How Biden Can Keep Jerome Powell While Making Progressives Happy

Angeles and Long Beach. We keep coming back to this topic of Stephonomics, not just because we like ships, but also to stay grounded and to remember in all our high for lutin conversations about the future of money or digital economy, that most of what we buy in one click doesn't get made in one click, and it doesn't get beamed across the world to your doorstep. It comes by ship. Traffic jams outside ports are one consequence. Another it turns out that the Port of London, despite Brexit,

is buzzing. Our global supply chains are Brendan Murray has been down to the docks to investigate. We have that later. We also have a report from our Swiss economy reporter, Catherine Boseley on why some are not so happy about that breakthrough agreement to charge a minimum corporate tax rate on global companies. But first, now, President Biden has already made quite an impression on America's public finances in his first month's in office, all those multi trillion dollar spending

packages and plans for future tax hikes. But with the hiring and potentially firing decisions he makes in the coming months, he may yet have an even bigger long term impact on the Federal Reserve. Definitely time to have a chat with two of the most experienced FED reporters on the planet, let alone at Bloomberg, Greg Torres and Rich Miller. Rich

quickly set the stage for us. You know, what, what are the personnel decisions that President Biden's looking at at the US Central Bank in the next year or so and why why are they so important? Well, the top, top, top of the paps is is the Airmanship. Jerome Powell's term four year term expires in February and Washington Weggs called it. The FED chairman the second most powerful person in Washington after the president, so you can imagine how

important that position is. But it's not just him. There's also the Vice Chairman of Supervision. His post comes up actually before Chairman pals Uh. And then you also have the Vice Chairman who follows monetary policy. And on top of that, there's one empty seat that has yet to be filled, so potentially four of the seven seats are up for grabs for Biden to to reshape probably one of the most powerful central bank, certainly one of the most powerful central banks in the world, and one of

the most powerful institutions in the U S economy. Great touris people just coming to the coming to this today might wonder why we even having the conversation because j pal the current chairman, is generally felt to have done a good job, So why are we even thinking about not reappointing him. Well, there are two progressives on the Senate Banking Committee that matter a lot, Shared Brown and

Elizabeth Warren, and in recent hearings expressed reservations. I guess it's the word about j. Palell's regulatory record and what he's done has gone along with Vice Chair of Supervision Randall Quarrels. Powell is a believer in kind of the financial system as it is. He's not um, He's not a big time innovator in my opinion. You know what needs to be rebuilt or fixed in in a way.

So people want, especially these progresses a little bit more restraint, a little bit more um scrutiny, and a financial system that bends more toward equality and rich. So there's that point where people actually want to be shifting policy in a sort of slightly less in favor of Wall Street and more in favor of reform. But there's also, I guess a kind of classic thing where you know, j Pal is a Republican, You've got Democrats quite keen to have their own people in charge. What are the other

factors that that Biden is now weighing and thinking about this? Well, well, there certainly is that. I mean that one cuts both ways, because Biden has sort of portrayed himself as a bipartisan, you know, healer of Washington's um afraid politics, so he could make a not in that direction by keeping power republican. But I mean the other thing is I guess that you know, for one of a better word, that the

other progressives don't think Chairman Powell was woken up. He hasn't been as full throted as as they like about what the Fed can do uh for in reducing income inequality. He hasn't been as full throted of out what the Fed can do to counteract high black unemployment. He hasn't been a full throat at about in support of a central bank digital currency, which which some progressives like because it will help the could help the unbanked and the

poor who don't have a financial accounts. So there's a constituency, as Craig said, you know, this sort of band of progressives who think that he's he's not been a supportive of what you know, you might call democratic priorities in his you know, four years that he's been in office. I guess Craig to state the obvious. He's a white man. Donald Trump, by and large nominated didn't always get past appointed, but nominated a lot of white men for for the FED.

