Federal Reserve Chairman Jay Powell has received praise from US President Joe Biden and others across the political spectrum as he enters his second term.
But there is one figure whose criticism he apparently cannot shake off: Elizabeth Warren, the liberal Democratic senator from Massachusetts, former presidential candidate, and ardent critic of big banks and light financial regulators.
On Tuesday, during his confirmation hearing before the Senate Banking Committee, Powell will be roasted again by Warren, who has been a thorn in his side throughout since taking office at the Fed in early 2018.
Last September, as part of her failed campaign to deny Powell a second term, Warren went so far as to tell the Fed chairman he was “a dangerous man” because of his unwillingness to police Wall Street more aggressively.
And this week, on the eve of his confirmation hearing, she launched a new attack on Powell for his handling of a trade scandal that has engulfed the Fed in recent months.
Warren demanded in a letter on Monday that the Fed release “all available information” by January 17 on personal financial transactions made by its officials. Her request followed amended disclosures by Richard Clarida, the outgoing Vice President, who came to light last week and suggested that he was much more active in financial markets than he initially revealed.
The Fed announced Monday that Clarida would be retire two weeks earlier than planned, and Warren suggested that the central bank, under Powell’s supervision, still conceal key details about the scandal.
“I am deeply concerned that your continued refusal to release information on Fed officials’ trade is contrary to your stated commitment to address the scandal ‘directly and transparently,'” Warren wrote. “This raises suspicions that the Fed may be failing to disclose the full extent of the scandal to the public.”
Warren’s office declined to comment on her planned interrogation for Tuesday’s hearing.
The fact that Powell was used by Biden for another term – and is widely expected to go through the Senate confirmation process with widespread bipartisan support – indicates a defeat for Warren.
“Warren had a very specific vision of much stricter government regulation of Wall Street in general. . . and she sees the Fed’s recent performance record as not difficult enough, ”said Sarah Binder, a professor of political science at George Washington University.
This is in contrast to her successful attempt in 2013 to persuade Barack Obama not to elect Lawrence Summers, the former Treasury Secretary and Harvard University economist, as head of the Fed.
Where Warren could form the president’s decision at the time by calling in other influential members of the banking committee for the case, including Sherrod Brown, the Ohio senator who now chairs the panel, this time her hair was mostly a lone attempt against Powell.
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.
Policy analysts say Warren could not overcome Powell’s shrewd political skills to retain support for Capitol Hill, and divisions among Democrats over what they wanted from the Fed in the first place.
“The Liberals, they wanted a comprehensive monetary policy and that’s what they got, where the focus is on full employment during the pandemic,” said Ben Koltun, an analyst at Beacon Policy Advisors.
“It was not necessarily enough for the people who wanted to change the window of what the Fed can do in terms of racial inequality or in terms of banking regulations. . . and this is where the Warren progressive archetype leans forward, ”he added.
But even if Powell sits comfortably for another term as Fed chairman starting early next month, Warren’s pressure was not in vain. Biden spoke to the senator while discussing the top roles of the Fed, and it is widely expected to address Sarah Bloom Raskin, the former deputy secretary of the U.S. Treasury, as Fed vice president for oversight.
Raskin was the preferred choice of the progressive left for the role, which is the top financial regulatory position at the US Federal Reserve.
Meanwhile, the top echelons of the Biden administration, including key economic and regulatory posts, have been peppered with Warren allies and former assistants, so her influence remains strong.
Warren’s criticism of the Fed has also developed – and may continue to do so. For most of last year, it was virtually only focused on financial regulation, and from the fall she began to exercise her sights on the trade scandal.
In October, Warren encouraged the Securities and Exchange Commission to launch an investigation into what it called “ethically dubious” transactions by Fed officials that reflect “horrific judgment” and whether they “violated insider trading rules”.
On the monetary front, many Democrats were comfortable with Powell’s pivot to tighten policies to fight inflation, but if he sends the Fed quickly to higher interest rates, it could also lead to a new source of tension – and public clashes – with Warren and The left side.