Elizabeth Warren to oppose second Fed term for 'dangerous man' Jerome Powell

Federal Reserve chair Jerome Powell. Photo / AP

Elizabeth Warren, the progressive Democratic senator from Massachusetts, said on Tuesday she would oppose Jerome Powell's renomination as chair of the Federal Reserve, calling him a "dangerous man" to lead the US central bank.

Warren's opposition to a second term in office for Powell deals a significant blow to his hopes of remaining at the helm of the Fed, because it will make it more difficult for President Joe Biden to renominate him without facing a backlash from the left of the Democratic party.

Powell's current term ends in February 2022 and Biden will have to make a decision soon.

Warren has long been a critic of Powell's stance on banking regulation, which she singled out as the reason why he was undeserving of more time as Fed chief.

"I came to Washington after the 2008 crash to make sure that nothing like that would ever happen again. Your record gives me grave concern," Warren told Powell at a Senate banking committee hearing.

"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", she said.

Warren highlighted multiple instances where the Fed has relaxed financial regulations, including the central bank's decision to amend liquidity requirements for certain Wall Street institutions.

She also flagged the Archegos Capital blow-up earlier this year, which saw banks suffer as large levered trades by the family office imploded.

Powell said the Fed has "learned its lessons" from that episode.

Although Warren is now publicly opposing Powell's bid for a second term at the Fed, a number of moderate Democrats are backing him for another four years in office, on the grounds that it would ensure stability in monetary policymaking at a time of big economic upheaval owing to the pandemic.

Even some progressive Democrats have cheered Powell's approach to monetary policy, given its more tolerant approach to inflation increases and dogged pursuit of full employment compared with previous Fed chiefs.

Warren's comments come on the heels of a leadership upheaval at the Fed, with two senior officials stepping down on Monday following scrutiny of their trading activity at a time when the Fed was intervening aggressively in financial markets last year to protect against a broader crisis in the early days of the pandemic.

Robert Kaplan, president of the Dallas Fed and Boston's Eric Rosengren were found to have been active investors, with at times substantial positions in certain company shares and funds.

Earlier this month, Powell announced a comprehensive review of the central bank's ethics guidelines surrounding the participation of senior officials in financial markets and on Tuesday backed a tightening of those rules.

He added that the appearance of a conflict of interest issue is "obviously unacceptable", and said the Fed is looking more closely at the trades made by Rosengren and Kaplan to make sure they comply with current guidelines and the law.

Written by: Colby Smith and James Politi

© Financial Times