Fed Chairman Jerome Powell could push the United States into recession
Warren, an outspoken critic of Powell, took a series of steps this week to push for greater financial oversight.
Senator Elizabeth Warren is stepping up pressure on the Federal Reserve and Chairman Jerome Powell following a series of eye-popping bank meltdowns earlier this month.
During a Wednesday interview with CNN’s Jake Tapper, the Massachusetts Democrat said Powell should not have been reconfirmed as Fed chair and his actions could push the country into a recession.
“Remember, there are only two jobs for the chairman of the Federal Reserve. One is monetary policy, inflation. plunge our economy into a recession,” Warren told Tapper.
Powell is also failing in his other job, that of regulatory oversight, Warren added. She said he spent five years weakening regulations on banks by billions of dollars, which contributed to the failures of Silicon Valley Bank and Signature Bank.
Warren also touched on Powell and the Fed’s role in driving up unemployment rates, a topic she aggressively questioned Powell on earlier this month.
“He wants to raise the unemployment rate by more than one point in a single 12-month period,” she said of Powell on CNN. “We’ve done this before in this country, in fact we’ve done it 12 times before. And of the 12 times, how many times did that lead to a recession? The answer is 12.
The Fed forecast on Wednesday that unemployment would be lower this year, The New York Times reported. Asked about the possibility of unemployment rising and spiraling out of control, Powell reportedly said recessions are hard to predict and reducing inflation is his top priority.
The Fed reportedly ‘considered’ pausing interest rate hikes due to banking problems, but said promising economic data deterred it, according to the Fed. Time. In a post on Twitter, Warren said that was a mistake.
Fed officials raised interest rates a quarter point on Wednesday, matching last month’s increase. Economic growth is expected to be slightly slower this year and inflation slightly higher than the Fed forecast in December, the Time reported.
Powell reportedly acknowledged that the Fed needed to strengthen “supervision and regulation” of banks.
A group of lawmakers argued this in a letter sent to the Fed on Wednesday. Warren and 11 other senators called on the Fed to crack down on large regional banks with assets between $100 billion and $250 billion, CNN reported. Sen. Ed Markey of Massachusetts and Sen. Bernie Sanders of Vermont also signed the letter.
“The irresponsible and excessive risk-taking by SVB and Signature executives should serve as a clear reminder that banks cannot be left to their own devices,” Warren and the other senators reportedly wrote. “The Fed has a responsibility to ensure financial stability, and to fulfill that responsibility, it must ensure that all potentially systemically important banks are subject to rigorous safety and soundness rules.”
Warren sent a letter to federal watchdogs on Saturday urging them to undertake an independent investigation into the causes of the bank failures.
She argued that the regulatory rollbacks initiated under Powell’s leadership “created an environment in which failure was inevitable.”
Warren has been extremely vocal on this topic in recent weeks, writing an opinion piece for the Time and telling NBC’s “Meet The Press” that Powell had “failed” and shouldn’t run the Fed.
Warren even teamed up with Senator Rick Scott, a Republican from Florida, to introduce bipartisan legislation that would replace the Fed’s internal watchdog with an independent inspector general appointed by the president and confirmed by the Senate. The goal, they said, was to increase the Fed’s accountability.
“Recent banking meltdowns and regulatory failures by the Fed have underscored the urgent need for a truly independent inspector general to hold Fed officials accountable for any misconduct or wrongdoing,” Warren said in a statement. “Last year, during the biggest ethics scandal in the history of the Federal Reserve System, I spearheaded a bipartisan bill to strengthen Fed accountability and appreciate Senator Scott’s work in making advance this effort.”
Stay up to date on all the latest news from Boston.com