maneuver may seem technical, but it could have the effect of holding down borrowing costs on things like mortgages and business loans and, in doing so, set the stage for stronger growth.Updated Dec. 16, 2020, 11:50 a.m. ET“The economy is far more sensitive to longer-term …
WASHINGTON — Treasury Secretary Steven Mnuchin broke sharply with the Federal Reserve this week, choosing to end a variety of programs aimed at helping markets, businesses and municipalities weather the pandemic and asking the central bank to return the funds earmarked to support those efforts.
Mr. Mnuchin said his decision was driven by a deference to what he believed was Congress’s intent when it allocated the funding, a desire to repurpose the money toward better uses and a belief that markets no longer needed them. But his actions, which will limit the incoming Biden administration’s ability to use those programs at scale, seem driven by politics.
“The law is very clear,” Mr. Mnuchin said in an interview on CNBC Friday. He defended his decision and suggested that the programs were no longer needed, because market conditions “are in great shape.”
But that view is not shared by the Fed, which quickly issued a statement expressing disappointment with the decision, calling the economy “still-strained and vulnerable.” It is worth noting that Mr. Mnuchin only publicly took the position that Congress meant for the programs to end after Dec. 31 once it became clear that President Trump had lost the election to Joseph R. Biden Jr.
By ending the programs — which have been funneling loans to medium-sized businesses and backstopping municipal and corporate bond markets — Mr. Mnuchin is taking away a source of economic support just as the new administration comes into office and as rising virus cases dog the recovery. By asking the Fed to return the money that enables the emergency efforts, he could make it harder for Democrats to restart them at a large scale and on more generous terms.
Chair Jerome H. Powell indicated the Fed would return the funds, in a letter to Mr. Mnuchin on Friday afternoon.
“It’s not just closing the store down for Biden,” said Ernie Tedeschi, a policy economist at Evercore ISI. “It’s burning the store down.”
Mr. Biden’s transition team criticized the move as trying to hamstring his ability to help the economy.
“The Treasury Department’s attempt to prematurely end support that could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible,” Kate Bedingfield, a spokeswoman for the transition, said in a statement.
Mr. Mnuchin’s decision came as a surprise to Mr. Trump, who was alerted to the decision shortly before Mr. Mnuchin’s letter was released on Thursday and who, on Friday morning, expressed some concern that the move could have a negative impact on the stock market, according to a person familiar with the matter who was not authorized to speak publicly. Asked if Mr. Trump had instructed Mr. Mnuchin to end the programs, Mr. Mnuchin’s spokeswoman said that it was “solely a Treasury decision based on what the law and congressional intent required.”
Here is a rundown of how these programs work, why Mr. Mnuchin says he is killing them, and why his arguments leave unanswered questions.
The programs are a collaboration.
Mr. Mnuchin is pulling the plug on a set of Fed emergency lending programs, which the central bank can use to keep credit flowing in times of crisis. After the 2008 recession, Congress insisted that the Treasury secretary sign off on such efforts.
The Fed is loath to take credit losses, so Treasury has been providing a layer of money to cover any loans or purchases that go bad. It initially used the Exchange Stabilization Fund, a pot of unused money. But in March, Congress beefed up the Treasury’s capacity.
Mr. Mnuchin and lawmakers earmarked $454 billion to support Fed lending when they cut a deal on a government pandemic response package. The Fed can make money out of thin air, and it only needs a little bit of backing — $1 of insurance can be turned into as much as $10 in bond buying or business loans. The programs offered a big potential bang for the government’s buck.
Mr. Mnuchin ultimately earmarked $195 billion for specific loan programs. Not much of that capacity has been used. Some programs calmed market conditions merely by reassuring investors. The small and medium-sized business loan program had restrictive terms.
When Mr. Mnuchin said Thursday that he would end the five appropriation-backed programs at the end of 2020, he asked the Fed to give back all but $25 billion, which he is leaving to support already-made loans and bond purchases.
The law is not ‘clear,’ as Mr. Mnuchin said.
Mr. Mnuchin has said “it is very clear in the law” that the allocation-backed programs must end Dec. 31. That is not true.
