Senator Elizabeth Warren, a leading Democrat on the Senate Banking Committee, is turning her back on Federal Reserve Chairman Jerome Powell after several of the largest banking collapses in United States history last week.
In an interview on MSNBC’s The Rachel Maddow Show Monday night, Warren eviscerated Powell over his role in helping loosen banking regulations during the Trump administration she believed helped contribute to the conditions that led to the collapse of high-risk institutions like Silicon Valley Bank over the past week.
While Trump was chiefly responsible for the changes to the law—signing a bill that axed regulatory requirements for regional banks like SVB with less than $250 billion in assets—Powell, Warren said, ran with those changes, tailoring the oversight of those banks in ways to make existing regulations “as weak as possible.”
As the second vice chair of the Federal Reserve for supervision, Michael S. Barr, and the Department of Justice begin investigating the banks’ collapse, Warren said Powell should consider recusing himself in order to maintain the integrity of their inquiry into how the agency missed an alleged “bank run” by some of the bank’s wealthiest account holders that led to the implosion.
“Fed Chair Powell’s actions directly contributed to these bank failures,” Warren wrote on Twitter Tuesday. “For the Fed’s inquiry to have credibility, Powell must recuse himself from this internal review. It’s appropriate for Vice Chair for Supervision Barr to have the independence necessary to do his job.”
Fed Chair Powell’s actions directly contributed to these bank failures. For the Fed’s inquiry to have credibility, Powell must recuse himself from this internal review. It’s appropriate for Vice Chair for Supervision Barr to have the independence necessary to do his job.
— Elizabeth Warren (@SenWarren) March 14, 2023
The Federal Reserve Board declined to comment, instead referring Newsweek to a prior joint statement by Powell and Barr from earlier this week.
“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” Barr said in the statement.
Warren has a long history of opposition to Powell. As a member of the Senate Banking Committee, Warren was the lone vote against Powell’s renomination to a second term last year over concerns he was too comfortable with the U.S. banking industry. Others, however, pointed out that if Warren had an issue with Powell playing a role in the investigation, she should take issue with Barr as well.
During the “bank run”—a process in which top account holders withdraw their funds from an allegedly insolvent bank all at once—Barr himself claimed the banks the Federal Reserve Board regulates were “well protected” from bank runs via a “robust array of supervisory requirements,” which ultimately proved to be untrue.
And criticism of federal oversight following the collapse proved bipartisan.
“These events are the result of some federal bank regulators being asleep at the wheel and shockingly poor management by an isolated number of banks,” Wyoming Republican Senator Cynthia Lummis, another Senate Banking Committee member, told Fox News Digital on Tuesday.
Others who agreed with some facets of Warren’s comments—including reforms to the federal system insuring bank losses—stopped short of placing the blame on Powell, instead focusing their comments on those they believed responsible for rolling back bank regulations in the first place: bank lobbyists, and members of Congress who voted for legislation repealing prior reforms like those prescribed under bills like the Dodd-Frank Act.
In a March 3 letter to Powell, the Senate Banking Committee’s Republican minority, led by ranking member Tim Scott, wrote to the Federal Reserve Board chairman in an effort to oppose new regulations that would have required banks to keep higher amounts of money in their reserves. They claimed such a requirement could “lead to higher borrowing costs for businesses and families, less investment and growth across the entire economy, and a deterioration in competitiveness of the U.S. capital markets—ultimately harming Main Street and American economic opportunity.”
“SVB is in my district, but I did not hesitate to tell them no when they lobbied hard for Donald Trump’s bill to weaken Dodd-Frank,” California Democratic Congressman Ro Khanna tweeted in a post-mortem of the SBV collapse. “I voted against the bill. Too many Dems voted yes.”