Warren Signals Powell Skepticism by Blasting Fed on Bank Rules

(Bloomberg) -- Senator Elizabeth Warren blasted Federal Reserve Chairman Jerome Powell for his oversight of Wall Street Thursday, signaling he may have a key foe on Capitol Hill as the Biden administration decides whether to keep him in the job.

Warren, a vocal proponent of tougher banking rules, laid out a laundry list of grievances as Powell appeared before the Senate Banking Committee. The Massachusetts Democrat argued the Fed went too easy on lenders in revising so-called living wills -- plans that lay out how firms could fail without disrupting the financial system. And she ripped the Fed’s revamp of the Volcker Rule, which bans banks from making speculative bets with their own capital.

Senate Banking Committee Chairman Sherrod Brown also chimed in, saying the Fed supported banks to the tune of “hundreds of billions of dollars” during the pandemic, and lenders turned around and rewarded their investors through stock buybacks and dividends. In a potentially ominous sign for Powell, the Ohio Democrat said “it’s time to try something different.”

President Joe Biden will ultimately decide whether Powell gets to stay in his role after his term as Fed chair expires early next year. But if prominent Democratic senators are opposed, or even lukewarm, it could spell trouble for his re-nomination. That’s especially true because his candidacy would have to go through Brown’s committee.

In his testimony, Powell aggressively rejected Democrats’ attacks. He argued less frequent living wills won’t weaken the process at all and disputed accusations that he’s reduced banks’ capital demands.

The central bank’s vice chairmanship for supervision -- its key regulatory post -- will also be open soon when Fed Governor Randal Quarles’s term expires in October. Brown mentioned several officials, including Fed Governor Lael Brainard and Federal Reserve Bank of Boston President Eric Rosengren, as those who he believes have been tougher on bank rules.

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