Moneybox

Elizabeth Warren Is Trying to Nuke Jerome Powell’s Renomination, Which Probably Means He’ll Keep His Job

Warren holds up a clasped hand as she speaks at a hearing.
Is Elizabeth Warren a 4D chess master? The patron saint of lost cases? You be the judge! Kevin Dietsch/Getty Images

Sen. Elizabeth Warren unleashed a guns-blazing ambush on Federal Reserve Chair Jerome Powell on Monday, calling him a “dangerous man” due to his handling of financial industry regulation while promising to oppose his nomination if he’s tapped for a second term as head of the central bank.

“Your record gives me grave concern,” she told Powell during 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.” She also suggested Powell had been “lucky” that the U.S. hadn’t suffered another financial crisis under his watch.

Advertisement

The move wasn’t a total surprise. Many progressives admire and support Powell, a Republican appointed to his position by Donald Trump, because of the way he has shifted the Fed’s monetary policy emphasis away from snuffing out inflation at all costs and toward the goal of encouraging full employment (i.e., making sure Americans can actually find jobs). But part of the left has fought a long-shot battle to stop his renomination anyway, in large part because they believe the Fed under his leadership has gone too easy on Wall Street. In August, Rep. Alexandria Ocasio-Cortez and other members of the Squad called on the Biden administration to pick someone else. Warren herself has been critical of Powell in the past, though previously she stopped short of saying she would vote against him.

Advertisement
Advertisement
Advertisement
Advertisement

If you want to get deep into the merits of this whole argument, well, you can read the longish piece I wrote earlier this month. But the main progressive rap against Powell is that during his reign, the Fed has chosen to water down some of the key financial regulations that were put in place after the 2008 financial crisis, such as capital requirements and stress tests meant to ensure banks could weather an economic storm. In doing so, it went beyond what Congress called for in legislation aimed a regulating smaller and midsize financial institutions.

Powell’s defenders have argued that he isn’t really a hardcore deregulator at heart. Rather, they’ve pointed out that he tends to go along with whoever happens to be the Fed’s vice chair of supervision, the position that oversees regulatory issues. Under Obama, that was Daniel Tarullo, who led efforts to stiffen the rules for banks. Since Trump’s term, it’s been Randy Quarles, who led efforts to loosen them. Once Quarles’ term expires in October, Biden could easily pick a new vice chair who would get tougher on finance.

Advertisement

Powell, who is a famously canny political operator, has picked up this line himself, suggesting he’d defer to a new vice chair who sought a more aggressive regulatory approach. “I respect that authority, I respect that’s the person who will set the regulatory agenda going forward,“ he said last week during a press conference. “I would accept that and furthermore, it’s only appropriate for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes.” During Monday’s hearing, he also suggested to Warren that he’d be open to a new direction on bank regulation. “Anything we did is fair game to look at again,” he said.

Advertisement
Advertisement

So, one way to look at all this is that Warren was just stepping up a pressure campaign that has successfully nudged Powell in a direction progressives want. Another way to view it, though, is that she probably just sealed Powell’s renomination by giving the GOP even more cover to support him. To be clear, this is pure, unadulterated speculation on my part. But a big part of Powell’s appeal to the Biden administration is that he has substantial bipartisan support, not just because he’s a Republican appointed by a Republican president, but also because he hasn’t been seen as superaggressive on regulatory issues. A while back North Carolina Republican Thom Tillis predicted Powell could sail through the Senate with 70 votes; Steve Daines of Montana wrote an open letter all but begging the Biden administration to reappoint the man.* Now conservatives have another excuse to back Powell, since it would give them an opportunity to own both Elizabeth Warren and AOC while looking reasonable themselves.

Advertisement

I guess it’s possible there’s some four-dimensional chess game going on here where Warren is consciously extracting explicit concessions from Powell while also making it more likely that Republicans will vote for him just to make her unhappy—which would be a pretty good outcome. Or maybe the Democrat from Massachusetts is just standing up for a kind of hopeless cause she believes in. Either way, she’s doing a convincing job of sounding sincere, which is why I’m pretty sure the Fed chair’s job just got a little more secure.

Correction, Sept. 28, 2021: This post originally misspelled Thom Tillis’ last name.

Advertisement