The law states that the Treasury should not hand out money from its $454 billion pot after the end of 2020 — but it allows already-dedicated funds to remain available. Because the Treasury had handed hundreds of billions of dollars in insurance money to the Fed, the central bank theoretically has lots of capacity left to make loans and buy bonds.
The Fed’s lawyers have interpreted the law to mean that they can keep the programs running into 2021, supported by the existing Treasury backstop, as the central bank’s statement on Thursday indicated.
Mr. Mnuchin himself had previously suggested that the programs could be extended past the end of the year, writing in an October letter that the decision would hinge on market conditions.
A Treasury spokeswoman said on Friday that Mr. Mnuchin had always believed Congress meant for the funding to sunset, and had planned to use Exchange Stabilization Fund money — plus the $25 billion that he is leaving with the Fed to cover existing loans — to extend the programs if needed.
That logic is hard to follow given Mr. Mnuchin’s belief that the law prevents new Fed lending backed by Congress’s money after Dec. 31. If that’s the case, it should also prevent new lending against the $25 billion, which comes from the same congressional pot, said Peter Conti-Brown, a lawyer and Fed historian at the University of Pennsylvania.
Congress can’t repurpose the money for free.
Mr. Mnuchin also suggested that taking back the earmarked money would allow Congress to reroute it to other purposes in ways that “won’t cost taxpayers any more money.”
But the Congressional Budget Office, in assessing the budget impact of the money dedicated to Fed programs, found it to be nearly free of cost. The idea was that the loans the money backed would eventually be returned, and fees and interest earnings would cover any expenses. So if the money is clawed back and repurposed for spending — not lending — it would add toward the deficit for accounting purposes.
Market distortions have always been a concern.
Top Republicans have suggested that leaving the programs operational for too long could distort markets, which is a genuine concern with such backstops. In his letter announcing his intent to close the programs, Mr. Mnuchin noted that normal market conditions prevail.
It’s true that corporate bond issuance has been rapid and states and localities are able to fund themselves at low rates. But virus cases are also spiking, suggesting that conditions could worsen and Fed backstops might again be needed.
Over the summer, Mr. Mnuchin agreed to extend the programs until Dec. 31 at a time when coronavirus infections were much lower than they are today, markets were functioning well, and companies were issuing bonds at breakneck speed.
Democrats say the move was political. Republicans applaud it.
Treasury’s move to claw back the funding limits Mr. Biden. The Fed and the next Treasury secretary can use the Exchange Stabilization Fund to back up bond purchases and business lending.
But it contains much less money than the government would have had with the congressional appropriation. That could hamper a goal that had been percolating among Democrats: to restart the programs, make them more generous and use them as a backup option if additional stimulus was tough to get through Congress.
Senator Mitch McConnell of Kentucky, the majority leader, said the request to end the programs and return the money was “fully aligned with the letter of the law and the intent of the Congress.”
Democrats reacted with outrage.
“It is clear that Trump and Mnuchin are willing to spitefully destroy the economy and make it as difficult as possible for the incoming Biden Administration to turn this crisis around and lead the nation to a recovery,” Representative Maxine Waters of California said in a letter.
Jim Tankersley contributed reporting.
WASHINGTON — Two of the world’s most powerful central bankers said on Thursday that economic risks from the coronavirus remain high, and they cautioned against putting too much faith in a quick fix from a vaccine, delivering a sober message as U.S. lawmakers signaled that another stimulus package was unlikely before year’s end.
“The next few months could be challenging,” Federal Reserve Chair Jerome H. Powell said during a webcast panel discussion, where he appeared alongside his European counterparts. Both Mr. Powell and Christine Lagarde, head of the European Central Bank, warned that while recent progress toward a vaccine was welcome news, it was too soon to write off looming risks to the global recovery as coronavirus cases surge globally, causing renewed lockdowns in some jurisdictions.
“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Mr. Powell said.
On Monday, the pharmaceutical company Pfizer announced encouraging results from its vaccine trials, nudging stock markets toward new heights. On Thursday, stocks ceded some of their recent gains, with losses deepening after Mr. Powell and Ms. Lagarde spoke.
While Mr. Powell acknowledged the vaccine progress, he cautioned that “significant challenges and uncertainties” remain around timing, production, distribution and the efficacy for different groups.
