September 28 (Reuters) – U.S. Federal Reserve Chairman Jerome Powell faced an unusually hostile congressional hearing on Tuesday in which lawmakers demanded more action in response to perceived shortcomings in everything from l ‘ethics and diversity to inflation and financial regulation, and a prominent Democrat has said she will not support him for another term.

The most significant moment came when Senator Elizabeth Warren of Massachusetts, a vocal critic of the Fed’s surveillance of Wall Street under Powell, called him a “dangerous man” to head the central bank.

“Renaming you means betting that … a Republican president who has consistently voted for Wall Street deregulation will no longer tip this economy into a financial cliff,” Warren said at a Senate Banking Committee hearing. “I don’t think it’s a risk worth taking.”

For Powell, his appearance before the committee – theoretically to discuss the Fed’s response to the coronavirus pandemic – was the final chapter in one of the most turbulent times he has endured as central bank chief , just as the White House is debating whether to retain him in the role.

On Monday, two of the 12 chairmen of the Fed’s regional reserve banks announced their departure, weeks after they were revealed to have been active investors. So Powell launched a thorough review of the rules governing the financial transactions of Fed officials, but that hasn’t stopped the drumbeat of critics who say he should have acted more forcefully.

Sen. Sherrod Brown of Ohio, Democratic chairman of the committee, said he would introduce legislation to prohibit Fed officials from holding individual stocks.

Another Democratic senator, Raphael Warnock of Georgia, said: “This is a blow to the image of the central bank. He asked Powell what steps he was taking to protect the Fed’s “impartiality”.

And Republican Senator Steve Daines of Montana asked if Powell would agree to subject the heads of quasi-private regional reserve banks to the Freedom of Information Act to allow greater public control over their activities, which Powell said he said. would like to “reflect on.”

Powell said the central bank is also reviewing transactions made by regional Fed chairmen to ensure they are legal and comply with current ethical guidelines.

“Even though it looks like these transactions were in accordance with existing rules, it just tells you that the problem is with rules and practices and disclosure needs to be improved,” Powell said in response to Warnock’s question. “We will get up at this time and fix it.”

FRESH RECEPTION

Tuesday’s hearing was a decidedly colder environment than the one Powell has typically faced on Capitol Hill since taking over as Fed chairman in early 2018. Powell has gone out of his way to harder than his predecessors to cultivate a relationship with Congress, an effort that isolated him from the start when he faced the wrath of whoever appointed him, former President Donald Trump.

In addition to the trade test by Fed officials, lawmakers questioned Powell’s reasoning that inflation – operating at about double its target rate of 2% – was “transient” and l ‘pushed on the Fed’s “dismal failure” to improve diversity in its ranks.

The number of minorities in leadership positions had “barely budged” during Powell’s tenure, Democratic Senator Robert Menendez of New Jersey said.

Powell said diversity was a “high priority” and, in response to a question from committee chairman Brown, said he would welcome the appointment of a black woman for the first time to the Fed’s board of governors. , composed of seven members.

The next chapter of the Fed’s leadership remained the center of attention throughout the proceedings.

“You know President Powell, the elephant in the room is whether you’re going to be reappointed for a second term as Fed chairman,” Warren said before announcing she would vote against him if he was. reappointed by President Joe Biden.

The Biden administration has not announced a decision on the reappointment of Powell, whose term expires in February, or on a list of other vacancies and pending openings on the Fed’s board. One board seat is currently empty and the two vice-president positions – for financial regulation and monetary policy – will be open between October and January.

The White House declined to comment on Warren’s remark that Powell was a “dangerous man” to run the Fed, but some outside observers lowered their expectations of Powell’s appointment.

“Confidence in the likelihood of a reappointment waned a bit over time without any action from the White House, weakened further when the trade controversy between Dallas Fed Chairman Kaplan and the Boston Fed Chairman Rosengren threatened to contaminate Powell, and dived today as Senator Warren opted for the chinstrap, describing him as a “dangerous man,” wrote Evercore ISI vice chairman, Krishna Guha.

Report by Jonnelle Marte; Editing by Andrea Ricci, Dan Burns and Richard Pullin

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