I guess the symbolism matters as well. Yes it does. It's kind of a myth that it's Biden faces one big choice. Actually he has four choices. In the mix of those choices or a lot. It feels like quite an important time for US monetary policy, trying to gauge these conflicting impulses. We have transit tree inflation, we hope transit tree, but quite a lot of inflation seemingly coming down the track. But we also have potentially another round of of of COVID. I mean, should the should the

financial market? Should all of us be be worried about a shift in the FED leadership at this kind of time? Rich, I think it is a very very tricky time. And that's one thing you arguably that Power has going for him. You don't, you know, you don't change horses and where you're in the middle of a raging stream. One person that Craig didn't mention, that's probably the leading candidate for the chair if if Power doesn't get it is a

layout brainerd who's who's who's who's on the FED. And it's kind of a known quantity to the markets and has voted against the number of the measures to ease bank regulation that Powell and quarrels of vice chair supported.

So she's kind of seen as the leading candidate other than Powell to get the chairman's post, And seeing as she's kind of a known quantity of the markets, it wouldn't probably be too risky to you know, appoint her instead of Powell, even though she's seen as someone who will be a little less um, a little more dubbish, a little less worry about inflation risk but arguably if you if you came with somebody who wasn't quite as well known to the markets and who might not have

it in a monetary policy background, you might have more trouble. It is true that she's named for being more dovish, but from where the Fed currently is, it's hard to think how you could be more dovish. I mean, they're still they at least for now, still have this extraordinarily loose policy and are very, very dedicated to holding it despite these quite remarkable inflation numbers we've had over the

last few months. Okay, so I'm gonna put you on the spot, both of you, and ask you seasoned observers as you are of the Washington political scene, what do you think is going to happen? Where do you think he's gonna end up? Craig first, So I'm going to be provocative and say perhaps we should expect an upset here and that they go with Lele Brainerd and they reconstruct the board. It looks more democratic and more blue and more oriented towards the big goals of the Biden program. Rich,

I'll take the other on that one. I'll take the I think and Pale and then who would you still say that the other two will be I mean, I agree with Craig in the sense that then then the president has to make some nods to the progressives in getting someone and and so to diversity. So I mean one one name that's been mentioned is, uh, you know, Raphael Bostick, who's the African American black president of the

Atlanta FEDS, maybe the vice chair or um um. And then Lisa Cook, black economist, has also been mentioned as for as a leading candidate for the open post. I mentioned, I mentioned there was an open post on the FED. So yeah, he'd have to bounce out, you know, other interests with the other other positions. And that's why if Powell gets it, you know, you you really have to

watch what you know the the other positions especially carefully. Well, we certainly had a reminder that these decisions are always political, even though the Federal Reserve does try and stay above the fray the rest of the time. And we have you on record, both of you telling us what's going to happen, and we will surely have you back when we find out who was right. Well, maybe you were all wrong, but thank you very much for joining us.

Thank you you might remember we started the year with the chaos at the Port of Dover after France closed its borders to UK freight traffic. Our reporter Lizzie Burden interviewed East European drivers sitting in their cabs, living on biscuits, wondering if they were going to get home for Christmas,

and what with Brexit and COVID and Boris Johnson. There's been plenty of chaos to go around in the UK over the past year or two, but some things are going right, and surprisingly, perhaps the Port of London is one of them. Here's Brendan Murray in the heart of London's financial district. A yellow and red boat run by the delivery giant d h L travels up and down the river terms every day with packages from all over

the world twenty miles downstream. It's just another work day for Katherine Spain, whose job as a senior harbor Master with the Port of London is ensuring goods like these never stopped flowing into a British economy hard hit by the pandemic. The office varies so much from day to day. Um I mean ships are coming in from all over the world. From the other side of the world in a China directs to the London Gateway. We have aggregate vestivals coming in from the Northy Judging Gap grounds to

