Finance

President Joe Biden announced Monday that he is renominating Jerome Powell for a second term as Federal Reserve chair and will put forth Fed Governor Lael Brainard as vice chairman.
The move comes after weeks of speculation that Brainard might get the nod.
In making the move, Biden praised Powell for “decisive” leadership during the Covid crisis.

Jerome Powell, who guided the Federal Reserve and the nation’s economy through the staggering and sudden Covid-19 recession by implementing unprecedented monetary stimulus, is being nominated for a second term as chairman of the U.S. central bank.
President Joe Biden made the announcement Monday morning following weeks of speculation that a push from progressives might see Fed Governor Lael Brainard get the spot.

Acknowledging the political pressure he faced to nominate a more progressive Democrat than the Republican Powell, Biden said Monday afternoon he settled on Powell because the current economic circumstances present “enormous potential and enormous uncertainty” and require “stability and independence.”
Brainard was designated as vice chair of the board of governors; she had been widely expected to get a separate vice chair for supervision post, which oversees the nation’s banking system. As vice chair for monetary policy, she would succeed Richard Clarida, whose term expires Jan. 31, 2022, and will oversee a wider swath of policy decisions.
Read more: Who is Lael Brainard?
“As I’ve said before, we can’t just return to where we were before the pandemic, we need to build our economy back better, and I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before,” Biden said in an earlier statement.
The nominations next head to the Senate for confirmation.

In making the decision, Biden praised the Powell Fed for its “decisive” action in the early days of the pandemic.
The Fed rolled out an unprecedented array of lending programs while also cutting interest rates back to near zero and instituting a monthly bond-buying program that would increase the central bank’s holdings of Treasurys and mortgage-backed securities by more than $4 trillion.

“Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve,” a White House statement said. “During that time, Lael Brainard – one of our country’s leading macroeconomists – has played a key leadership role at the Federal Reserve, working with Powell to help power our country’s robust economic recovery.”
The announcement coincided with a boost to the stock market while government bond yields were higher across the board.
Markets are watching closely the pace the Fed will follow as it unwinds its massive policy support.

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Officials already have indicated they will start paring back the bond purchases, with reductions of some $15 billion per month that would see the program likely conclude in late spring or early summer 2022.
Interest rate hikes are another matter.
Most Fed officials thus far have said they won’t consider raising rates at least until the bond buying taper winds down. However, markets have been looking for a faster timeline for rates, with the initial hike now priced in for June 2022.
“The president chose the status quo for monetary policy and financial regulation,” said Mark Zandi, chief economist at Moody’s Analytics. “The Fed’s going to slowly but steadily take its foot off the monetary accelerator.”
Treasury Secretary Janet Yellen, who also was Powell’s immediate predecessor at the Fed’s helm, lauded Powell for the way he handled the job in the face of the pandemic crisis, which brought the U.S. not only its steepest but also its shortest recession.
“Over the past few years, Chair Powell has provided strong leadership at the Federal Reserve to effectively meet and address unexpected economic and financial challenges, and I am pleased our economy will continue to benefit from his stewardship,” Yellen said.

Controversy in recent days

Though Powell carried the day, it was not without controversy.
The Fed has been under fire lately following an ethics scandal in which multiple officials engaged in trading stocks at a time when the institution was implementing policies aimed at boosting markets. Powell disclosed that he owned municipal bonds, which the Fed also was buying, and he also bought and sold funds tied to the broad stock market indexes.
At the same time, the Fed has been hit with inflation running faster than it had anticipated – in fact, at the sharpest pace in 30 years. Official Fed policy since September 2020 has been to let inflation run somewhat hotter than the standard 2% target if it allows for full and inclusive employment, but prices have been rising well above that level.
Powell has held to the line that inflation will cool off once factors associated with the pandemic return to normal. But the recent readings have raised questions about the so-called average inflation targeting that signaled a historic turn in central bank monetary policy.
The inflation also has come with a rapid economic recovery and a decline in the unemployment rate from a pandemic peak of 14.8% to its current 4.6%.
Presented later Monday afternoon in a joint appearance with Biden, both Powell and Brainard stressed the importance of controlling inflation.
“We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing and transportation,” Powell said. “So we use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
Brainard added that she is “committed to putting working Americans at the center of my work at the Federal Reserve. This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go.”
Brainard emerged as a key force in the race over who would carry the Fed through the next four years. She has taken point on several issues important to the Biden administration, particularly the need for the Fed to brace the banking system against disruptive climate change events.
A former undersecretary of the Treasury during the Obama administration, Brainard also has been a strong proponent of a digital dollar as a means to open the financial system to the unbanked.
The White House statement stressed the importance of progressive for the Fed in the years to come.
Biden said that Powell and Brainard “also share my deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
“Fundamentally, if we want to continue to build on the economic success of this year we need stability and independence at the Federal Reserve – and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs,” he added.
Biden still has more work to do on the Fed: There is one vacant position on the board of governors, while the Clarida vacancy will need to be filled come January. He also will need to name a vice chair for supervision, a post the departing Randal Quarles had held until his term expired in October. The White House indicated Monday that those moves will be announced in early December.
The initial congressional reaction to Monday’s news was positive.
Sen. Sherrod Brown (D-Ohio), who chairs the pivotal Senate Banking Committee that will first hear the nominations, said, “I look forward to working with Powell to stand up to Wall Street and stand up for workers, so that they share in the prosperity they create.”
Pennsylvania Republican Patrick Toomey said he will support Powell though he noted he has had disagreements with central bank policies.
The news is likely a disappointment to progressives including Sen. Elizabeth Warren, D-Mass., who said in September that the Fed’s role in relaxing banking regulations in recent years makes Powell a “dangerous man” and that she would oppose his renomination. 
Biden recently met with Warren to discuss the appointments, according to a source familiar with the matter.
Two other Democratic senators, Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon, also said they would oppose Powell.

