Biden backs Powell after Senator Elizabeth Warren escalates opposition

Mr Biden has given no indication that he has made a decision on whether to offer Mr Powell a second term when his current term expires in February. Members of Mr. Biden’s economics team supported Mr. Powell’s retention. However, Ms Warren’s vocal opposition has complicated Mr Biden’s political calculation, as he tries to balance moderate and progressive demands with his domestic policy goals.

Several members of both sides have also expressed support in recent weeks for Mr Powell’s re-appointment, giving him high marks for his response to the pandemic. Some Democrats were encouraged by his public comments that recent inflationary pressures, because they are caused by temporary supply chain disruptions, do not require an immediate policy response from the Fed.

But a vocal minority of Democrats, led by Ms Warren, called for his replacement and favor someone who would be more active in lobbying the central bank to regulate banks and address climate risks. Last week Ms Warren told Mr Powell at a hearing that his track record in favor of a lighter touch on the banks made him a “dangerous man” to lead the Fed and that she would not support his appointment.

Mr. Powell is a Republican who was first appointed to the Fed’s board of directors 10 years ago by President Obama. He was named Fed Chairman by President Trump in 2018.

On Monday, Ms Warren called on the Securities and Exchange Commission to investigate trading activity, first reported last month by the Wall Street Journal, which prompted two Fed chairmen Eric Rosengren of Boston and Robert Kaplan to Dallas, to resign.

Mr Biden’s comments on Tuesday followed a speech in the Senate earlier today in which Ms Warren said Mr Powell had “failed as a leader.” Ms Warren said transactions by Fed chairmen and additional information in May that Vice President Richard Clarida had transferred money between mutual funds as the coronavirus pandemic began to shake the markets financial, indicated a “culture of corruption”.

Mr Powell has moved quickly in recent days in an attempt to calm the controversy. The Fed said in a statement Monday that it began discussions last week with its Inspector General’s office to conduct an independent review to determine “whether the business activities of certain senior officials were in compliance with both the rules of ‘relevant ethics and law “. We welcome this review and will accept and take appropriate action based on its findings. “

In his testimony to Congress on September 28, Powell promised an overhaul of the Fed’s policies on how its executives handle personal investments to minimize even the appearance of conflicts of interest. He conceded that the rules which allowed the negotiation of MM. Kaplan and Rosengren are not enough to maintain public trust, even though they appeared to meet each bank’s existing protocols.

“We now understand that we need to change our practices, and we are in the process of creating ideas and recommendations for that,” he said. He was not interviewed and did not address the transactions disclosed by Mr. Clarida.

Write to Nick Timiraos and [email protected]