the terminals. You know, stuff coming in a lot from northern Europe, but it could come in from absolutely anywhere. What Spain and her colleagues are witnessing is a revival of commercial traffic along the Thames, once the maritime center of the world. London Sports handled more cargo than any of its UK rivals last year, the first time that's

happened in two decades. It's a sprawling complex that includes a major container terminal called the DP World Gateway, as well as the historic Tilbury Docks, which are used for cruise ships and other cargo. The pandemic, it seems, brought out the online shopper in all of us and served as a reminder that people still buy a lot of physical stuff even in the digital economy. That's been a big lift in London's efforts to be a bustling crossroads for trade, says Robin Mortimer, the CEO of the Port

of London Authority. So you can sort of see, you know, that whole two thousand year journey from a timey little Roman port right in the center of London now to a huge globally competitive container terminal out in the in

the estuary um Now. One of the interesting things is that because so much of the infrastructure of the Port of London has moved out of the main populated capital city, there is a sort of perception that the Port of London is um something of the past and it's a little bit out site, out of mind, I think for people, London story as a trading city has taken a number

of turns over the centuries. Twenty miles down river from London, Tilbury's Docks have been a mainstay for a hundred early five years, launching ships across the British Empire and welcoming generations of immigrants to England shores. So the peak trade of the city of London was both in the nineteen thirties and nineteen sixties either side. In the Second World War,

that's Arthur peter Stone. In the Second World War, the Germans, they understood full well that the quarter London was key to the British economy, so therefore it became a big target at that time. None of you was it an economic target, but it was very easy to spot from the air for bombits because you know, London could have a blackout during the bits, so the pilots couldn't see where built the buildings were, but they could see the water with the moon shining off of it, and so

they therefore they could they could target the docks. So amazingly the dots carried on working all through the blitz or through the war, and just carried on night and day even with bomb dropping around. Fast forward to this year and you see where how as and logistics depots springing up along the river bank southeast of the city. The Port Authority is buying up land and old docks to meet the demand, and it plans to develop London's

first shipyard in a century. Bookings for cruise ship voyages from Tilbury are picking up again, and just across the river, Amazon is opening a distribution center employing more than workers. And it's not just commerce. Thatt's returning locals are hungry for outdoor recreation like kayaking and paddle boarding, but the biggest opportunities are London's links to the global economy, a big question mark after the UK split from the European

Union this year. Such links bring great potential, but there's also the risk of disruptions, like the ship that got stuck in the Suez Canal earlier this year. Charles Hammond, the group Chief executive of Fourth Ports, which operates Tilbury, says Brexit and the pandemic have refocused attention on London as a vital gateway for global trade. I think it's a good thing that people are reminded of the fundamental importance of trade and supply chains to a modern economy.

And I think given the pandemic, given other hiccups like seers, people are no longer taking that for granted, and I think are understanding the role that essential workers, essential facilities playing doing that. So I think in the pandemic a lot of things that were maybe largely taken for granted are now much more appreciated, and I'd like to think

ports are one of those facilities. M H. Finally, you know, we believe in balanced reporting on this podcast, but I fear we may not have been entirely balanced in our reporting of the big tax agreement hammered out among G seven finance ministers last month. We may have given the impression that companies being forced to pammin and rate on their profits. However cleverly they organized their affairs was an entirely positive development. President Biden and many European leaders would

tend to think so. They're hoping to get precious new revenues out of this for infrastructure and education. But as always, there is another side to the story, and you're likely to hear it most often in the corridors of Dublin and Zurich. Here's our europe Economy Reporter and Deputy bureau Chief in Zurich, Catherine Bosley. Finance ministers representing the world's twenty biggest economies broke into a plaza their progress on establishing a global minimum corporate tax rate of sitting in

their meeting in Venice this month. As an observer, Swiss finance Minister Willie Maha didn't join in the clapping. Countries like Switzerland and Ireland are watching the US led international push with consternation because they could be the losers right now, Ireland's levee for companies is twelve point five percent and one in five workers is employed directly worrying directly by