Battling back from Covid

President Donald Trump appointed Powell to the position in 2018 in somewhat of a surprise. Trump chose to pass over then-Chair Janet Yellen, an unusual move in that Fed leaders are rarely removed after just one term. Former President Barack Obama initially appointed Powell to a 14-year term as governor in 2014.
Though Trump nominated Powell, he later fired withering criticism at the Fed chief when the central bank raised interest rates seven times in 2017 and 2018. The former president went as far as to call the Fed policymakers “boneheads” for trying to normalize policy as the economy recovered.
As for Brainard, she is now widely expected to be named vice chair of supervision, a key Fed post to oversee the nation’s banking system.
The Fed is empowered by Congress to fulfill two mandates: Maximize U.S. employment and keep inflation stable. Its leaders, known as governors, are nominated by the president and vote on how to adjust interest rates, regulate the nation’s largest banks and monitor the health of the economy.
To combat the spike in unemployment and recession that began in the spring of 2020, the central bank slashed interest rates and began buying some $120 billion in Treasury bonds and mortgage-backed securities every month. It also instituted a variety of lending programs aimed at keeping fixed income markets functioning after they endured significant stress at the beginning of the pandemic.
Economists credit that quick and sizable response for stabilizing financial markets and later repressing long-term interest rates. Lower interest rates make it easier for corporations to take on loans to build new factories, or for individuals to buy homes or cars. 
“Under Powell the Fed has placed more emphasis on having the economy operate at maximum employment,” Mike Feroli, chief U.S. economist at JPMorgan, said via email.
“This is a goal progressive economists have long advocated and a goal which is presumably consistent with Biden’s agenda.”  
Treasury Secretary Janet Yellen, one of Biden’s top economic advisors and a counselor on his Fed nominations, told CNBC earlier this month that she is happy with the Fed chief’s work. Yellen was the first woman to serve as the Fed’s chair and is the country’s first female Treasury secretary. “I talked to him about candidates and advised him to pick somebody who is experienced and credible,” Yellen said. “I think that Chair Powell has certainly done a good job.” Powell is also popular on Capitol Hill, where lawmakers on both sides of the aisle have praised his leadership and amiability since he took over for Yellen in February 2018. 

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Traders work on the floor of the New York Stock Exchange (NYSE) on October 15, 2021 in New York City.
Spencer Platt | Getty Images

U.S. stock futures were steady in overnight trading on Monday after a tech-focused sell-off spurred by rising bond yields that saw the Nasdaq Composite drop more than 1%.
Dow futures rose 35 points. S&P 500 futures gained 0.1% and Nasdaq 100 futures rose 0.1%.

The S&P 500 and Nasdaq Composite fell on Monday as growth pockets of the market reacted to a jump in bond yields. The U.S. 10-year Treasury yield climbed by 9 basis points to above 1.62% on Monday.
Stocks initially reacted positively to the announcement that Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden, driving expectations that the central bank will stay on its monetary path as the economy recovers from the pandemic and attempts to combat inflation. However, markets reversed course towards the end of the session and yields continued to rise.
On Monday, the Dow Jones Industrial Average rose 17 points, after being up more than 300 points at one point in the session. The S&P 500 fell 0.32% after hitting an intraday high during regular trading. The Nasdaq Composite dropped 1.26% despite hitting an intraday record earlier in the session.

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“Bullishness was enhanced by the announcement that current Chair Powell will be reappointed by President Biden,” said Jim Paulsen, chief investment strategist for Leuthold Group. “Fears were building in recent weeks that Lael Brainard may be chosen over Powell and she was perceived as a much bigger monetary Dove which had intensified inflation fears.”
While trading is likely to slow because it’s Thanksgiving week and the Fed chief decision is behind the market, investors will be watching some economic data coming out Tuesday, including the Philly Fed. Additional data out later in the week includes weekly unemployment claims, a GDP update, personal income, and consumer confidence reads.

“It is Thanksgiving week, so the next few days will likely be extremely low volume and probably won’t have many fireworks,” said Ryan Detrick, chief financial strategist at LPL Financial. “Still, Wednesday will bring the latest Fed minutes and the Fed’s favorite measure of inflation in the PCE, so we could have something to think about before we go off and eat a lot of turkey.”
Earnings season continues on Tuesday with reports from American Eagle, Best Buy and Abercrombie & Fitch before the bell. Dell Technologies, GAP, HP and Nordstrom report quarterly earnings after the bell on Tuesday.
Investors are also juggling concerns about coronavirus overseas. German Chancellor Angela Merkel warned that the country was seeing a spike in the virus.
“Although Covid case counts are up around the globe, there is not much evidence that it is shutting down the U.S. economy again as it has in the past,” added Paulsen. “For example, travel forecasts for the Thanksgiving holiday are the strongest since before the pandemic.”
U.S. markets will be closed for the Thanksgiving holiday on Thursday. The stock market closes early at 1 p.m. ET on Friday.