Ms. Lagarde, explaining that she did not want to be “exuberant” about the treatment, also pointed to “uncertainties — about the logistics, about the transportation, about the rolling out, about the fabrication” and about how many people will actually be vaccinated in 2021.
Economic risks in the United States remain acute as millions remain out of work, government support fades and the country sets records for virus cases and hospitalizations, prompting cities and states to impose new restrictions on activity.
Yet prospects for another relief package before year’s end narrowed on Thursday as Democrats and Republicans continued to disagree over the scope and cost of a bill and as a top Republican indicated that Senator Mitch McConnell, the majority leader, was no longer planning to rely on Treasury Secretary Steven Mnuchin to cut a deal with Democrats, reflecting his party’s wariness that Mr. Mnuchin had been too eager to concede.
Speaker Nancy Pelosi of California and Senator Chuck Schumer of New York, the minority leader in the Senate, cited record-breaking infections across the country, along with the election of Joseph R. Biden Jr., to justify their position that any package must be much larger than what Republicans had been suggesting.
But in holding firm to their respective positions — Democrats demanding $2.4 trillion as a starting point, with Republicans proposing a fraction of that amount — congressional leaders appeared to be closing the door on the possibility of a year-end compromise.
“My view is, the level at which the economy is improving further underscores that we need to do something at about the amount that we put on the floor in September and October,” Mr. McConnell told reporters, referring to the targeted $500 billion packages Senate Republicans tried to pass before the election.
The price tag Ms. Pelosi and Mr. Schumer were discussing, he said, “is not a place I think we’re willing to go, but I do think there needs to be another package.”
Key supports for displaced workers and shuttered businesses have expired, and while households have been using savings that they built up earlier in the year to keep up with their bills, there is a risk that many will struggle to make ends meet as they run through those nest eggs. Mr. Powell and his colleagues have been clear that more support will be needed, in particular as the pandemic accelerates shifts in the economy — like increased remote work and automation — and leaves some workers permanently displaced.
“We’re recovering, but to a different economy,” Mr. Powell said, warning that a “substantial group of workers” are “going to need support as they find their way in the post-pandemic economy, because it’s going to be different in some fundamental ways.”
Mr. Powell said that while the United States’s recovery has been faster and stronger than anticipated and is expected to continue, it has been uneven — and it remains incomplete.
“The main risk we see to that is clearly the further spread of disease here in the United States,” Mr. Powell said. “We’ve got new cases at a record level, we’ve seen a number of states begin to reimpose limited activity restrictions, and people may lose confidence that it is safe to go out.”
Ms. Pelosi and Mr. Schumer huddled with Mr. Biden by phone on Thursday, stressing afterward that they were on the same page about the “urgent need” for Congress to provide bipartisan funds to support the unemployed, workers, small businesses, state and local governments facing huge budget deficits, and the nation’s health care system before he takes office. It had been unclear how actively Mr. Biden, the incoming head of the party, would involve himself in negotiations before his inauguration.
Ms. Pelosi portrayed Republicans as “coldhearted” for insisting on a smaller relief package and tried to upbraid them.
“It’s like the house is burning down and they just refuse to throw water on it,” she said.
That message had clear political overtones. Nearly everything said in the halls of Congress these days appears to be aimed, at least in part, at voters in a pair of runoff Senate elections in Georgia in January that will determine control of the Senate. Economists at Goldman Sachs suggested that Republicans might be eager to secure a deal before the Jan. 5 vote to avoid claims that the Republican-controlled Senate prevented help from reaching households — but Democrats might have an incentive not to compromise much, with that vote imminent.
“The political atmosphere is less conducive to a deal than it seemed a week ago,” Alec Phillips and his colleagues at Goldman Sachs wrote in a research note on Thursday, noting that the prospect for a vaccine could itself reduce appetite for a big government package.
The two sides will also have to reach an agreement on crucial spending legislation to prevent a lapse in government funding on Dec. 11, with either an agreement on the dozen annual must-pass bills or another stopgap spending bill. There is a possibility that lawmakers will wrap additional relief funding into a larger package with that legislation.
“We’d like to do a streamlined or targeted stimulus bill, but we’ve got to have some support from the other side,” said Senator Richard C. Shelby of Alabama, the chairman of the Senate Appropriations Committee.
