Warren Outdoes Brown in Populist Duel Aimed at Fed’s Powell

pa href=https://www.cato.org/people/norbert-michel hreflang=undNorbert Michel/a
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pTuesday’s Senate Banking a href=https://www.banking.senate.gov/hearings/02/28/2023/the-semiannual-monetary-policy-report-to-the-congresshearing/a provided clear evidence that Senator Elizabeth Warren (D‑MA) is competing with Senator Sherrod Brown (D‑OH) for the title of chief populist. Warren excoriated Fed chair Powell for the Fed’s tightening and effectively accused him of wanting to put two million people out of work. (She comes in just before the a href=https://www.banking.senate.gov/hearings/02/28/2023/the-semiannual-monetary-policy-report-to-the-congress1:28 mark/a.) Committee chair Brown, more cordial, stuck to his typical playbook of vilifying big corporations for earning profits./p
pWhat’s funny is that neither of them said anbsp;word about what the Fed is doing with its a href=https://www.forbes.com/sites/norbertmichel/2022/11/01/the-feds-repo-and-reserve-payouts-have-populists-in-a-bind/?sh=40bf05974b62interest payments/a on bank reserves or reverse repurchase agreements (repos). The silence is surprising because the Fed is paying billions of dollars a href=https://www.forbes.com/sites/norbertmichel/2022/11/01/the-feds-repo-and-reserve-payouts-have-populists-in-a-bind/?sh=40bf05974b62in interest/a to large banks and mutual funds. Given their positions, it would be great to know whether Brown or Warren have any desire to end this arrangement. And staying silent isn’t very populist./p
pRegardless, Powell deserves anbsp;ton of credit for keeping his cool. I’m not anbsp;fan of extreme tightening or even price targeting for that matter, but Warren’s line of attack was pure political theater. Congress gave the Fed it’s mandate, and Warren is part of the only machine that could undo that mandate. She’s been in Congress for more than anbsp;decade but has done nothing to change it./p
pSpeaking of responsibility, ranking member Tim Scott (R‑SC) deserves credit for pointing out that the a href=https://www.cato.org/commentary/inflation-good-news-not-so-good-news-bad-newsinflation problem/a we’re experiencing a href=https://stayathomemacro.substack.com/p/can-the-fed-bring-inflation-downwas/a a href=https://www.federalreserve.gov/econres/notes/feds-notes/fiscal-policy-and-excess-inflation-during-covid-19-a-cross-country-view-20220715.htmlindeed/a a href=https://www.nber.org/papers/w30892fiscally induced/a. Perhaps the Fed could have been less accommodative of Congress’s fiscal spending, and it surely could have started tightening anbsp;a href=https://www.cato.org/commentary/fed-should-stop-targeting-pricesbit sooner/a. But neither move would have prevented the well‐​rehearsed ire of Senator Warren. (Watch till a href=https://www.warren.senate.gov/newsroom/videos/watch/senator-warren-questions-ny-fed-president-william-dudleythe end/a.)/p
pWarren could repudiate excessive fiscal expenditures that cause inflation, something for which she has direct responsibility, but Inbsp;wouldn’t hold my breath. Besides, fixing the economy you broke is hard. It’s much easier to go after Powell./p