U.S. President Joe Biden has picked former Federal Reserve Governor Sarah Bloom Raskin for the key Fed regulatory post and two black economists – Lisa Cook and Philip Jefferson – to serve on his board. board of directors in what would represent historical demographics. overhaul of the most powerful central bank in the world.
The White House sent the nominations to the Senate on Thursday evening, according to two sources familiar with the process.
The nominations would fill the ranks of a seven-member panel that wields sweeping influence over the world’s largest economy and would make the Fed’s top leadership the most racially and gender-diverse in its 108-year history. .
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The appointments come as Biden’s own plans to revive the economy after the COVID-19 pandemic ran into an unexpected spike in inflation. This is an opportunity for him to leave a lasting mark on a body that sets economic policies – especially on interest rates – that reverberate around the world.
“President Biden has named a thoughtful, qualified, and nonpartisan group of five candidates for the Federal Reserve Board of Governors who together will bring an extraordinary amount of skill, experience, and competence to the Federal Reserve,” he said. said the source familiar with the matter. applications.
“They will prioritize the independence of the Federal Reserve and are committed to fighting inflation, keeping our economy stable amid the pandemic, and ensuring that our economic growth broadly benefits all people. workers.”
The White House declined to comment.
The nominations drew immediate fire from the top Republican member of the Senate Banking Committee, signaling a potentially difficult and partisan nomination process ahead in a legislative body Democrats control only by virtue of Vice President Kamala’s dual role. Harris as President of the Senate. .
“I have serious concerns” about Raskin, Sen. Pat Toomey of Pennsylvania said in a statement, adding that he believed she would try to stop banks from lending to oil and gas companies and otherwise deviate from the two congressional mandates that guide the Fed’s primary mission – maximum employment and price stability.
Toomey and other Republicans repeatedly asked Fed Governor Lael Brainard, the Fed’s No. 2 nominee, about her support for climate risk research during her nomination hearing earlier Thursday. . He also voiced his skepticism of Cook and Jefferson, saying he will “examine closely” whether they have the “experience, judgment and political views necessary to serve as Fed governors.”
MORE DIVERSIFIED FED BOARD
Cook, a professor of economics and international relations at Michigan State University, would be the first black woman to serve as Fed governor. Jefferson, a professor and senior administrator at Davidson College in North Carolina, would be just the fourth black man to serve on the panel and the first in more than 15 years.
Biden’s picks would mean the seven-member board of governors would include four women, also a first. Currently, the Fed’s board of directors has only six members, all white and four of them men.
“It’s clearly a changing of the guard,” said Harvard University professor Larry Katz. It is a “new group of groundbreaking candidates who will bring important perspectives and representation to the board”.
Former Fed Governor Elizabeth Duke, who served with Raskin, told Reuters Biden’s nominees will “inspire more and more diverse people to get into economics and study the practice of economics.” ”.
The effort to make the Fed look more like America comes at a critical time. Inflation is at its highest level in decades. Unemployment is down, but U.S. employers have 3.6 million fewer workers on their payroll than before the pandemic.
Tasked with both maintaining price stability and maximizing employment in the United States, the Fed debates the speed and extent of raising interest rates and tightening monetary policy to contain the inflation without bypassing the labor market.
Its current leaders have already signaled they are ready to start raising interest rates as early as March, reversing from an ultra-dovish stance that could test financial markets and influence the pace of the recovery over the course of a year. election in which the control of Congress is at stake. Read more
Fed Chairman Jerome Powell, whom Biden asked late last year to serve a second four-year term as chairman, starting next month, is leading the pivot. The Senate Banking Committee held Powell’s nomination hearing on Tuesday, while Fed Governor Lael Brainard, whom Biden named vice central bank chairman, appeared before the panel on Thursday.
Progressives had favored more diverse choices to lead the Fed; the slate Biden presented on Thursday helps meet that demand.
Raskin, who spent four years as Fed governor before being named assistant treasury secretary from 2014 to 2017, is expected to exercise tighter oversight on Wall Street than the former vice chairman of Fed oversight. , Randal Quarles, who left the Fed. at the end of last year.
Cook wrote extensively about the economic consequences of racial disparity and gender inequality, and grew up in the violence of school desegregation in the American South. Jefferson has written extensively on wages, poverty, and income distribution.
Kevin Hassett, who chaired the Council of Economic Advisers under former President Donald Trump, said Jefferson was an “incredibly smart economist” and a serious scholar who should be confirmed by the Senate soon.
“He’s the kind of honorable, serious person the Federal Reserve should have.”