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YOUNG COMPANIES everywhere were preparing for doomsday in March 2020. Sequoia Capital, a large venture-capital (VC) firm, warned of Armageddon; others predicted a “Great Unwinding”. Startups like Airbnb trimmed their workforce in expectation of an economic bloodbath. Yet within months the gloom had lifted and a historic boom had begun. America unleashed a raft of stimulus measures; the dominance of tech firms increased as locked-down consumers spent even more of their lives online. A wave of companies, including Airbnb, took advantage of the bullish mood by listing on the stockmarket. The market capitalisation of venture-capital-backed firms that went public last year amounted to a record $200bn; it is on course to reach $500bn in 2021.With their pockets full, investors are now looking to bet on a new generation of firms. Global venture investment—which ranges from early “seed” funding for target firms that have not yet developed a product to funding for more established startups—is on track to hit an all-time high of $580bn this year, according to PitchBook, a data provider. That is nearly 50% more than was invested in 2020, and about 20 times that in 2002 (see chart).The type of investor piling into venture activity has changed just as dramatically. It was once the preserve of niche venture-capital firms run in Silicon Valley. These raised funds from and invested on behalf of pension funds and other end-investors, often relying on vast networks of connections with founders. So far this year, however, only three of the ten biggest venture investors by assets under management have been traditional VC firms.Instead, deals led or solely struck by private-equity shops, hedge funds and others that used to conduct little venture activity are on track to nearly double from $144bn in 2020 to $260bn this year. That accounts for a staggering 44% of global VC activity, up from 20% in 2002. “Crossover” funds like Tiger Global Management, which straddle public and private markets, are deploying capital at a breakneck pace. Behemoth pension funds are increasingly directly investing in startups.The flood of money from deep-pocketed investors has helped swell valuations. But it is also flowing to once-neglected corners and new opportunities. Venture activity now extends well beyond Silicon Valley and America more broadly, and is financing enterprises working on everything from blockchains to biotech.The wave of capital is also transforming how VC works. VC firms are adopting new strategies as they seek to differentiate themselves in some respects, and to mimic their Wall Street competitors in others. That comes with both benefits and drawbacks for the business of innovation.The modern venture-capital industry sprouted from a laboratory at Fairchild Semiconductor, a Silicon Valley chipmaker, in the 1960s. Arthur Rock, the first to leave Fairchild for investing, raised $5m in his first fund and returned $100m over seven years. Eugene Kleiner and Don Valentine soon followed, setting up Kleiner Perkins and Sequoia respectively. Both are still large VC firms today.The approach was to back risky startups in hope that the big successes, like Google, would carry an entire portfolio. Seed investments were often made before a startup earned any revenue. Then came an alphabet soup of successive funding rounds, typically ranging from series A to C, as a company matured. The VCs’ funds were closed-ended, meaning they distributed returns to investors, usually pension funds, endowments and other long-term-oriented investors, within seven to ten years, after taking a cut of their own.Veni, vidi, VCThe venture capitalists did not just provide finance. They also played consiglieri, often taking a seat on a company’s board. They offered a wealth of experience and access to a network of contacts, introducing startups to professional chief executives, for instance. Entrepreneurs flocked to Sand Hill Road, the home of many Silicon Valley VC firms, in the hope of being funded. The industry’s reliance on personal connections made it rather like an old boys’ club.The model proved astoundingly successful. Although VC-backed companies represent less than 0.5% of American companies created every year, they make up nearly 76% of the total public-market capitalisation of companies started since 1995. Over time VCs increasingly bet on slightly older “later-stage” companies and some opened offices abroad. Andreessen Horowitz, also based on Sand Hill Road, was founded in 2009 and rose towards the top.Why, then, is the model being disrupted? The frenzy reflects both the entrance of competitor funds and greater interest from end-investors. That in turn reflects the fall in interest rates across the rich world, which has pushed investors into riskier but higher-return markets. It has no doubt helped that venture capital was the highest-performing asset class globally over the past three years, and has performed on a par with bull runs in private equity and public stocks over the past decade.End-investors who previously avoided VC are now getting involved. In addition to alluring returns, picking out the best-performing funds may be easier for VC than for other types of investment: good venture performance tends to be more persistent, according to a paper in the Journal of Financial Economics published last year. The success of big tech, much of which was backed by VC dollars, may have been another attraction. Investors may have previously underestimated the revenue-earning potential of the industry, says Fred Giuffrida of Horsley Bridge, a fund that invests in VC funds. They may now be correcting for this.The rush of capital has pushed up company valuations. Seed-stage valuations today are close to where series A valuations (of companies that are typically already generating revenue) were a decade ago. The average seed valuation for an American startup in 2021 is $3.3m, more than five times the level in 2010.But funding is also venturing into new terrain. In 2002 84% of venture activity, in terms of value, took place in America. That share is now about 49% (see chart, middle panel). China’s share grew from under 5% in the 2000s to 37% in 2018, before its tech crackdown brought it down to nearer 20%. Capital has instead sought greener pastures in Europe.Software startups continue to be popular with venture capitalists. But “you’re seeing a broadening of who gets funded,” says Josh Lerner of Harvard Business School. Riskier biotechnology, crypto and space ideas are being backed. Moderna, a pharmaceutical company that produces covid-19 vaccines, was spun-out of Flagship Pioneering, a VC firm. Green tech, which saw a boom and bust in the 2000s, is resurgent. PwC, a consultancy, estimates that between 2013 and 2019 climate-tech venture deals grew at five times the rate of overall startup funding.For many old-school venture capitalists, this new competitive world is unsettling. “We need to react,” acknowledges Roelof Botha of Sequoia. Though rising valuations bolster returns on current portfolios, they dry up future returns. Crossover funds are less price-sensitive than traditional VCs. And for later-stage startups, investors’ money is more fungible, says Mr Giuffrida. It matters less who is investing than how much they are willing to pay. The market for orthodox VC firms is becoming tougher. Despite the venture boom, fundraising by new niche VCs in America has fallen from a peak of $14bn in 2018 to an expected $5.5bn in 2021.Differentiation is one part of the traditional firms’ response. Many crossover investors tend to take a data-driven approach, building portfolios of startups that resemble an index of top performers in each sector. They eschew taking board seats or playing large roles in their portfolio companies. To contrast with this, some VCs are underlining their personal touch. Crossover funds “are transactional capital. We are relationship capital,” says one early-stage investor.One fund in Austin, Texas, 8VC, is expanding its startup “incubator”, which currently nurtures and spins out five or so companies a year. Slow Ventures, another VC firm, is even investing directly in the career paths of individuals, such as online-content creators, who may not yet run a proper business. Without a compelling offering, says Ben Horowitz, co-founder of Andreessen, VCs either need to be willing to overpay, or close up shop altogether.Another response is to scale up. Some angel investors, who invest their own money without a team or firm, are spreading their wings and evolving into solo venture capitalists, who invest external funds. They can move fast—there are no other partners to convince before doing a deal. Elad Gil, a prominent solo VC, made around 20 investments in the first half of 2021 and is raising a $620m fund, an astonishing sum for an individual investor.The biggest and best-known VC firms are also expanding. Andreessen has grown its investment team from about 25 to 70 in the past four years. It offers companies support on everything from diversity and inclusion policy to a vast network of potential hires and customers.The line between VC and other investors is also blurring further, and not just because Wall Street is encroaching onto Sand Hill Road. Big VC firms are becoming more like other asset managers. Sequoia is expanding its presence in public markets. In October it said that its American and European venture funds will sit within a larger, timeless fund. When portfolio firms go public, their shares will flow to the superfund instead of to end-investors. This allows Sequoia to capture returns even after an IPO. Crossover funds like Tiger already seamlessly transfer holdings from their private to public funds. Other large VC firms may follow suit.Sequoia’s superfund mirrors Wall Street’s fascination with permanent capital. “Many of the dynamics in private-equity markets are now spilling over into venture markets,” says Mr Lerner. VCs and private-equity funds used to raise money from investors every few years, which can be costly and prevent them holding on to investments. Leading buy-out firms like Blackstone and KKR found ways around this. Nearly a third of KKR’s assets under management are now permanent.Sequoia is also becoming a registered investment adviser, joining Andreessen and other large funds, like SoftBank. That allows it to hold more “secondary” shares—stakes that are not bought directly from the issuing company. (VCs’ secondary holdings are usually capped at 20% of their portfolios.) Andreessen’s status as an adviser allowed it to launch a $2.2bn crypto fund in June that mainly invests in digital tokens, rather than startups.The biggest funds are best placed to benefit from the new world. Funding from a top VC firm sends a signal of a startup’s quality, argues Mike Volpi of Index Ventures. And because non-traditional investors often rely on such signals to guide their dollars, their value has only risen. The result is that the industry has become more unequal: although the average American VC’s assets under management rose from $220m in 2007 to $280m in 2020, that is skewed by a few big hitters. The median, which is less influenced by such outliers, fell from $70m to $48m. But this is not to say that the industry has become dominated by a few star funds. Market shares are still small. Tiger Global, for instance, led or co-led investments worldwide worth $5bn in 2020, just 1.3% of total venture funding. Startups have diverse enough needs so there is plenty of scope for a variety of VC firms to exist, reckons Mr Volpi.Company founders, for their part, have gained bargaining power as investors compete. “There’s never been a better time to be an entrepreneur,” says Ali Partovi of Neo, a VC firm based in San Francisco. Ten years ago, most new founders had not heard of a term-sheet, a document describing the terms and conditions of an investment, says one venture capitalist. Now, many startups work with “accelerators” like Y Combinator to learn the basics. Cloud computing and other software-as-a-service (SaaS) tools allow some firms to expand without much capital investment.The time taken to strike a deal has shrunk from several weeks to days, if not hours. Zoom has changed the nature of fundraising. Biodock, a microscopy startup, had ten calls with VCs scheduled in a day, which gave it more power in negotiations, reckons Michael Lee, its founder. Founders receive “refreshes”, top-ups of equity during fundraising rounds. To get ahead of the rush, some investors are offering companies cash even before they start looking for more funding.The shift in power away from investors is welcome in some respects. The outsized returns of VC firms will be competed down. Moreover, tech is no longer terrain that only well-connected venture capitalists in Silicon Valley can make sense of. The performance of SaaS firms, for instance, can be assessed using data on users’ behaviour. The relationship between founder and venture capitalist might matter less than it used to, particularly as the startup grows.But there are costs, too. Shortened deals can lead to FOMO (a fear of missing out) for investors and, sometimes, worse investment decisions, says Mr Partovi. The shift has also weakened governance. As the balance of power tilts away from them, VCs get fewer board seats and shares are structured so that founders retain voting power. Founders who make poor chief executives—such as Travis Kalanick, the former boss of Uber, a ride-hailing firm—can hang on for longer than they should. The relationship between VC firms and founder lasts about ten years, as long as the average marriage, notes Mr Partovi. You wouldn’t choose your spouse in a hurry.Another risk is that the market is too frothy. Some investors point to bumper profits for tech companies and the financial health of even the youngest startups as reasons for being optimistic about valuations. But “companies are being priced on the assumption that everyone will win. Statistically that won’t happen,” says Mr Giuffrida of Horsley Bridge.Stellar returns for investors, then, may not be assured. But the broader question is whether the innovation that is taking place is worth the risk. “If too much stuff gets funded, that’s generally good. It’s much better than nobody funding Moderna,” says Mr Horowitz. And capital can drive new ideas, not just the other way around. Investors have typically been willing to bet on riskier but more innovative startups during past venture booms, finds a study by Ramana Nanda of Imperial College, London and Matthew Rhodes-Kropf of MIT Sloan School of Management. Resilience, a capital-intensive drugmaker founded last year, has raised $800m and already bought several factories. This would not have been possible even two years ago, says Drew Oetting of 8VC. Venture activity in the space sector grew by 70% globally to $7.7bn in 2020. “There are more moonshots”, reckons Mr Lerner of Harvard.In tech the result could be more vibrant competition. The big-tech firms used to gobble up challengers: acquisitions by Amazon, Apple, Facebook, Google and Microsoft rose after 2000 and hit a peak of 74 in 2014. But they have fallen since, to around 60 a year in 2019 and 2020, perhaps owing to a fear of antitrust enforcement. More startups are making it to public markets. Listings, rather than acquisitions or sales, now account for about 20% of “exits” by a startup, compared with about 5% five years ago.Wherever valuations go, it looks like the changes to the structure of VC will last. Outsized returns in early-stage investing were bound to be bid down eventually. As VC firms themselves are forced to innovate, a broader range of ideas is being backed in a wider variety of places. The pandemic was not the disaster that venture capitalists had first expected. It has nevertheless transformed what they do. More

