Fed's Powell faces heated questions on trading, regulation and diversity

Cool Reception

Tuesday's hearing was a decidedly chillier environment than Powell has typically faced on Capitol Hill since taking over as Fed chair in early 2018. Powell has gone to greater lengths than his predecessors to cultivate relationships with Congress, an effort that insulated him early on when he faced the wrath of the man who appointed him, former President Donald Trump.

In addition to the ordeal over trading by Fed officials, lawmakers questioned Powell's rationale that inflation - running at roughly twice its targeted 2% pace - was "transitory" and pressed him on the Fed's "dismal failure" to improve diversity in its ranks.

The number of minorities in management 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 seven-member Board of Governors.

The next chapter of the leadership of the Fed remained in focus during the entire proceeding.

"You know Chair Powell, the elephant in the room is whether you are going to be renominated for a second term as Fed chair," Warren said before announcing she would vote against him if he were reappointed by President Joe Biden.

The Biden administration has not announced a decision on whether to reappoint Powell, whose term expires in February, nor on a slate of other vacancies and pending openings on the Fed board. One board seat is currently empty and both vice chair positions - for financial regulation and monetary policy - will come open between October and January.

The White House would not comment on Warren's remark that Powell was a "dangerous man" to run the Fed, but some outside observers lowered their expectations that Powell will be renominated.

"Confidence in the likelihood of reappointment ebbed a bit as time passed with no action from the White House, weakened some further when the controversy over trading by Dallas Fed President Kaplan and Boston Fed President Rosengren threatened to contaminate Powell, and took a dive today as Senator Warren went for the jugular, describing him as a 'dangerous man,' Evercore ISI Vice Chairman Krishna Guha wrote.