Federal Reserve Chairman Jerome Powell testifies during the Senate Banking, Housing and Urban Affairs Committee hearing examining the CARES bill’s quarterly report to Congress on September 24, 2020 in Washington, DC.

Drew Angerer | AFP | Getty Images

We will soon find out what the leadership of the Federal Reserve under President Joe Biden will be.

The president will decide this fall whether to stay with Chairman Jerome Powell, whose term ends in February, or to place one of his distinguished colleagues at the helm of one of the most powerful economic institutions in the world.

Wall Street urges Biden to reappoint Powell for a second term. But the progressives are demanding a new face at the top of the central bank.

The job of chairman of the Fed is not the only role to be won. The term of office of Vice President Randal Quarles, the central bank’s regulatory contact, expires in October. And it all means Fed Governor Lael Brainard could stand up for a promotion.

Political advisors speaking to CNBC about Fed sales said the Biden administration is considering sending its nominations as a bundle to the Senate Banking Committee in September. They stressed that the search is ongoing and the timeline may shift depending on whether Biden decides to re-name Powell.

A strong indication of Wall Street’s fear of a possible replacement by Powell came last month from Mike Feroli, US chief economist at JPMorgan.

“Fed Chairman Powell’s response to the COVID-19 financial crisis and recession has been aggressive, creative and determined.

But Feroli said: “He is now in danger of losing his job.”

Placing the parts

That’s because progressive Democrats want Brainard to replace Powell.

Its proponents say it would urge the Fed to put more emphasis on banking regulation, income inequality and climate change.

Some Democrats, like Biden Treasury candidate Graham Steele, have said it would be a “huge missed opportunity” not to replace Powell with a woman or a minority member to run an institution long used by white men was dominated.

Feroli said Powell delighted the progressives by doubling the Fed’s commitment to maximum employment in all segments of the population, but that the group is still frustrated with the former investment banker’s reluctance to address issues like the economic impact of climate change.

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The White House declined to comment on the story and has not publicly stated whether the government is looking for a new chairman. Perhaps the closest thing the Biden administration got to public comment was Treasury Secretary Janet Yellen’s comments to CNBC last month.

Yellen, who made history as the first woman to head the Fed, said the central bank “did a good job” under Powell’s tenure.

When asked if she would support Powell for a second term, Yellen said she would keep that opinion a secret for the time being. She is likely to play an oversized role in advising the president, with Powell and Brainard serving as Fed governors while Yellen was chairman of the central bank.

The Treasury Department declined to comment on the story.

Yellen’s praise for the Powell Fed may have invalidated some progressive Democrats who hope Biden will take the opportunity to install a member of his own party.

“There are two dimensions. And one is how much [Powell] has helped the Fed as a whole deregulate further than Congress might have told them to, “said Mike Konczal, director of macroeconomic analysis at the left-wing Roosevelt Institute.

“The second question is whether the Fed could be more creative in using its powers,” he continued. “Can the Fed act much more aggressively against climate change? Could it have acted much more aggressively in consolidating state and local government balance sheets during the crisis.”

“These are two separate questions,” said Konczal. “And progressives believe Powell failed at both of them.”

Despite progressive concerns, Powell has a long list of allies on both sides of the political gang and is still seen on Wall Street as likely to maintain his chairmanship. His commitment to protecting 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 Fed chief, repeatedly attacked the Fed chief over what Trump believed was high interest rates. But most Republicans in Congress, including North Carolina MP Patrick McHenry, have signaled their continued support for 68-year-old Powell.

“You deserve and deserve another term as chairman of the Federal Reserve,” said McHenry, senior Republican on the House of Representatives financial services committee, in July. “You have shown that you are a steady hand during this pandemic and the ongoing recovery, and you have defended the independence of the Fed.”

Brainard and Quarles

Progressives disagree on their preferred candidate, but many argue that Brainard is a sweet spot between Powell’s persistently low interest rates and tighter banking regulation.

Brainard has been a key Powell lieutenant throughout the Covid crisis and has for years supported the Fed’s growing emphasis on maximum employment through easy money policies. However, it has regularly objected to his decisions to relax certain banking regulations that were imposed after the 2008 financial crisis.

Lael Brainard, Governor of the US Federal Reserve, listens during an event sponsored by the Economic Club of New York in New York, the United States, on Tuesday, September 5, 2017.

Mark Kauzlarich | Bloomberg | Getty Images

Powell isn’t the only Fed member criticized for simplifying banking regulation, and his fate depends on Biden filling another key position.

Quarles’ term expires in October, offering progressives another great opportunity to put more sophisticated banking supervision in place.

Given his track record at the Fed and pressure from progressives to better regulate banks, Biden will almost certainly seek to replace Quarles as vice chairman of oversight.

Quarles, a former mutual fund manager and former Republican Treasury Department official, has angered Democrats for his industry-friendly and risky approach since joining the Fed in 2017.

Under his leadership, the Fed rolled back liquidity and capital requirements for large U.S. banks in 2019, beyond what many Democrats in Congress intended when the 2010 Dodd-Frank Act was partially withdrawn.

Randal Quarles

Jb Reed | Bloomberg | Getty Images

“Your term as Chair is up in five months and our financial system will be safer when you are gone,” Senator Elizabeth Warren, D-Mass., Told Quarles during a hearing in May. “I urge President Biden to fill your role with someone who will actually protect our financial system.”

It’s less clear who Biden is considering for Quarles’ job, but Brainard could be a candidate if the President wants to keep Powell with him. Economist Lisa Cook, a favorite of Senate Banking Committee chair Sherrod Brown, D-Ohio, is also being considered for a role at the central bank.

A Federal Reserve board spokesman did not respond to CNBC’s request for comment.