OF ALL AMERICA’S many job openings, this was the most important. On November 22nd President Joe Biden announced that he would renominate Jerome Powell as chairman of the Federal Reserve when his current term expires in February. Investors and analysts had long expected the reappointment, with initial reports suggesting that it would come nearly three months ago. The delay reflects a worrying pattern of indecision and gaps in personnel appointments by the White House. None are more crucial than naming the head of the Fed, a position with outsized power over the economy. So it is reassuring that Mr Biden has at last made the obvious choice, opting for a steady pair of hands at a time of economic danger.Mr Powell must now confront two broad challenges. The first, and by far the most pressing, is how to tame inflation, now running at its highest rate in more than three decades. Mr Powell was rightly commended for presiding over a prompt, forceful response to last year’s pandemic-induced slowdown. Unwinding those stimulus policies will be even more treacherous. With consumer prices up by 6.2% in October compared with a year earlier, and likely to rise still higher in coming months, the Fed is under clear pressure to act.That, however, is more complicated than it sounds. Before raising interest rates, Mr Powell has all but committed himself to bringing the Fed’s quantitative easing to a halt—that is, halting its monthly purchases of bonds that helped reinvigorate the economy over the past 20 months. The Fed is starting to reduce, or taper, its asset purchases this month, but it is only on track to stop them altogether by June 2022. This means that a first rate increase is still at least half a year into the future.The immediate question for Mr Powell, then, is whether to taper more quickly. Doing so would be sensible. As it stands, even if the Fed is reducing its monthly purchases, it is still pumping cash into the financial system at a time when the stockmarket is near record highs and interest rates, in inflation-adjusted terms, are deeply negative. Moreover, an earlier completion of the taper would give the Fed more options. It need not commit itself to raising rates early next year, but it would be wise to have that on the menu.Yet it would take courage for Mr Powell to do this. Scarred by its first experience with tapering back in 2013, when global markets panicked at the mere hint of it, the Fed has carefully telegraphed its moves to investors this time around. “If suddenly you have a new taper schedule and, critically, it has clear implications for rates, you are rolling the dice as to the market reaction,” says Krishna Guha of Evercore ISI, an advisory firm. But sticking to gradual tightening as inflation gallops higher is just as big a gamble. Over the past year the Fed has consistently underplayed the inflationary threat, forecasting that prices would be lower than they actually are. That cannot continue. The shift to tighter policy will be a decision for the entire Fed board, but as chairman Mr Powell must steer the discussion in that direction before it is too late.The other big challenge for Mr Powell is the question of the central bank’s fundamental role. The principal alternative candidate to lead the Fed was Lael Brainard, a governor on the Fed’s board who was favoured by the progressive wing of the Democratic Party. Mr Biden has nominated her to be vice-chairwoman, giving her more influence over big decisions. She and Mr Powell have differing views in three areas: how to regulate banks; how to approach climate change; and whether to launch a digital version of the dollar. Over the course of Mr Powell’s second four-year term, all of these questions will come to the fore.Under Mr Powell the Fed has slowly chipped away at some of the rules erected to make the banking system safer after the global financial crisis of 2007-09. This deregulation earned Mr Powell the enmity of left-wing Democratic politicians, including Elizabeth Warren, a senator, who called him a “dangerous man”. Ms Brainard, by contrast, regularly voted against these relaxations. Most of the rule changes have in fact been relatively mild and, most importantly, banks’ capital buffers are much higher than a decade ago. But with Ms Brainard now second only to Mr Powell, the signal to banks is that the regulation may tighten. (The White House is, however, yet to fill the important role of vice-chair for supervision, which was occupied until October by Randal Quarles.)On climate, Mr Powell has encouraged financial institutions to weigh global warming in their thinking about future risks, but he has also said that climate change is not a big factor in the central bank’s own decisions. That is defensible: the Fed must keep its focus on the economy and leave the environment, in the main, to other parts of the government. But Ms Brainard wants the climate to figure more prominently in the Fed’s calculus. Mr Powell must find a way to accommodate that demand without it becoming a distraction.Similarly, Ms Brainard has called for the Fed to launch a “central bank digital currency”, to ensure that the dollar remains the dominant global currency in the 21st century. Mr Powell’s longstanding position is that he wants the Fed to study the matter further, saying that it is better to be right than to be first. At least he need not worry about being first: China is already well ahead of America in the digital race.Mr Powell will, in short, have a crowded agenda over his second term. And he just has to start with the simple matter of quelling inflation without crashing the economy. Time to get to work. More

