WASHINGTON — Senator Elizabeth Warren was in attack mode and the target was, for her, a familiar one — Federal Reserve Chair Jerome Powell.
It was three days before the failure of Silicon Valley Bank turbocharged her anger toward his policies, but she already had plenty of ammunition.
At a Senate Banking Committee hearing on March 7, Warren noted that the Fed’s estimates showed its effort to reduce high inflation with aggressive interest rate hikes would cost 2 million Americans their jobs. What would Powell say, she asked, to those “hard-working people who have decent jobs today, who you’re planning to get fired over the next year?”
Powell argued that inflation is “hurting the working people of this country badly, all of them,” and the Fed was using the only tool it had to fight it. But Warren didn’t let up.
“And putting 2 million out of work is just part of the cost and they just have to bear it?” she asked.
That question triggered a rare flash of annoyance from Powell.
“Well, will working people be better off if we just walk away from our jobs and inflation remains 5 percent, 6 percent?” he said, throwing his right hand up twice in frustration.
Powell, 70, is a savvy Washington veteran with a reputation for being unflappable. He calmly withstood a fusillade of rare public presidential criticism from 2018 to 2019 when then-president Donald Trump harangued him for interest rate hikes he branded “loco” and the work of “boneheads.”
But Warren has been Powell’s most relentless critic. She’s hammered him over the past five years for interest rate hikes, ethical transgressions by Fed officials, and loosening financial regulatory oversight. Now Silicon Valley Bank’s failure has taken her criticism to another level, increasing pressure on Powell as he and other federal officials try to keep the SVB collapse and subsequent failure of Signature Bank from escalating into a full-blown crisis.
Warren declared that Powell had used “a flamethrower” on the tough financial regulations that Congress enacted after the 2008 financial crisis and that his “astonishing list of failures” as Fed chair “directly contributed” to the bank collapses. She’s all but called for him to resign or be fired, although she won’t say if she’s appealed directly to President Biden.
“I’ve made it clear to everyone who will listen: I do not think Jerome Powell should be chairman of the Fed,” Warren told the Globe. “He had two jobs. One is monetary policy, the other is regulatory oversight. And he failed monumentally at both of them.”
The White House has said Biden continues to have confidence in Powell, and few other lawmakers have publicly derided his performance, a fact some attribute to Powell’s own version of constituent services. Since becoming Fed chair in 2018, he has had 339 one-on-one or small group calls, meetings, or meals with a total of 100 current or retired senators, according to his publicly released calendars.
“It is much harder to viciously attack somebody that you’ve met and liked, and he is an expert at sitting down with members of Congress and listening to their concerns and trying to explain how the Fed is addressing them,” said Jaret Seiberg, a financial policy analyst at the Washington research arm of investment bank TD Cowen. “That’s how you build political support. He knows what he’s doing.”
But the lines of communication have been frayed between Warren and Powell. She’s had only four calls and two face-to-face meetings with him during his five years in office, and none since June 2021. That’s far fewer than some of her colleagues on the Senate Banking Committee, including Sherrod Brown, the panel’s top Democrat, who has spoken directly with Powell 34 times.
Warren’s interactions with the Fed chair have been less frequent than they were with Powell’s predecessor, Janet Yellen. Over Yellen’s four-year tenure as Fed chair, Warren had seven calls and six face-to-face meetings, including four lunches.
Warren said she’s willing to speak with Powell at any time but their prior conversations have not been fruitful.
“I have explained over and over my views that a banking system that loads up on risk is a threat to our economy here at home and ultimately to the world economy,” she said. “I’m not going to talk about any individual conversations, but it’s clear I haven’t gotten through.”
Powell appears undeterred by the criticism. He and Fed officials voted unanimously to increase their benchmark interest rate by a quarter percentage point despite pressure from Warren and other lawmakers to stop the string of increases because of concerns that higher rates could trigger a recession. Those fears were exacerbated by the upheaval in financial markets caused by the bank failures.
“I think it rolls completely off his back. In fact I’m not even sure it touches him,” Seiberg said of the criticism. “The chairman understands how Washington works and he’s not going to get flustered by politically focused attacks.”
But Claudia Sahm, an economist who worked at the Fed from 2007 to 2019, said Warren has some legitimate gripes. And Powell’s reaction to Warren’s March 7 questions about job losses was “out of character,” indicating she might be getting to him.
