New Haven Register (New Haven, CT)
A potential Powell renomination for Fed faces some dissent
Resistance to the potential renomination of Federal Reserve Chair Jerome Powell intensified this week, with Sen. Elizabeth Warren becoming the first senator to publicly oppose him and many progressive groups pushing for some alternative leader at the Fed.
Powell receives generally high marks from economists and Wall Street for his actions in steering the economy through the pandemic recession. But he has come under fire from some progressive groups around issues that are traditionally not major points of contention when the Fed’s leadership is considered, such as financial regulation, or have never come up before, such as climate change.
Powell’s term will expire on Feb. 5, 2022, and most analysts say he’s still likely to be renominated and confirmed by the Senate for a second four-year term. But his future seems less certain than it was a month ago.
The White House declined to say Wednesday whether President Joe Biden had decided on a Fed chair or what influence Warren’s statements might have but said Biden is still consulting with his economic team on the matter.
So far, Warren, who was among 13 senators to vote against Powell in 2018 when he was first nominated for the Fed chairmanship by President Donald Trump, is so far the only senator to publicly oppose him this time. Powell has been endorsed by several liberal and moderate Democrats, including Sen. Richard Durbin of Illinois and Sen. Jon Tester of Montana, and enjoys broad Republican support in Congress.
Still, at a Senate hearing Tuesday on the government’s support for the economy, Warren argued that actions the Powell Fed has taken have weakened bank regulations that Congress passed after the 2008 financial crisis.
“Over and over, you have acted to make our banking system less safe,” Warren said.
“And that makes you a dangerous man to head up the Fed, and that’s why I will oppose your renomination.”
The Powell Fed has revised many bank rules that were established after the 2008 financial crisis — a catastrophe that nearly toppled the financial system and led to huge taxpayer bailouts for the largest U.S. banks. Groups such as Americans for Financial Reform, a progressive nonprofit, say that, among other steps, Powell has reduced the capital that banks are required to hold to ensure they remain solvent. They also say that he has weakened the Volcker Rule, which restricts banks from trading with money that is federally insured.
“The strength of her opposition highlights the political cost to Biden within his party of proceeding with reappointment and must reduce Powell’s chances some,“Krishna Guha, an analyst at the investment bank Evercore ISI, said Tuesday. “But at this stage — recognizing that it is not a done deal — we still think he is odds-on for renomination.”
Former Rep. Barney Frank, and former Sen. Chris Dodd, who crafted sweeping legislation that tightened bank rules after the 2008 crisis, co-wrote a column endorsing Powell earlier this month in The Hill newspaper.
Powell’s changes “were not major attacks” on their legislation, Dodd and Frank wrote. And Biden can make other appointments to the Fed’s board, they noted, to limit Powell’s ability to take further deregulatory steps.
One alternative is that Biden could appoint Lael Brainard, a Fed governor who has repeatedly cast dissenting votes on Powell’s rule changes, to the Fed’s top regulatory post. That position is now held by Randal Quarles, whose term as the Fed’s regulatory leader will expire Oct. 13.
Brainard is also the leading alternative to Powell as Fed chair among progressive Democrats, because of her support for tighter banking rules and for greater action on climate change. She would also continue Powell’s low-interest rate policies. And as a member of the Fed’s Board of Governors for seven years, her appointment would be seen as unlikely to disrupt financial markets.