The GM logo is seen on a water tank of the General Motors assembly plant in Ramos Arizpe, in Coahuila state, Mexico February 11, 2021.
Daniel Becerril | Reuters

Check out the companies making headlines in midday trading.
Activision Blizzard — The video game stock continues to be on watch as the company has come under fire following reports of alleged sexual misconduct. Shares slid as much as about 2% on Monday Activision CEO Bobby Kotick told senior managers he would consider leaving his job if he can’t fix culture problems at the video game maker, according to a Wall Street Journal report Sunday.

Teladoc — Shares of the virtual health-care services company dropped 6.7% after BTIG downgraded the stock to neutral from buy. BTIG noted it’s “disappointed” with membership growth expectations and said it sees membership as “the most leading indicator of long-term growth.”
General Motors — Shares of General Motors rose 3.6% after CNBC reported that the company has acquired a 25% stake in the Seattle-based boating start-up Pure Watercraft. GM will become a supplier of components to Pure Watercraft and will provide engineering, design and manufacturing expertise to help it establish new factories.
Rivian, Ford — Rivian shares tumbled more than 8%, extending its losses from Friday on news that a deal with Ford to jointly develop an electric vehicle has been canceled. Ford shares gained 5%.
Tesla — Shares of Tesla rose 1.7% after CEO Elon Musk tweeted that the company’s Model S Plaid electric sedan would “probably” launch in China early next spring, in response to a question by another Twitter user.
Blink Charging — Shares of the EV charging company slid more than 11% after Cowen downgraded the stock to a market perform rating. The firm said that the company’s valuation now appears stretched relative to peers, following the “euphoric run across EV charging stocks.” The group has gotten a boost in recent sessions thanks to the infrastructure bill, which directs billions in funding for a national charging network.