Senator Charles E. Grassley of Iowa, chairman of the Senate Finance Committee, suggested that Republicans were in no mood to compromise, signaling that Mr. Mnuchin would no longer be leading talks with Ms. Pelosi.
“There hasn’t been any discussion yet between McConnell and Pelosi, but McConnell is not going to rely on Mnuchin anymore to do the dealing,” Mr. Grassley told reporters on Thursday morning. “I think he’s intending to take it over and try to get something going.”
The way things are shaping up, the Biden economy appears likely to show uncanny similarities to the 2011-to-2016 Obama economy.
Joe Biden will be inaugurated in January amid an economy that is likely to be slowly recovering from collapse. The Senate will probably be in the hands of Republicans — an opposition party perhaps willing to do enough to try to prevent steep damage to the economy and markets, but unwilling to embrace the kind of multi-trillion dollar spending agenda that could generate a Biden boom. This combination would mean that the Federal Reserve would be left playing the dominant role in trying to propel an economic recovery, with the downsides that would entail.
Much about that forecast is uncertain. There is still a chance, if both runoff elections in Georgia go their way, that Democrats could win 50 seats in the Senate, with Kamala Harris as vice president to tip the balance. Or, this version of a Republican Senate may prove more receptive than the Obama-era one to working with Mr. Biden on his economic agenda. (The Senate majority leader, Mitch McConnell, indicated a desire on Wednesday to pass a new stimulus bill before the end of the year, though on Friday he said that good jobs numbers meant that stimulus should be relatively small.)
And it is possible that when the coronavirus crisis abates, the economy will snap back to health on its own, particularly if the Biden administration handles public health policy effectively.
But the reaction to the election in financial markets in recent days suggests that something like the Obama recovery is more likely: in short, a long slog back to health.
Treasury bond yields fell sharply Wednesday, suggesting investors expect less fiscal stimulus, slower growth and easier monetary policy from the Fed than had been envisioned pre-election. And the stock market soared Wednesday and Thursday, as investors priced in both easier money from the Fed and a Biden administration that will be constrained in its ability to raise taxes and expand regulation on businesses.
By contrast, in the run-up to the election, markets had become more positioned for a world in which a Biden administration came to office with a Democratic Senate, and could more fully embrace the kind of transformative agenda many on the left would prefer.
“The whole blue wave idea that would have come with not only very generous stimulus in the near term but structural reforms and big infrastructure investment, that seems to be off the table,” said Julia Coronado, president of MacroPolicy Perspectives.
On the campaign trail, Mr. Biden spoke of transformative efforts to fund clean energy and other infrastructure investment, which analysts expected would imply the spending of trillions of dollars and the creation of millions of jobs.
The experience of the final six years of the Obama presidency looms large. In that span, Republicans controlled at least one chamber of Congress and blocked any large-scale fiscal policy — and insisted on spending cuts in response to high deficits. Legislative deal-making took place at the margins, if at all. It was the Federal Reserve that played the dominant role in trying to propel an economic recovery, through quantitative easing and other unconventional policies.
Last time, the recovery generated by that combination was a long march back toward prosperity.
In the last recession, Congress passed a large fiscal stimulus bill in early 2009 that helped start an expansion in mid-2009. When Republicans took control of the House in early 2011, they insisted upon a turn toward deficit reduction, and the expansion continued slowly in the years that followed, with help from the Fed’s actions.
From the time that expansion began in mid-2009, it took more than six years for the unemployment rate to fall to 5 percent, its level when the Great Recession began. The Fed’s programs were effective at driving up financial markets, but with less clear-cut benefits for ordinary Americans.
The Fed chair, Jerome Powell, has been vocal about the limits of the Fed’s tools, stressing that the central bank can lend money but cannot spend it. He has called on Congress to use its power of the purse to inject money into the economy directly.
“The upshot of all of this is that the configuration of government means the Fed is going to be expected and required to be even more stimulative than they might have been otherwise,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former Fed and Treasury Department official. “The fiscal impulse is likely to be diminished relative to a blue wave scenario and even relative to a scenario where Trump won and Democrats won the Senate.”
A Biden win should ensure continuity at the Fed, Mr. Sheets said, either because he reappoints Mr. Powell to a second four-year term when his current one expires in early 2022, or because he appoints someone with broadly similar views on monetary policy and credibility on Wall Street, like the Fed governor Lael Brainard or the former chair Janet Yellen.
