Sen. Elizabeth Warren (D-Mass.) said Tuesday she will oppose a second term for Federal Reserve Chair Jerome Powell, signaling the start of what could become a significant intra-Democratic Party conflagration over the fate of the Republican central banker.
Powell, an appointee of former President Donald Trump, will see his first term come to an end in February. Wall Street expects President Joe Biden to nominate him for a second four-year stint leading the Fed, and many Democrats have praised Powell’s handling of the pandemic recovery, his push for full employment and his dovish approach to interest rates.
But during a hearing of the Senate Banking Committee on Tuesday, Warren slammed Powell’s approach to financial regulation, arguing that he has repeatedly watered down rules intended to prevent a repeat of the 2008 financial crisis.
“Your record gives me grave concerns,” Warren told him. “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 did not respond to Warren’s comment.
While some progressive House members and activists have criticized Powell and pushed for Biden to change the leadership of the Fed, Warren’s comments are the first indication that some Senate Democrats ― who will have to vote to confirm Powell for a second term ― may want a different candidate. Sen. Sherrod Brown (D-Ohio), the chair of the banking committee, could join Warren in her opposition.
Some progressives have suggested Federal Reserve Governor Lael Brainard as a replacement for Powell, citing her tougher approach to regulating banks. Ironically, many progressives opposed Brainard as a possible nominee for Treasury secretary at the beginning of Biden’s administration, in part because they hoped Warren herself would get the job.
The woman who ended up with the Treasury secretary position, former Federal Reserve Chairwoman Janet Yellen, has told the White House she supports keeping her successor for a second term, according to Bloomberg.
It’s not clear whether Warren will end up persuading a large portion of Senate Democrats to oppose Powell. In 2018, when Powell was first nominated, Warren was the only member of the Senate Banking Committee to oppose him. Thirteen senators voted against his final confirmation.
Many senators in both parties are likely to see Powell’s handling of interest rates, inflation and unemployment as more important than his approach to banking regulations. But Warren, whose own political career was launched in the aftermath of the 2008 crisis, has made it clear that preventing a repeat is among her top priorities.
“So far you’ve been lucky. But the 2008 crash shows what happens when the luck runs out,” she said at Tuesday’s hearing. “The seeds of the 2008 crash were planted years in advance by major regulators like the Federal Reserve that refused to rein in big banks. I came to Washington after the 2008 crash to make sure nothing like that would ever happen again.”
Warren cited a number of cases where the Federal Reserve has weakened reforms put in place after the financial crisis: making it easier for banks to pass so-called “stress tests” meant to assess whether they could survive a crisis without a bailout; weakening the Volcker Rule, which aims to separate commercial banking from high-risk trading; and easing liquidity requirements.
It’s possible Biden will attempt to appease progressives by nominating Brainard for vice chair for supervision at the Fed ― a job created by the 2010 Dodd-Frank financial reform law to focus explicitly on regulatory matters. That position is currently held by Randal Quarles, a former partner at a large private equity firm. His term is set to expire in October.