Vaccine makers — Vaccine makers’ shares rose after the Centers for Disease Control and Prevention on Friday gave final clearance for their Covid booster shots for U.S. adults. Pfizer and BioNTech also reported upbeat study results for 12- to 15-year-old vaccine recipients. Moderna gained 7% on Monday. Pfizer added almost 1%, and its partner BioNTech jumped more than 11%.
Vonage, Ericsson — Shares of Vonage soared 27% following news it will be acquired by Swedish telecom firm Ericsson for $6.2 billion. The deal is expected to close in the first half of 2022 and follows Ericsson’s acquisition of U.S. wireless networking company Cradlepoint last year for $1.1 billion. Ericsson’s shares fell more than 7%.
Astra — Shares of the rocket builder surged 17% after the company reached orbit for the first time over the weekend. Astra’s LV0007 rocket launched from the Pacific Spaceport Complex in Kodiak, Alaska, on Saturday, carrying a test payload for the U.S. Space Force.
Banks — Bank stocks moved higher along with Treasury yields after President Joe Biden announced his nomination of Federal Reserve Chairman Jerome Powell for a second term. JPMorgan, Goldman Sachs and Morgan Stanley all rose more than 2%. Bank of America gained almost 2%. and Wells Fargo gained more than 3%. Bank stocks tend to benefit from rising interest rates because they allow for higher profits.
 — CNBC’s Hannah Miao, Pippa Stevens and Yun Li contributed to this report.

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President Joe Biden’s decision to nominate Lael Brainard as Fed vice chair is thought to be in part the work of progressives, who say she’ll emphasize climate change and equitability.
In tapping Brainard, Biden nominates the 59-year-old to help manage the U.S. economy through a jump in inflation and a steady but uneven recovery.
Brainard has also pressed the case for a digital dollar and is seen as a leading voice on financial innovation such as crypto at the Fed.

U.S. Federal Reserve board member Lael Brainard speaks after she was nominated by U.S. President Joe Biden to serve as vice chair of the Federal Reserve, in the Eisenhower Executive Office Building’s South Court Auditorium at the White House in Washington, U.S., November 22, 2021.
Kevin Lamarque | Reuters

Lael Brainard is often the outlier.
In her role as one of seven Federal Reserve governors, she’s made a habit of objecting to otherwise-unanimous motions to roll back financial regulations. Until her first objection in 2018, no governor had dissented since 2011.

Barring her handful of dissents each year, there have been just three others from her colleagues in recent years.
One of Brainard’s more-recent dissents came in June 2020, when the Fed considered changes to the Volcker Rule, a landmark provision of the financial-crisis Dodd-Frank law that limits banks’ dealing with private-equity firms and hedge funds.
Brainard cast the sole vote against altering the rule. The proposals, she warned, could weaken core protections and allow banks to “return to risky activities seen in the 2008 financial crisis.”
As Brainard is the only Democrat on the Fed’s board, her objections — 12 in 2020 alone — went unheeded.
But now someone is listening. And his name is Joe Biden.

The president has picked Brainard to be vice chair of the Fed, one of the most powerful economic positions in the world and perhaps the heir apparent to the Federal Reserve chair role itself. Biden on Monday picked Chairman Jerome Powell to lead the Fed for a second term.
The job of Fed vice chair carries sway in how interest rates are set, the balance of employment versus inflation, and the direction of regulation over the nation’s biggest banks, such as JPMorgan Chase, Bank of America and Wells Fargo.
“While there’s still more to be done, we’ve made remarkable progress over the last 10 months in getting Americans back to work and getting our economy moving again. That success is a testament to the economic agenda I’ve pursued and to the decisive action that the Federal Reserve has taken under Chair Powell and Dr. Brainard to help steer us through the worst downturn in modern American history and put us on the path to recovery,” President Joe Biden said in a prepared statement.

“As I’ve said before, we can’t just return to where we were before the pandemic,” he added. “Together, they also share my deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
A spokesman for the Federal Reserve declined to make Brainard available for an interview.

Progressive push

Biden on Monday announced his intent to nominate the 59-year-old Brainard to serve as Powell’s deputy to help manage the U.S. economy through a jump in inflation, a steady but uneven recovery and sluggish labor force participation.
Brainard was thought to be under consideration for the top job in the days leading up to the White House announcement. But Powell, a Republican, earned high marks from leaders in both parties for the Fed’s actions in 2020 to flood the economy with cash as businesses across the country closed thanks to Covid-19.
Economists say that near-zero interest rates and the Fed’s $120 billion in monthly purchases of Treasury and mortgage securities saved the U.S. economy from an even deeper recession and is a principal reason for the faster-than-expected rebound.
Prior to Monday’s announcement, Wall Street speculated Brainard could also be tapped to be the Fed’s Vice Chair for Supervision, the central bank official in charge of regulating banks. The White House said Monday that the president would announce its candidate for that job at some point in December.
“While Brainard missed out on the top job this time, her nomination as vice chair for monetary policy rather than vice chair for supervision and regulation as more widely speculated places her at the core of Fed policymaking going forward and positions her as a potential future Fed chair or Treasury secretary,” said Krishna Guha, head of central bank strategy at Evercore ISI.