There are ways the Biden economy might escape the slow-growth economic outlook, if the Senate goes along with enough coronavirus rescue funds to prevent widespread business failures and sharp pullbacks by state and local governments. Strategists at Jefferies, for example, project that a “skinny” stimulus of $500 billion to $1 trillion could be in play.
Then, a successful public health policy enables economic activity to quickly return to pre-pandemic levels.
“If we got a trillion dollars of stimulus, you could have a decent constellation of policies if an administration comes in and manages the virus well,” Ms. Coronado said. “We need to manage the virus efficiently, and if we got a good federal response by the end of the first quarter combined with some stimulus, you could see decent momentum.”
The global financial crisis a dozen years ago was caused by fundamental imbalances in the economy that took time to repair, whereas the coronavirus recession was caused by a surprise shock — which raises at least the possibility of a much quicker return to normal.
So the biggest question may turn out to be this one: Has the pandemic fundamentally broken anything about the economy? If not, a speedy recovery may be possible even without a politically aligned Congress. If not, it might feel like the early 2010s all over again.
WASHINGTON — If he wins the presidency, Joseph R. Biden Jr. will inherit an economy struggling to recover from its steepest plunge in decades. His economic team will need to help workers and businesses survive a pandemic winter, while developing policies to address the racial and income inequalities the crisis has exacerbated in the labor market.
Assembling that team would force Mr. Biden to balance competing impulses. He wants to surround himself with aides who have experience battling past downturns — a talent pool that is overwhelmingly white, male and centrist. But he also wants to stock his administration with advisers who represent the racial, gender and ideological diversity of the nation and his party better than previous administrations.
Allies inside and outside Mr. Biden’s sprawling network of informal economic advisers say there are signs that, even as Mr. Biden looks to familiar names from his White House years with President Barack Obama, his potential administration is on track to include far more economists of color, women and progressive economic thinkers than Mr. Obama’s initial team, which was stocked with establishment white male economists.
“You’d like a team that has kind of been to war,” said Stephanie Kelton, an economics professor at Stony Brook University who served on a task force when Mr. Biden became the nominee but is not currently an adviser to the campaign.
But Ms. Kelton, an increasingly important voice on the progressive side of the party, said it’s important to find people who realize that mistakes were made after the 2008 recession, because “it took seven years to claw back the jobs that were lost. We can’t afford that again.”
Robert E. Rubin, a former Treasury secretary under President Bill Clinton, who remains a leading voice among centrist Democrats, said Mr. Biden would be facing “the most daunting set of challenges that any president has faced since F.D.R. He needs people who are experienced, who are well equipped to deal with that.”
The nation is mired in a so-called K-shaped recovery in which some people and businesses have thrived as companies shifted to remote work and consumer demand skewed toward goods over services. Other workers have fallen into prolonged unemployment and a wave of small businesses have shuttered or are close to doing so. Mr. Biden’s allies have stressed that he will need to address that damage should he win the presidency.
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“What I think is important is to recognize that this is not your grandfather’s type of recession,” said Senator Ron Wyden of Oregon, the top Democrat on the finance committee. “There are two economies — Main Street getting hammered, Wall Street sky high.”
Perhaps the most important economic role to fill will be that of Treasury secretary, since that person will serve as a conduit between the White House, the Federal Reserve and Congress, along with playing a key role in diplomacy and financial regulation. During the financial crisis, the Treasury secretary played an outsize role in steering the response, first under Henry M. Paulson during the George W. Bush administration and then under Timothy F. Geithner during the Obama years.
Mr. Biden appears likely to tap a woman for the job — which would be a first in the Treasury Department’s 231-year history. Lael Brainard, a Federal Reserve governor and former Treasury official, tops many Biden advisers’ lists of possible future secretaries. Ms. Brainard, who served as the Treasury’s under secretary for international affairs during the Obama administration, has extensive recent experience in financial regulation and a proven track record of working well with the Fed chair, Jerome H. Powell.
