Warren steps up criticism of Powell following rate hike, says he is ‘dangerous’ to serve as Fed chair
Sen. Elizabeth Warren (D-Mass.) stepped up her criticism of Federal Reserve Chairman Jerome Powell following the Fed’s most recent interest rate hike Wednesday, saying that he is a “dangerous man” to serve in his role.
Warren told CNN’s Jake Tapper in an interview that Powell is doing a “terrible job” in his position and is risking sending the economy into a recession with the Fed’s continuous interest rate increases.
“I think he’s a dangerous man to have in this job,” she said.
Warren’s denunciation of Powell came after the Fed announced earlier in the day that it is raising interest rates for the ninth consecutive time, ticking the baseline range up 0.25 points to a range of 4.75 to 5 percent.
The raises have been part of the Fed’s plan to get inflation under control and drive it back under the target of 2 percent. The annual inflation rate dropped from 6.4 percent in January to 6 percent last month, continuing a downward trend from the peak of 9.1 percent but still much higher than the goal.
Powell has said he is willing to take necessary steps to reduce inflation even if it causes an economic downturn, and the Fed has been aggressive in combatting it, raising interest rates by 0.75 points four times in a row last year.
The economy has shown some resilience in continuing to add hundreds of thousands of new jobs, but the recent collapse of Silicon Valley Bank and Signature Bank has rattled the market, causing some economic experts to expect the Fed might hold at the current interest rate.
Warren said Powell has spent the five years he has served in his position weakening regulations for the large banks like Silicon Valley and Signature.
“I predicted five years ago, the consequence of that kind of weakening would be that we would see these banks load up on risk, look for short-term profits, give themselves the ginormous bonuses and big salaries, and then some of those banks will explode, and that is exactly what has happened on Chair Powell’s watch,” Warren said.
Silicon Valley Bank collapsed after the bank did not have enough cash on hand to fulfill withdrawal requests and needed to sell assets to increase its liquidity. That led to a bank run after customers learned about the situation.
Warren said Powell is “trying to drive” the economy into a recession with the interest rate hikes and raise the unemployment by more than 1 percentage point in a 12-month period.
The unemployment rate rose from 3.4 percent to 3.6 percent last month despite job growth, and the Fed’s projected unemployment rate for this year was set at 4.5 percent following Wednesday’s interest rate increase.
Warren said the unemployment rate has risen by at least 1 point in that time period 12 times, and every time it has resulted in a recession.
“So that’s the direction he’s trying to push us. That is a danger to our economy,” she said.
Warren has previously issued harsh criticism on Powell in his role as Fed chair, arguing that he has failed on both monetary policy and regulation. She called for a pause on interest rate increases on Sunday ahead of the Fed’s Wednesday decision.
Janet Yellen reassures bankers during speech in front of lobbying group
Treasury Secretary Janet Yellen speaks during a Senate Finance Committee hearing at the U.S. Capitol last Thursday. She delivered remarks to the American Bankers Association on Tuesday.
March 21 (UPI) -- Treasury Secretary Janet Yellen told the American Bankers Association on Tuesday that the government is prepared to protect all depositors if a bank fails as it did following the collapse of Silicon Valley Bank in California and Signature Bank in New York.
Yellen, addressing the association's summit in Washington, D.C., on Tuesday morning, said that the U.S. financial system is on solid footing. Silicon Valley Bank in California and Signature Bank in New York failed within days of each other, sending shockwaves through the market.
"The situation demanded a swift response," Yellen said of the bank failures and the Federal Deposit Insurance Corporation stepping in to guarantee all depositors regardless of amount. "In the days that followed, the federal government delivered just that: decisive and forceful actions to strengthen public confidence in the U.S. banking system and protect the American economy.
"Let me be clear: the government's recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors' savings and the banking system remain safe."
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Yellen said the government took action recognizing that the banks, regardless of size, play a critical role in keeping the entire system balanced.
"Large banks play an important role in our economy, but so do small- and mid-sized banks," Yellen said. "These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses. They also increase competition in the banking sector, and often have specialized knowledge and expertise in the communities they invest in."
Yellen said the action government took to strengthen public confidence in the banking system helped to avoid the kind of panic that could have caused more depositors to remove their money.
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"The steps we took were not focused on aiding specific banks or classes of banks," Yellen said. "Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."
"I believe that our actions reduced the risk of further bank failures that would have imposed losses on the Deposit Insurance Fund, which is paid for through fees on insured banks."
Yellen said 11 banks announced $30 billion in deposits into troubled First Republic Bank last week, adding that it represented "a vote of confidence" in our banking system.
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"We are continuing to monitor conditions closely," Yellen said. "My team and I have been in close communication with many of you, in addition to federal and state regulators, other market participants, and international counterparts."
Yellen said they are trying to find out why Silicon Valley Bank, which catered to tech startups, and Signature Bank, which was devoted to cryptocurrencies failed but it was important to find those answers.
"While we don't yet have all the details about the collapse of the two banks, we do know that the recent developments are very different than those of the Global Financial Crisis," Yellen said. "Back then, many financial institutions came under stress due to their holdings of subprime assets."
"We do not see that situation in the banking system today. Our financial system is also significantly stronger than it was 15 years ago. This is in large part due to post-crisis reforms that provided stronger capital standards, among other important improvements."
Yellen said the Treasury Department remains committed to making sure depositors will be protected during the current review of the banking system.
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