Biden Backs Powell After Sen. Elizabeth Warren Intensifies Opposition

Mr. Biden gave no indication he has made a decision over whether to offer Mr. Powell a second term when his current one expires in February. Members of Mr. Biden’s economic team have supported keeping Mr. Powell. However, Ms. Warren’s vocal opposition has complicated Mr. Biden’s political calculus, as he tries to balance moderate and progressive demands on his signature domestic policy goals.

Several members of both parties have also voiced support in recent weeks for Mr. Powell’s renomination, giving him high marks for his response to the pandemic. Some Democrats have been heartened by his public comments that recent inflationary pressures, because they are being driven by temporary supply-chain disruptions, don’t require an immediate policy response from the Fed.

But a vocal minority of Democrats, led by Ms. Warren, have called for his replacement and favor someone who would be more active in pressing the central bank to regulate banks and address climate-related risks. Ms. Warren last week told Mr. Powell at a hearing that his record favoring a lighter touch on banks made him a “dangerous man” to lead the Fed and that she would not support his nomination.

Mr. Powell is a Republican who was first nominated to the Fed’s board 10 years ago by President Obama. He was named as Fed chairman by President Trump in 2018.

On Monday, Ms. Warren called for the Securities and Exchange Commission to investigate trading activities, first reported last month by The Wall Street Journal, that prompted two Fed presidents, Eric Rosengren of Boston and Robert Kaplan of Dallas, to resign.

Mr. Biden’s comments on Tuesday followed a Senate floor speech earlier in the day in which Ms. Warren said Mr. Powell had “failed as a leader.” Ms. Warren said the trading by the Fed presidents and additional disclosures in May that Vice Chairman Richard Clarida had moved money between mutual funds, as the coronavirus pandemic began buffeting financial markets, indicated a “culture of corruption.”

Mr. Powell has moved quickly in recent days to try to quell the controversy. The Fed said in a statement Monday it began discussions last week with its inspector general’s office to conduct an independent review of “whether trading activity by certain senior officials was in compliance with both the relevant ethics rules and the law. We welcome this review and will accept and take appropriate actions based on its findings.”

In testimony before Congress on Sept. 28, Mr. Powell promised a revamp of Fed policies on how its leaders manage personal investments to minimize even the appearance of conflicts of interest. He conceded that the rules that allowed the trading by Messrs. Kaplan and Rosengren to occur aren’t adequate to sustain the public’s confidence, even though they appeared to satisfy each bank’s existing protocols.

“We understand now that we need to modify our practices, and we’re in the process of creating ideas and recommendations for that,” he said. He wasn’t asked about and didn’t address the transactions disclosed by Mr. Clarida.

Write to Nick Timiraos at [email protected]