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Warren Opposes ‘Dangerous’ Powell for Second Term as Fed Chair

·4 min read
Warren Opposes ‘Dangerous’ Powell for Second Term as Fed Chair

(Bloomberg) -- Senator Elizabeth Warren, pressing Federal Reserve Chair Jerome Powell on his record on financial regulation, said she wouldn’t support him for a second term as head of the U.S. central bank -- the highest-profile Democrat with a say on his confirmation to come out against him.

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“Your record gives me grave concern,” the Massachusetts Democrat said Tuesday during a Senate Banking Committee hearing. “You have acted to make our banking system less safe, and that makes you a dangerous man to head up the Fed and that is why I will oppose your renomination.”

Powell’s term expires in February and Bloomberg News has reported that White House aides are considering recommending President Joe Biden keep him on the job.

It’s not clear Warren’s disapproval would derail Powell. The chair has bipartisan support in the Senate, and if Biden picks him he would likely be confirmed again.

But the president would likely consider the political fallout of picking a Fed chair more popular with Republicans than Democrats if Warren’s views triggered more opposition in Biden’s own party.

The opposition from Warren, a key Democrat, means the administration will either need to increase its push for Powell or pick a candidate more palatable to liberal Democrats. But that means more resistance from Republicans in the confirmation process in a Senate in which Democrats hold 50 of 100 seats.

The senator’s opposition contrasts with the backing of Treasury Secretary Janet Yellen, who testified beside Powell at the hearing. Yellen told senior White House advisers in August that she supports reappointing Powell as chair. Her support is a crucial voice in the White House deliberation process, Bloomberg has reported, given her prior experience as Fed chair and at the central bank.

Bipartisan Support

A number of senators in both parties have said they would back him, including Republicans Rob Portman of Ohio, Thom Tillis of North Carolina, Mike Rounds of South Dakota, Jerry Moran of Kansas and Steve Daines of Montana.

Powell’s votes that joined Vice Chair of Supervision Randal Quarles’s policies of easing regulation in the name of efficiency has been a sticking point for both Warren and Sherrod Brown, an Ohio Democrat and chair of the Senate banking panel.

Warren’s the only senator to come out against a Powell pick. Brown has yet to endorse him, but made a push for a more diverse Federal Reserve during the Tuesday hearing.

Fed Governor Lael Brainard is seen as another leading contender for the chair seat. She and Powell have diverged in their views on financial regulation in particular.

Fed Chair Race Spotlights Powell-Brainard Wall Street Rule Split

A White House official did not offer an immediate comment.

Powell, a Republican, was nominated to the Fed Board by former President Barack Obama and elevated to chair by former President Donald Trump.

Powell Flexibility

Warren’s declaration indicates that she doesn’t believe that a new vice chair of supervision can set the agenda with a chair who may not agree with him or her. Powell has shown flexibility in the past, at least resisting dissenting in Board votes against initiatives by Daniel Tarullo, who led an aggressive overhaul of supervision in the wake of the 2008-2009 financial crisis.

Powell interprets the Dodd-Frank Act -- the 2010 reforms put in place to strengthen banks after the crisis -- in rather strict statutory terms. The law says that the vice chair of supervision “shall develop policy recommendations” for the Fed Board and shall “oversee the supervision and regulation of such firms.”

The chair seat is just one of four positions the Biden administration could fill. Vice Chair Richard Clarida’s term as a governor expires in January, and Randal Quarles term as vice chair of supervision expires next month. In addition, there is a vacant seat.

The appointments could have a dramatic impact on expectations of policy next year. What’s more, Robert Kaplan and Eric Rosengren, presidents of the Dallas and Boston Fed banks, have resigned in the wake of scrutiny over their stock trading in 2020, possibly throwing two new forecasts into the equation when Fed officials meet in December.

Read More: Biden’s Opportunity to Reshape the Fed

(Updates with details, beginning in the fourth paragraph)

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