Still, her background in trade could prove to be a liability with more progressive members of the party. While at the Treasury, Ms. Brainard was reluctant to take a hard line on currency manipulation, for instance when it came to the weak Chinese yuan in the early 2010s. That was an unpopular stance among some left-leaning senators worried about the competitive threat cheap imports from abroad posed to domestic manufacturers.
Other women also make the unofficial lists circulating, including Senator Elizabeth Warren of Massachusetts, who enjoys a lot of support among progressives. Sarah Bloom Raskin, formerly at the Treasury and Fed, is frequently discussed, as is Janet L. Yellen, the former Obama-era Fed chair.
Another name floating around the Biden camp is Roger W. Ferguson Jr., a former Fed vice chairman who is now president of the financial manager TIAA. Mr. Ferguson, the only Black person to ever serve in that high-ranking Fed position, has experience confronting crises — he played the central role in the Fed’s response to the Sept. 11, 2001, terrorist attacks because its chair, Alan Greenspan, was out of the country at the time.
Mr. Biden will also need to tap White House economic advisers who, along with the Treasury secretary, will help develop whatever stimulus package his administration tries to push through Congress. Perhaps as important as whom he chooses is whether they can align on a plan to save the economy. Disagreements among Mr. Obama’s top economic advisers in 2009 led to a smaller stimulus package than might have otherwise been put forward during the Great Recession, in part because of concerns about the impact on the federal deficit.
Among the top contenders for senior economic roles are Heather Boushey, co-founder of the Washington Center for Equitable Growth, and Jared Bernstein, who served as Mr. Biden’s top economic adviser during the Obama administration and is now at the Center on Budget and Policy Priorities.
Both have advised the Biden campaign from the outside, as part of a small group of economists Mr. Biden turns to for daily briefings and policy recommendations. That group includes Ben Harris, an economist at Northwestern University’s Kellogg School of Management who succeeded Mr. Bernstein as Mr. Biden’s chief economist, and who now plays a sort of clearinghouse role in economic policymaking for the Biden campaign. He could land a White House job as well.
Several other veterans of the Obama years also appear to be in the running for top economic jobs. Most of them are white men, including Austan Goolsbee, a former chairman of Mr. Obama’s Council of Economic Advisers; Gene Sperling, who led the National Economic Council for Mr. Obama and Mr. Clinton; and Jeffrey Zients, who succeeded Mr. Sperling and who is a co-chairman of Mr. Biden’s transition team.
People in the Biden orbit are also eyeing veterans of the White House or the Fed who are not white men, including Lisa D. Cook, who served as chief economist for the Council of Economic Advisers under Mr. Obama; Raphael Bostic, who heads the Federal Reserve Bank of Atlanta, making him the first Black person to ever hold a regional Fed presidency; and Mary C. Daly, the president of the Federal Reserve Bank of San Francisco.
Mr. Biden may also have an opportunity to add staff to the Fed, which will continue to play a key role in supporting the labor market and economic recovery, potentially in close collaboration with the Treasury. While President Trump has nominated Judy Shelton and Christopher Waller for the two open slots, it is unclear whether they will win confirmation before the congressional term ends in January. Another Fed governor slot could open if Ms. Brainard is moved to the Treasury.
Mr. Biden would also need to make decisions about the Fed’s top spot, though not immediately. Mr. Powell’s tenure as head of the central bank does not end until early 2022. The Fed’s vice chair for supervision, a powerful position that influences banking regulation, will be up for replacement in October 2021.
Across the various roles, labor groups and the progressive wing of the Democratic Party are pushing Mr. Biden to elevate economic thinkers who are more liberal, and more focused on racial inequality, than previous Democratic administrations — citing the outsize damage the pandemic recession has dealt to women and to Black and Hispanic workers. They also want advisers who are not afraid to spend money on programs to help bring about economic equality — even if it means adding to the budget deficit.
“He’s going to have to have some people who are very good and credible at handling all of the extreme forms of inequality we’ve seen pop in from this, and can get the labor market back up and can especially undo the harm that’s been disproportionate on women and minorities,” said William E. Spriggs, the chief economist at the A.F.L.-C.I.O., who was part of a group of several hundred economic policy experts who prepared policy recommendations for Mr. Biden’s campaign this year.
“I think they get it,” Mr. Spriggs said. “But you know, personnel are chosen sometimes on the basis of other things.”
Ana Swanson contributed reporting.