Karen Petrou: How to Ensure Equitable Fed Intervention in the Crisis Next Time
With her unerring instinct for the jugular on which media thrive, Sen. Warren on Tuesday called Jay Powell a “dangerous man.” This promptly sent many into still more feverish speculation about the Fed’s next chairman, blotting out coverage of an even more consequential development in the House: Democratic plans to rewrite the Fed’s powers in the next financial crisis. Last week, I pointed to the political price for Mr. Powell’s renomination: the Omarova appointment. A structural one with even more lasting impact is the rewrite of the Fed’s emergency-liquidity powers to, as Democrats demand, end backstops for “Wall Street” in favor of Fed facilities for everyone else.
Although little noticed, HFSC Chairwoman Waters on Thursday said for the second time in as many weeks that “Our committee is committed to ideas to ensure that facilities like these [the Fed’s in 2020] can more directly support workers and small businesses as well as state and local governments the next time there is a crisis.” Holding fire on Mr. Powell, Senate Banking Chairman Brown also targeted Fed support for Wall Street in his opening statement on Tuesday. This follows an inconclusive HFSC hearing a week or so ago on just what these new facilities might look like but make it clear that an array of reforms is under active consideration.
Importantly, these demands for people-focused facilities aren’t an isolated case of progressive pique. After the 2008 crisis, there was much bipartisan ire over whom the Fed helped how. This led to a …