Sen. Elizabeth Warren (D-MA) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington, DC, U.S., September 28, 2021.
Kevin Dietsch | Reuters

The administration’s decision to promote Brainard is thanks in part to progressive lobbying and Democrats such as Sens. Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon.
Throughout the summer and fall, Warren encouraged Biden to find a Fed chair tougher on banks and to stay away from Powell, whom she called a “dangerous man.” Others, including Whitehouse and Merkley, pushed for a candidate who considers climate change a serious threat and would reframe the way banks consider its risks.
Brainard has in recent months delivered speeches on topics including climate change and the race-based economic disparities that the Covid-19 pandemic exacerbated.
She told Harvard undergraduates in February that while the Labor Department’s headline unemployment rate is a useful metric, it tends to mask inequalities when taken in isolation. Instead, she said, she considers broad-based and inclusive maximum employment a “critical guidepost for monetary policy.”
Some viewed such speeches as a not-so-subtle attempt to distinguish herself from Powell, who had been reluctant to expand the Fed’s jurisdiction to topics that could be perceived as partisan.
“Brainard was Biden’s obvious choice as Chair were he not to renominate Powell,” PNC Chief Economist Gus Faucher said in an email. “Differences between Powell and Brainard on monetary policy have been slight, but Brainard has generally been stricter on the banking industry than Powell. It was something of a surprise move that Brainard was named Vice Chair, and not Vice Chair for Supervision.”
Senate Banking Committee Chairman Sherrod Brown, D-Ohio, was quick to applaud Biden’s decision to promote Brainard. His committee is expected to recommend both Powell and Brainard to the broader Senate, where lawmakers are expected to confirm both appointments by wide margins.
“Dr. Lael Brainard has spent her life fighting for a stronger, fairer economy – one where workers share in the growth and prosperity they create and where their hard work is not gambled away by reckless Wall Street banks,” he said in a release.  
Sen. Pat Toomey, the committee’s top Republican, praised the president’s decision to renominate Powell and said in a release that while he has some concerns about Brainard’s tendency to favor more banking regulation, he looks forward to meeting with her to talk them over.

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The Fed has long placed a premium on its political independence.
Board members serve 14-year terms in part to insulate them from the day-to-day desires of elected officials. But that power is bestowed with a narrow mandate: Use monetary policy to maximize employment, stabilize prices and moderate long-term interest rates.
Brainard did not always appeal to the progressive wing of the Democratic Party.
Just 12 months ago, with speculation raging over whom Biden might tap to be his Treasury secretary, some progressives painted Brainard as too moderate for the role.
Revolving Door Project Executive Director Jeff Hauser made a case against Brainard in a blog post dated Oct. 15, 2020.
“We need a Treasury Secretary who overcomes the Bill Clinton and early Obama era Democratic technocrat’s fixation on budget deficits that Brainard peers and colleagues like Robert Rubin and Tim Geithner exhibited,” he and his colleagues wrote.
“Brainard has proved that she won’t go to bat on climate issues at the Fed. How can we trust that she will, as Treasury Secretary?” they added. The Revolving Door Project is part of the Center for Economic and Policy Research, a left-leaning think tank.

Federal Reserve Chairman Jerome Powell poses for photos with Fed Governor Lael Brainard (L) at the Federal Reserve Bank of Chicago, in Chicago, Illinois, U.S., June 4, 2019.
Ann Saphir | Reuters

Brainard has also pressed the case for a digital dollar and is seen as a leading voice on financial innovation at the Fed. She said at a springtime conference that a cryptocurrency backed by the central bank could make it easier to service the nearly 1 in 5 Americans considered “underbanked.”
“The Federal Reserve remains committed to ensuring that the public has access to safe, reliable, and secure means of payment, including cash,” she said at a conference presented in May by Coindesk. “As part of this commitment, we must explore — and try to anticipate — the extent to which households’ and businesses’ needs and preferences may migrate further to digital payments over time.”

Academic and political pedigree

Brainard is no stranger to the Fed and has served on its main governing body, known as the Board of Governors, since 2014. If confirmed by the majority of the Senate, Brainard would serve as vice chair for four years after current Vice Chair Richard Clarida’s term expires next year.
Her life and career are both marked by international relations.
Brainard was born in Hamburg, Germany, to a Foreign Services officer and grew up in East Germany and Poland during the Cold War. Her education culminated in a Ph.D. in economics at Harvard in 1989.
Her studies focused on the relationship between international trade policies and employment. She worked for the Clinton administration’s National Economic Council during the 1990s, when she served as one of the president’s chief advisors to the Group of Eight industrial nations.

After the George W. Bush administration, Brainard rejoined U.S. government in 2009 as Treasury’s under secretary for international affairs, which at the time made her the highest-ranking woman in the department’s history. As Treasury’s chief diplomat, she represented U.S. interests throughout the global financial and European debt crises.
She resigned from the Treasury post in 2013 as it became clear that former President Barack Obama planned to nominate her to the Fed’s board. She began her 14-year term at the central bank in June 2014.
For most of her time at the Fed, her quiet ambition and data-driven work have endeared her to her Republican colleagues, including Powell. Those qualities have also made her a routine candidate for the nation’s top economic posts as appealing to senators on both sides of the aisle.
But as the Biden administration prolonged its decision on whom to nominate, some believe Brainard’s confirmation odds waned somewhat among Republicans.
Her recent speeches about climate change and other progressive priorities, coupled with a longer track record of supporting bank regulation, is believed to have eroded some support among Republicans over the past 10 months.
Her history of favoring lower interest rates at the risk of fueling inflation — albeit to boost employment — may no longer be in vogue in an economy with consumer prices rising at their fastest clip since 1990.

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Fintech firm MoonPay said Monday it has raised $555 million in its first-ever financing round.
The investment, led by Tiger Global and Coatue, values the company at $3.4 billion.
MoonPay lets users buy cryptocurrencies using conventional payment methods like credit cards.

MoonPay CEO and co-founder Ivan Soto-Wright speaking at the Bitcoin 2021 conference in Miami, Florida.
Eva Marie Uzcategui | Bloomberg | Getty Images

Cryptocurrency start-ups have raised record funding this year.
It’s no surprise, then, that some major players in the space — from the Winklevoss twins’ virtual currency exchange Gemini to Ethereum co-founder Joseph Lubin’s blockchain start-up ConsenSys — announced massive new funding deals in the last week.

