Elizabeth Warren voiced serious reservations about Jerome Powell's nomination as Fed Chair, labeling him a potential danger to oversee the Federal Reserve due to his actions that allegedly weakened bank security.
She contended that Powell's Fed took significant steps to undermine banking system safety through deregulation efforts, such as revising bank stress tests, the Volcker Rule, and liquidity requirements.
Powell, a Republican nominee under former President Donald Trump, refuted the claims that his initiatives were deregulatory in nature, while acknowledging that the Fed's actions were subject to fair review. He emphasized that banks possess sufficient capital to endure a recession.
Warren argued that Powell's appointment would prevent the Republican-majority in the Fed from steering the economy again towards a banking crisis in the subsequent five years. "This position carries significant power – a qualified candidate I do not think it's worth the risk," Warren asserted.
Warren reiterated prior concerns voiced by Sheila Bair, former bank regulatory authority, and warned that loosening regulations could raise the likelihood of a repeat of the Great Recession.
"Luck has been on your side, but the 2008 crash demonstrated what happens when that luck ceases," Warren stated. "The seeds for the 2008 crash were sown years ago by powerful regulatory bodies like the Federal Reserve that refused to contain the big banks."
Powell's term as Fed Chair expires in February, and the White House has yet to announce whether President Joe Biden will reappoint him. Recently, progressive groups, led by New York Democratic Representative Alexandria Ocasio-Cortez, urged Biden to replace Powell, citing concerns about his regulatory and climate stance.
[Source: edition.cnn.com]
Enrichment Insights:
Warren's concerns revolve around the potential to weaken banking regulations due to Powell's tenure as Fed Chair, specifically discussing deregulation proposals and their potential impact on bank stability rules. Here are her main concerns:
- Effect on Bank Stability Rules: Warren is afraid that deregulation could lead to a reduction in banking regulations, reducing the incentive for banks to hold and trade U.S. Treasuries (USTs) and potentially increasing the risk of another economic collapse.
- Department of Financial Regulation: Warren's objections also extend to the lack of transparency and accountability in the Fed's decision-making process, particularly regarding potential deregulation and the perceived influence of big bank lobbyists.
- Consumer Protection: In a related matter, Warren has voiced concerns about reduced enforcement activities at the Consumer Financial Protection Bureau (CFPB), which could lead to a decrease in consumer protection, such as banks not being held accountable for denying services to specific customers.
By confronting Powell's nomination, Warren emphasizes the weighty implications of the Fed Chair's position and raises concerns about the potential impact on bank stability and consumer protection if deregulation continues.
