How Elizabeth Warren became a thorn in Jay Powell’s side

Jay Powell, Chairman of the Federal Reserve, has been applauded by US President Joe Biden and others across the political spectrum as he enters his second term.

But there is one figure he can’t seem to shake off criticism: Elizabeth Warren, the Liberal Democrat senator from Massachusetts, former presidential candidate and ardent critic of big banks and light financial regulators.

In his confirmation hearing before the Senate Banking Committee on Tuesday, Powell will again be toasted by Warren, who has always been a thorn in the side since he took over as the Fed in early 2018.

As part of his failed campaign to deny Powell a second term last September, Warren went so far as to tell the Fed Chairman he was “a dangerous man” because of his reluctance to monitor Wall Street in any way. more aggressive.

And this week, on the eve of her confirmation hearing, she launched another attack on Powell for his handling of a trade scandal that has engulfed the Fed in recent months.

In a letter released Monday, Warren demanded that the Fed release “all available information” by Jan. 17 on personal financial transactions made by its officials. His request followed amended disclosures from Richard Clarida, the outgoing vice president, which came to light last week and suggested he was much more active in financial markets than he initially disclosed.

The Fed announced Monday that Clarida would be stepping down two weeks earlier than expected, and Warren suggested that under Powell’s watch, the central bank was still hiding key details about the scandal.

“I am deeply concerned that your continued refusal to release information about the transactions of Fed officials is at odds with your stated commitment to tackle the scandal” frankly and transparently, “” Warren wrote. “This raises suspicions that the Fed may not be disclosing the full extent of the scandal to the public.”

Warren’s office declined to comment on his round of questioning scheduled for Tuesday’s hearing.

The fact that Powell was selected for another term by Biden – and is widely expected to go through the Senate confirmation process with broad bipartisan support – marks a defeat for Warren.

“Warren had a very specific view of the much stricter government regulation of Wall Street in general. . . and she considers the Fed’s recent track record not strong enough, ”said Sarah Binder, professor of political science at George Washington University.

This contrasts with his successful efforts in 2013 to persuade Barack Obama not to choose Lawrence Summers, the former Treasury Secretary and Harvard University economist, to lead the Fed.

While at the time, Warren was able to shape the president’s decision by enlisting other influential members of the banking committee to the cause, including Sherrod Brown, the Ohio senator who now chairs the panel, his own. was mostly a lone effort against Powell this time around.

Brown accepted Biden’s choice. The only other public dissidents among Senate Democrats were Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon, who said they could not support Powell because of his weakness on climate issues.

Political analysts say Warren has not been able to overcome Powell’s astute political skills to maintain his support for Capitol Hill and the divisions among Democrats over what they expected from the Fed in the first place.

“The Liberals, they wanted expansionary monetary policy and that’s what they got, where the focus is on full employment during the pandemic,” said Ben Koltun, analyst at Beacon Policy Advisors.

“That wasn’t necessarily enough for people looking to change the window of what the Fed can do in terms of racial inequality or in terms of banking regulation… And this is where the progressive archetype of Warren leans forward, ”he added.

But even though Powell is comfortably seated for another term as Fed chairman starting early next month, Warren’s pressure has not been in vain. Biden spoke to the senator as he deliberated over the Fed’s key roles, and is expected to largely hand Sarah Bloom Raskin, the former U.S. Assistant Secretary of the Treasury, to the Fed for oversight.

Raskin was the progressive left’s preferred choice for the post, which is the top financial regulatory post at the U.S. central bank.

Meanwhile, the upper echelons of the Biden administration, including key economic and regulatory positions, are peppered with allies and former aides to Warren, so his influence remains strong.

Warren’s criticisms of the Fed have also evolved – and may continue to do so. For most of the past year she has focused almost exclusively on financial regulation, and from the fall she began to address the trade scandal.

In October, Warren urged the Securities and Exchange Commission to open an investigation into what it considered to be “ethically dubious” transactions by Fed officials who reflected an “atrocious judgment” and whether they “violated the rules on insider trading ”.

On the monetary front, many Democrats have been comfortable with Powell’s pivot to tighter policy to fight inflation, but if he quickly steers the Fed toward higher interest rates, it could also become a new source of tension – and public clashes – with Warren and the left.

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