MoonPay, a relative newcomer, is taking the crypto mania in venture capital to new heights. The three-year-old fintech firm said Monday it has raised $555 million in its first-ever financing round. The investment, led by Tiger Global and Coatue, values the company at $3.4 billion.
Founded in 2018, Miami-based MoonPay’s software lets users buy and sell cryptocurrencies using conventional payment methods like credit cards, bank transfers or mobile wallets like Apple Pay and Google Pay.
It also sells its technology to other businesses including crypto website Bitcoin.com and non-fungible token (NFT) marketplace OpenSea, a model CEO Ivan Soto-Wright calls “crypto-as-a-service.”
Soto-Wright said the firm aims to make crypto accessible to the masses in the same way that video-conferencing tools like Zoom made it easier to make calls over the internet.

“With the blockchain and cryptocurrencies, I think right now we are still in the dial-up days,” he told CNBC in an interview.

“Eventually we will get to this place where it’s frictionless to move any amount of value around anywhere in the world, and costs move as close as possible to zero.”

‘PayPal for crypto’

With prices of bitcoin and other cryptocurrencies hitting all-time highs lately, venture capital investment in the start-ups powering the market is booming. Investors are looking for the next Coinbase after the crypto exchange giant’s blockbuster listing in April.
MoonPay’s pitch to investors is that it offers a “gateway” to digital assets. For now, that includes bitcoin, ether and other digital tokens like NFTs. But Soto-Wright’s vision is to expand the platform to include everything from digital fashion to tokenized stocks.
“People are calling us similar to PayPal, but for crypto,” he said.
The company has strong controls and checks in place to tackle money laundering, Soto-Wright said. Regulators have become increasingly wary about illicit activity in the market.
MoonPay says it has been profitable since launching its platform in 2019. The firm is on track to hit $150 million in annual revenue this year after transaction volumes skyrocketed 35-fold from 2020. Its service is now used by more than 7 million customers.
Still, the company faces stiff competition, not least from fintech pioneers like PayPal, which rolled out its own crypto features last year.

Soto-Wright said he’s not worried about the competition. He described PayPal as a “walled garden” that doesn’t give users control over their assets. “We believe the future of crypto is about customers taking possession of their private keys,” passwords that grant people access to their funds, he said.

IPO ambitions

Looking ahead, MoonPay plans to spend the money raised on new products and expansion. Soto-Wright said the firm already has ambitions to take the business public. “We have aspirations eventually to be a public company,” he said.
Cryptocurrencies are notoriously volatile, however, and that has impacted even the most well-known players in the space. Coinbase, for example, missed sales estimates in the third quarter after a drop in monthly users.
Bitcoin hit an all-time high of nearly $69,000 earlier this month, but has since dropped about 17%. Ether, meanwhile, is down 13% from its record high.

Soto-Wright said MoonPay is prepared for a potential downturn in crypto markets, adding the firm is “agnostic” on which assets it supports.
“In the same way that telecoms got disrupted by voice over IP (internet protocol), we think, over time, financial services and all these different applications will be disrupted by the blockchain,” he said.
“There’s obviously going to be volatility as the market is trying to discover what assets, what blockchains are ultimately going to get adopted.”

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Take a look at some of the biggest movers in the premarket:
Astra Space (ASTR) – Astra rocketed 38.4% higher in premarket trading, after Astra sent a rocket into orbit for the first time over the weekend. The rocket carried a U.S. Space Force payload.

Activision Blizzard (ATVI) – Activision CEO Bobby Kotick would consider leaving his job if he can’t fix culture problems at the video game maker, according to a Wall Street Journal report. Kotick is said to have made those comments to senior managers after he and the company faced criticism for its handling of sexual misconduct allegations. Activision shares slid 1.4% in premarket trading.
Apple (AAPL) – Apple won’t be able to deliver new iPads in time for Christmas in key Asian markets, according to Japan’s Nikkei news service. The report also said iPhone delivery delays aren’t quite as long, but still far longer than in a typical year.
Pfizer (PFE), BioNTech (BNTX), Moderna (MRNA) – The drugmakers saw their shares rise after Covid booster shots for all adults got final clearance from the Centers for Disease Control and Prevention on Friday. Additionally, Pfizer and BioNTech announced upbeat study results for vaccine recipients aged 12-15. BioNTech was up 2% while Moderna gained 1.8%. Pfizer edged higher by 0.8%.
Monster Beverage (MNST) – The energy drink maker is discussing a merger with Constellation Brands (STZ), according to multiple reports. Bloomberg – which first reported those talks – said the structure of such a deal is not yet known. Monster Beverage and the spirits producer have a combined market value of nearly $92 billion. Constellation rose 2% in the premarket, while Monster was down 0.3%.
Vonage (VG) – Ericsson (ERIC) is buying the U.S. cloud communications firm for $6.2 billion, with the deal expected to close in the first half of next year. The deal follows the Swedish telecom firm’s acquisition of U.S. wireless networking company Cradlepoint last year for $1.1 billion. Vonage soared 25.7% in the premarket, while Ericsson slid 3.9%.

Bluebird Bio (BLUE) – The drugmaker’s shares surged 7.2% in the premarket after the Food and Drug Administration granted priority review status for its treatment of a blood disorder known as thalassemia.
Rent The Runway (RENT) – Rent The Runway was rated “buy” in new coverage at Goldman Sachs, which set a $25 price target for the luxury fashion rental company’s stock compared to Friday’s close of $16.20. Rent The Runway also got positive mentions in new coverage at Morgan Stanley, Telsey Advisory Group, Wells Fargo, Credit Suisse, JMP Securities and Piper Sandler. The stock rallied 4.3% in premarket action.
Rivian (RIVN) – Rivian fell 3.4% in premarket trading following Friday’s news that Ford (F) and Rivian have dropped plans to jointly develop an electric vehicle.
Wynn Resorts (WYNN) – Wynn added 1.4% in the premarket, while Melco Resorts (MLCO) gained 1.6%. Both resort operators rose on a South China Morning Post report that the border between Hong Kong and mainland China could reopen soon, potentially increasing the number of visitors to Macau casinos.
Blink Charging (BLNK) – The stock was downgraded to “market perform” from “outperform” at Cowen, which said the charging network operator’s valuation is stretched following a “euphoric” run across electric vehicle charging stocks. Blink lost 2.6% in premarket action.

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