foreign multinationals. Last year, levels on the ten biggest companies accounted for half of all net corporate tax receipts in the country. Finance Minister Pascal Danahos as this country must now brace for a hit of two billion euros to corporate tax income per year by twenty five, about four

percent of Ireland's annual tax receipts. I mean, if the minimum tax is introduced as envisaged by the G seven D twenty and the os is inclusive framework, if it really is introduced in that way, this is a really massive change to the international tax system. Michael Devereaux, director of the Oxford University's Center for Business Taxation. I don't think we can really underestimate how big a change it is. It really makes a difference to minimum tax rates around

the world. Officials in Switzerland, which had to give up banking secrecy for offshore accounts in the face of US pressure a decade ago, are concerned they'll lose out on money they need to maintain infrastructure. Finance Minister Maua says as many as four thousand companies could be affected by the global reform. He's declined to put a price tag on the damage. A city that embodies Switzerland's reliance on multinational corporations is Basil, whome to some of the world's

biggest drug companies, Rush and Novartists. There's also Lanza, which produces madernast COVID nineteen vaccine. Before the pandemic struck, levies on corporate profits constituted nearly a quarter of the municipalities. Tax revenue scated to money is the one thing, and the other thing, which is probably much more important for us,

are the jobs. These aren't letterbox companies. They are companies that generate lots of jobs here and people work there, so we don't have any interest in a big company. Leaving that was tanyaz Oland, finance director of the City

of Basel. The Global Tax Accord, with its fift minimum rate, which is running under the auspices of the O E c D, is on track to be finalized at the G twenty summit in Rome in October, with the new provisions coming into force, but there are still lots of details to be hammered out, including what sort of tax deductions might be granted. Hungary, Estonia and Ireland are also challenging the proposals, with Hungarian Prime Minister Victor Orban calling

the plan absurd. The opposition of the three countries, who together account for just three point six percent of the US population, is significant. A unanimous decision among all the blocks countries may be needed to craft a legal directive for the EU to adopt the reform. Here's Mark Redmond, CEO of American Chamber of Commerce Ireland. We're talking now at the end of July, right, and there's a lot of road to travel whichween now and the planned if you will, deadline in October for the o e c

D to finally sort out all the open questions. And our understanding is there are a lot of open questions. There is a lot of work to be done at O e c D level to get to an agreement. Switzerland has chosen the path of least resistance and is going along with the o e c D S tax plan.

Informal proposals on how to keep the country attractive have ranged from carbon tax credits or offsets for R and D investments to lowering individuals social insurance contributions in the famously low tax Canton or state of Tuk, home to commodities giant Glencore budget master. Hence, Tendler is relaxed about the change. He says it's best to treat the reform like an opportunity. Mon conjol nine and mon conjol one can say no, one can criticize it, one can oppose it.

But the question is what good is that it's no good? At the end of the day, we're in this vortex. We have to go with it and sees opportunities and not say no. Treasury Secretary Janet Yellen and President Biden have hailed the global tax deal is the end of a damaging global race to the bottom in corporate taxes. That may be true, but as you raise a glass to that, spare thought for countries who had better big

chunk of their economy on winning that race. M Well, I'm sorry to say that's it for This series of Stephanomics was supposed to be off now until October that if I talked to anyone exciting before then, you can be sure we'll be putting it on this feed. In the meantime, you can get your fix of insights and news from Bloomberg Economics on the Bloomberg Terminal website or

app all by subscribing to as Economics on Twitter. This entire series was manfully produced by Magnus Henrickson and the global tax story this week was based on reporting by Mourueno, Konyam, Peter Flannagan, Katherine Boseley, Leonard ken Chopper and Claudia Madeler. Special thanks also to Craig Torres, Rich Miller and Brendan Murray. Mike Sasso, his executive producer of Stephanomics and the head of Bloomberg Podcast is Francesca Levi. Enjoy your summer, Pom.