Warren says Powell ‘failed as a leader’ amid Fed trading scandal

Sen. Elizabeth Warren (D-Mass.) excoriated Federal Reserve Chair Jerome Powell from the Senate floor on Tuesday, urging President Biden to replace the central bank’s leader amid backlash over financial trades by some of its top officials.

Warren claimed in a speech that Powell has ignored a “culture of corruption” at the Fed and failed to take appropriate action after three colleagues disclosed high-value financial trades conducted in the early days of the coronavirus pandemic. Powell’s term as Fed chair expires in February and progressives opposed to his renomination, such as Warren, have seized on the trading scandal as another strike against a second stint.

“Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing and protect the public’s confidence should be the minimum standard any Federal Reserve chair should meet,” Warren said.  

“And, once there is a problem, a quick and aggressive response is critical. Chair Powell has failed at both tasks.”

Warren blamed Powell for the independent actions of two presidents of Fed reserve banks and Fed Vice Chair Richard Clarida, all of whom conducted financial trades approved by ethics officials in early 2020.

Former Boston Fed President Eric Rosengren retired last week after financial disclosures revealed he had heavily invested products tied to commercial real estate in the outset of the pandemic. Rosengren had spoken frequently about how downtown business districts would fare amid COVID-19 throughout the recovery from the pandemic.

Dallas Fed President Robert Kaplan also announced his retirement last week following a report from the Wall Street Journal documenting millions of dollars worth of stock trades he made as the Fed was plotting to stabilize financial markets.

And Bloomberg News reported this weekend that Clarida moved between $1 million and $5 million from a bond fund into a stock fund Feb. 26, 2020, one day before Powell announced the Fed could take action to protect the economy as the coronavirus pandemic escalated.

All of the trades conducted by the three Fed policymakers were cleared in advance by ethics officials, and neither Kaplan nor Rosengren are members of the Fed board of governors, which was responsible for the Fed’s emergency lending efforts.

Even so, Powell has frequently expressed his frustration over the scandal and ordered a review of internal ethics rules to avoid future questions about the Fed’s credibility. The Fed’s Office of Inspector General, the bank’s internal watchdog, confirmed such a probe on Monday.

“We need to make changes and we are going to do that,” Powell said last month after a meeting of the Federal Open Market Committee (FOMC), the Fed’s monetary policymaking panel.

“No one on the FOMC is happy to have these questions raised.”

Warren, however, found Powell’s explanation and frustration insufficient. 

“Last week, I said that I would not support Chair Powell’s renomination because in one decision after another, he has consistently failed to serve as an effective financial regulator. But that is not his only failure. Chair Powell has also failed as a leader,” she said.

“Our nation needs leaders who are willing to set and enforce strong ethics standards and who act swiftly when a problem arises,” she continued. 

“Our nation does not need a go-along-to-get-along leader who doesn’t know or doesn’t care when, on his watch, people with great responsibility advance their own interests over those of our nation, or someone who drags his feet in dealing with problems that shake the public’s confidence in the institution he leads.”