“I came to Washington after the 2008 crash to make sure that nothing like that would ever happen again,” she told Powell during a Senate Banking Committee hearing. “Your record gives me grave concern. Over and over, you have acted to make our banking system less safe. And that makes you a dangerous man to head up the Fed, and it’s why I will oppose your renomination.”
Powell’s four-year term as Fed chairman ends in February and President Biden has not yet announced if he plans to renominate him. Powell, a Republican, was nominated to the central bank’s board of governors by Barack Obama and has served since 2012. Donald Trump nominated Powell as chairman in 2017, opting to replace Janet Yellen, a Democrat who now serves as Biden’s Treasury secretary.
Powell, a former Treasury official under George H.W. Bush, has earned high marks from many Democrats and Republicans for his clear communication of the Fed’s monetary policy decisions and for rebuffing public pressure from Trump to keep interest rates at historic lows despite the improving economy in 2018 and 2019. Powell also drew bipartisan praise for quick and aggressive efforts to fight the deep recession caused by the coronavirus pandemic, including using emergency lending powers to stabilize financial markets.
But the Fed also is a top financial regulator and Warren, along with other progressives, has criticized Powell for not being tougher in that role.
Last month, Representatives Ayanna Pressley of Boston, Alexandria Ocasio-Cortez of New York, and three other progressive House Democrats publicly urged Biden to nominate a new Fed chair. In addition to criticizing him for weakening financial regulatory reforms put in place after the 2008 crisis, the lawmakers said that under Powell’s leadership, the Fed “has taken very little action to mitigate the risk climate change poses to our financial system.”
Warren has been one of Powell’s harshest critics, and would vote on his renomination in the Banking Committee and on the Senate floor. But Powell only needs a simple majority of support from the evenly divided Senate, and is expected to draw deep support from Republicans as well as some Democrats, so her opposition would not be nearly enough to derail confirmation should Biden decide to renominate him.
Underscoring Powell’s GOP backing, Senator Mike Rounds, a Republican from South Dakota, immediately followed Warren at Tuesday’s hearing and told the Fed chair that “I most certainly think you deserve to be renominated.” Another Banking Committee member, centrist Democrat Jon Tester of Montana, said this month he also supported Powell’s renomination, praising him for maintaining the Fed’s independence in the face of unusual public criticism from Trump in 2018 and 2019 over interest rate increases.
But Warren’s comments were another warning to Biden, a former competitor for the 2020 Democratic presidential nomination whom she has turned into a close ally, that choosing Powell would be tantamount to picking a fight with economic progressives. Warren voted against Powell’s confirmation as Fed chair in 2018. Other opponents in the 84-13 vote were Senators Kamala Harris of California, now Biden’s vice president, and Bernie Sanders of Vermont.
Warren and other progressives have spoken highly of Lael Brainard, the only Democrat on the Fed board, who is widely viewed as a top contender for the Fed chair nomination. White House Press Secretary Jen Psaki would not indicate on Tuesday where Biden stands in his decision-making process and had nothing to say about Warren’s comments.
As she has done at previous hearings, Warren peppered Powell with regulatory questions on Tuesday. She started by asking him if he regretted weakening the Fed’s annual stress tests for banks, which are designed to determine if they can withstand a severe economic shock. The Fed introduced stress tests after the 2008 financial crisis and in 2019 revised them so they’re easier to pass.
“I don’t think we have weakened the stress test and I’m not sure what you’re referring to,” Powell said.
After they sparred over a couple other regulatory issues, Warren said she would address “the elephant in the room” about whether Powell deserved to be renominated.
“Renominating you means gambling that for the next five years, a Republican majority at the Federal Reserve with a Republican chair, who has regularly voted to deregulate Wall Street, won’t drive this economy over a financial cliff again,” Warren said. “And with so many qualified candidates for this job, I just don’t think that’s a risk worth taking.”
Powell had no response to Warren’s opposition to his renomination. But at a news conference last week, Powell said he deferred on regulatory matters to the Fed’s vice chair for supervision, Randal Quarles, a Republican whose term ends next month. To try to appease progressives, Biden could nominate Brainard for that job, which is the Fed’s top regulatory official, if he chooses to renominate Powell.
“I respect that that’s the person who will set the regulatory agenda going forward, and I would accept that,” Powell said.
Jim Puzzanghera can be reached at firstname.lastname@example.org. Follow him on Twitter: @JimPuzzanghera.