We will soon find out what the Federal Reserve's leadership will look like under President Joe Biden.
The president is set to make a decision this fall on whether to stick with Chairman Jerome Powell, whose term ends in February, or tap one of his respected colleagues to lead one of the world's most powerful economic institutions.
Wall Street is pushing Biden to reappoint Powell for a second term. But progressives are calling for a fresh face atop the central bank.
The Fed chair job isn't the only role up for grabs. The term for Vice Chairman Randal Quarles, the central bank's point person for regulation, expires in October. And this all means that Fed Governor Lael Brainard could be in line for a promotion.
Political aides who spoke to CNBC about the Fed turnover said the Biden administration is considering sending its nominations as a bundle to the Senate Banking Committee in September. They stressed that the search progress is ongoing, and that the timeline could shift based on whether Biden decides to renominate Powell.
A strong indication of Wall Street's fear about Powell's possible replacement came last month from Mike Feroli, chief U.S. economist at JPMorgan.
"Fed chair Powell's response to the COVID-19 financial crisis and recession was aggressive, creative, and determined; his leadership during that period has justly received applause from economists and legislators across the political spectrum."
But, Feroli said, "He is now at risk of losing his job."
Placing the pieces
That's because progressive Democrats want Brainard to replace Powell.
Her advocates say she would push the Fed to put a greater emphasis on bank regulation, income inequality and climate change.
Some Democrats, such as Biden Treasury Department nominee Graham Steele, have said it would be a "huge missed opportunity" not to replace Powell with a woman or member of a minority to lead an institution long dominated by white men.
Feroli said Powell pleased progressives by doubling down on the Fed's commitment to maximum employment across demographics, but that the group is still frustrated with the former investment banker's reluctance to address issues like the economic impacts of climate change.
The White House declined to comment on this story and has not publicly indicated whether the administration is looking for a new chairman. The closest the Biden administration has come to a public comment may have been Treasury Secretary Janet Yellen's comments to CNBC last month.
Yellen, who made history as the first woman to lead the Fed, said the central bank has "done a good job" under Powell's tenure.
Asked whether she supports Powell for a second term, Yellen said she would keep that opinion private for now. She will likely play an outsized role in advising the president since Powell and Brainard served as Fed governors while Yellen was chair of the central bank.
The Treasury Department declined to comment further for this story.
Yellen's praise for the Powell Fed may have deflated some progressive Democrats, who hope Biden takes the opportunity to install a member of his own party.
"There are two dimensions. And one is how much [Powell] has aided and abetted the Fed as a whole in deregulating further than perhaps Congress told them to," said Mike Konczal, director of macroeconomic analysis at the left-leaning Roosevelt Institute.
"The second question is whether the Fed could be more creative in how it uses its powers," he continued. "Can the Fed be much more aggressive on climate change? Could it have, in the crisis, gone in a much more aggressive manner in solidifying the balance sheets of states and local municipalities."
"Those are two separate questions," Konczal said. "And progressives feel Powell has failed on both."
Despite progressive concerns, Powell has a long list of allies on both sides of the political aisle, and still viewed on Wall Street as likely to maintain his chairmanship. His commitment to insulating the Fed from political influence and his record during the 2020 recession earned him praise from Republicans and Democrats alike.
Former President Donald Trump, who promoted Powell to lead the Fed, repeatedly attacked the Fed chief for what Trump considered steep interest rates. But most congressional Republicans, including North Carolina Rep. Patrick McHenry, have signaled their continued support for the 68-year-old Powell.
"You have earned and deserve another term as chair of the Federal Reserve," McHenry, the top Republican on the House Financial Services Committee, said in July. "You have proven to be a steady hand throughout this pandemic and ongoing recovery, and you've defended the independence of the Fed."
Brainard and Quarles
Progressives are not unanimous on their preferred candidate, but many argue that Brainard represents a sweet spot between continuing Powell's low interest rates and tougher bank regulation.
Brainard has been a key lieutenant to Powell throughout the Covid crisis and has for years supported the Fed's growing emphasis on maximum employment through easy-money policies. But she has regularly objected to his decisions to relax certain bank regulations imposed after the 2008 financial crisis.
Powell isn't the only Fed member open to criticism for easier banking regulation, and his fate depends on how Biden chooses to fill another key position.
Quarles' term expires in October and offers progressives another big opportunity to install a more demanding bank supervisor.
Biden will almost certainly seek to replace Quarles as vice chair for supervision given his track record at the Fed and pressure from progressives to better regulate banks.
Quarles, a former investment-fund manager and former Republican Treasury official, has angered Democrats since he joined the Fed in 2017 for what they view as his industry-friendly, risky approach to the job.
Under his leadership, the Fed in 2019 rolled back liquidity and capital rules for large U.S. banks beyond what many Democrats in Congress had intended in the 2018 partial rollback of the 2010 Dodd-Frank law.
"Your term as chair is up in five months, and our financial system will be safer when you are gone," Sen. Elizabeth Warren, D-Mass., told Quarles during a May hearing. "I urge President Biden to fill your role with someone who'll actually keep our financial system safe."
It's less clear whom Biden is considering for Quarles' job, but Brainard could be a candidate if the president wants to keep Powell around. Economist Lisa Cook, a favorite of Senate Banking Committee Chair Sherrod Brown, D-Ohio, is also under consideration for a role at the central bank.
A spokesperson for the Federal Reserve's board did not respond to CNBC's request for comment.
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