Finance

Powell gets Biden’s backing amid criticism

President Biden said he has confidence in Federal Reserve chairman Jerome Powell after senator Elizabeth Warren on Tuesday escalated her criticism of the central bank’s leader.

“Thus far, yes,” Biden said when asked by a reporter during a trip to Michigan if he had confidence in Powell. “But I’m just catching up to some of these assertions,” he said, referring to senior officials’ trading activities that sparked Warren’s most recent volley of disapproval.

Biden gave no indication he has made a decision over whether to offer Powell a second term when his current one expires in February. Members of Biden’s economic team have supported keeping Powell. However, Warren’s vocal opposition has complicated Biden’s political calculus, as he tries to balance moderate and progressive demands on his signature domestic policy goals.

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Several members of both parties have also voiced support in recent weeks for Powell’s renomination, giving him high marks for his response to the pandemic. Some Democrats have been heartened by his public comments that recent inflationary pressures, because they are being driven by temporary supply-chain disruptions, don’t require an immediate policy response from the Fed.

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

Powell is a Republican who was first nominated to the Fed’s board 10 years ago by President Obama. He was named as Fed chairman by President Trump in 2018.

On Monday, Warren called for the Securities and Exchange Commission to investigate trading activities, first reported last month by The Wall Street Journal, that prompted two Fed presidents, Eric Rosengren of Boston and Robert Kaplan of Dallas, to resign.

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Biden’s comments on Tuesday followed a Senate floor speech earlier in the day in which Warren said Powell had “failed as a leader.” Warren said the trading by the Fed presidents and additional disclosures in May that vice chairman Richard Clarida had moved money between mutual funds, as the coronavirus pandemic began buffeting financial markets, indicated a “culture of corruption.”

Powell has moved quickly in recent days to try to quell the controversy. The Fed said in a statement Monday it began discussions last week with its inspector general’s office to conduct an independent review of “whether trading activity by certain senior officials was in compliance with both the relevant ethics rules and the law. We welcome this review and will accept and take appropriate actions based on its findings.”

In testimony before Congress on 28 September, Powell promised a revamp of Fed policies on how its leaders manage personal investments to minimize even the appearance of conflicts of interest. He conceded that the rules that allowed the trading by Kaplan and Rosengren to occur aren’t adequate to sustain the public’s confidence, even though they appeared to satisfy each bank’s existing protocols.

“We understand now that we need to modify our practices, and we’re in the process of creating ideas and recommendations for that,” he said.

He wasn’t asked about and didn’t address the transactions disclosed by Clarida.

Write to Nick Timiraos at [email protected]

This article was published by Dow Jones Newswires

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