“These choices they’re having to make, the potential tradeoffs, these must weigh on him,” Sahm said. “He’s not a callous and cruel person. He doesn’t want 2 million people to lose their jobs.”
A Fed spokesperson declined to comment on Warren’s criticisms.
Warren hasn’t been shy about trying to influence the Fed. She was among a group of Democrats who publicly pushed for President Barack Obama to nominate Yellen in 2013 over former Treasury secretary Lawrence Summers, the economist and one-time Harvard president.
Powell, a Republican, was confirmed by the Senate for a seat on the Fed’s board of governors in 2012. He is a lawyer and former investment banker who was a Treasury official under President George H.W. Bush. He later spent eight years as a partner at The Carlyle Group private equity firm as well as serving as a visiting scholar at the Bipartisan Policy Center think tank in Washington.
When Yellen’s four-year term as Fed chair neared its end, Trump nominated Powell. His background immediately concerned Warren, as did his answers to her questions at his confirmation hearing.
“Every question I asked him about regulation, everything about his history indicated he believed that the banking system overall should have lighter regulation,” Warren said.
She was the only member of the Senate Banking Committee to vote against his confirmation, which sailed through the full Senate 84-13 in January 2018. Her fears quickly were realized, she said, when Powell supported bipartisan legislation that loosened regulations on small and midsized banks while giving the Fed more discretion in monitoring them.
Warren warned that the new law increased the risk of future bailouts in part because it lifted the threshold for banks to undergo strict federal oversight — from those with more than $50 billion in assets to those with more than $250 billion — in a move designed to help small banks and larger regional institutions like Silicon Valley Bank and Signature Bank. Powell also supported changes made by the Fed board to loosen oversight of some banks.
So when Biden decided in 2021 to nominate Powell for another four-year term as chair, Warren came out publicly and strongly against him.
“Your record gives me grave concern,” she told Powell at his second confirmation 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.”
Again, Warren was the only banking committee member to vote against Powell, who was confirmed 80-19 by the Senate.
Lawmaker criticism of the Fed chief is not unusual, particularly in times of economic turmoil. Ben Bernanke came under intense fire during and after the 2008 financial crisis. He was confirmed for a second term in 2010 by a 70-30 vote, the most opposition ever for a Fed chair.
In his 2016 book, “The Courage to Act: A Memoir of A Crisis and Its Aftermath,” Bernanke wrote that several senators called him afterward to say they believed he was doing a good job but voted against him for political reasons. He said one told him, “sometimes you just have to throw some red-meat to the knuckle-draggers.”
Senator Jack Reed, a Rhode Island Democrat on the Senate Banking Committee, said Powell has “one of the most challenging jobs in the country.” Reed opposed the 2018 regulatory changes but voted twice to confirm Powell.
He praised the actions of Powell and other federal officials after the recent bank failures, moves that included guaranteeing all deposits and launching a new Fed lending program to help other endangered banks stabilize their finances. But Reed said he wanted to wait for the results of a Fed review of the failures to decide if he still has confidence in Powell.
Warren has called for Powell to recuse himself from the Fed’s review given his efforts to loosen oversight of banks. Powell told reporters Wednesday that Fed bank supervisors identified problems by Silicon Valley Bank’s management, which “failed badly” in growing the institution rapidly and not taking steps to protect its finances against potential declines in the value of its long-term investments caused by higher interest rates.
Fed banking supervisors intervened but weren’t able to prevent the collapse, Powell said.
“Clearly we do need to strengthen supervision and regulation and I assume that there will be recommendations coming out of the report and I plan on supporting them and supporting their implementation,” Powell said Wednesday in answering questions for the first time since the failure.
Warren said she was pleased to hear that, but not satisfied.
“I’d be a lot more encouraged if that had been his view five years ago,” she said. “But he needs to back that up with action.”
Warren promised to continue pressuring Powell and the Fed to toughen their banking oversight even as she’s pushing for answers from the chief executives of Silicon Valley Bank and Signature Bank about their actions that led to the failures.
“My goal is not to hurt his feelings. My goal is to get him to change his behavior,” she said of her criticism of Powell. “There are real consequences to what this man does.”