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Are Fed Governor Appointments Important?

Politics
4 min read

Image Credit: New America (Flickr)

About the Federal Reserve Board of Governors Appointments

 

There are three names consistently mentioned as US President Biden’s picks for Federal Reserve Board nominees.  These are Sarah Bloom Raskin for the important regulatory role of Vice Chair for Supervision, also expected to be nominated are academic economists Philip Jefferson and Lisa D. Cook to fill the remaining two vacancies on the Fed’s seven-member governing board. Is it important who is chosen? What would these three bring to the table?

The Importance of Fed Governors

The Board of Governors is the governing body of the entire Federal Reserve System, with offices located in Washington DC. The board consists of seven members, or “governors,” who are nominated by the President and confirmed in their positions by the Senate. Governors guide the operation of the Federal Reserve System to promote the goals and fulfill the responsibilities given by the Federal Reserve Act.

The seven members of the Board are automatically voting members of the Federal Open Market Committee (FOMC) which consists of 12 voting members, and four non-voting regional Reserve Bank presidents. The FOMC is tasked with creating an environment where the banking system is safe, and inflation, economic growth, and full employment are well balanced. It’s expected that 2022 will be a particularly challenging year to successfully manage these priorities.

 

About the Nominees

President Biden is said to be nominating climate-change activist Sarah Bloom Raskin as the central bank’s vice chair for supervision. Raskin would be filling the seat vacated by Randal Quarles who recently left this role. She has served as a Fed governor previously (2010 to 2014) before becoming President Obama’s deputy treasury secretary. The 60-year-old is married to US Representative Jamie Raskin.

The president is also expected to name Lisa DeNell Cook whose career has predominantly been in academia. Cook earned a Ph.D. in economics from the University of California, Berkeley with concentrations in macroeconomics and international economics. She is currently a Professor of Economics and International Relations, Michigan State University. The Milledgeville, GA native formerly worked as a senior economist on Obama’s Council of Economic Advisors

The third expected Fed governor to be nominated is Davidson College dean Philip Jefferson. Jefferson is a former Fed economist who now serves as dean of faculty and academic-affairs vice president at Davidson College in North Carolina. Born and raised in Washington DC, Jefferson received an MA and PhD. From the University of Virginia.

Senate Approval

The three nominees could face opposition during their Senate confirmation hearings. Some lawmakers have already come out against Raskin’s long-expected nomination. The opposition is based in part on her long-held position that financial regulators should use their rule-making powers to fight climate change. An example of Raskin’s views can be found in an op-ed piece from late 2021 that reads, “while none of [America’s] regulatory agencies was specifically designed to mitigate the risks of climate-related events, each has a mandate broad enough to encompass these risks within the scope of the instruments already given to it by Congress. Accordingly, all U.S. regulators can – and should – be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risk.”

Such positions have drawn criticism from lawmakers. Senator Pat Toomey said in a statement that Raskin “has specifically called for the Fed to pressure banks to choke off credit to traditional energy companies and to exclude those employers from any Fed emergency lending facilities. I have serious concerns that she would abuse the Fed’s narrow statutory mandates on monetary policy and banking supervision to have the central bank actively engaged in capital allocation.”

There also seems to be concern over the experience of the two nominees that are professors. One senator said, “I will closely examine whether Ms. Cook and Mr. Jefferson have the necessary experience, judgment and policy views to serve as Fed governors.”

Take-Away

The banking system and those that preside over and guide it are important to the overall state of the economy. The coming year is expected to be particularly challenging as moves to lessen inflation inputs will undoubtedly dampen economic growth. Fed governors and FOMC members best serve their mandates if their focus is on the mandates. There is some concern that if any of the three are nominated, the Senate hearings may be fraught with drama related to determining if there is enough experience from some of the candidates, and if there is an agenda above and beyond that explicitly provided for in the Federal Reserve Act.

Paul Hoffman

Managing Editor, Channelchek

 

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Sources:

https://law.duke.edu/news/op-ed-raskin-urges-us-financial-regulators-use-their-tools-mitigate-climate-risk/

https://lisadcook.net/bio-cv/
https://www.minneapolisfed.org/people/philip-jefferson

https://blog.earn2trade.com/what-is-the-fomc/#ixzz7HwdoAjME

https://www.barrons.com/news/us-to-appoint-climate-conscious-bloom-raskin-as-fed-s-top-banking-regulator-01642144806?tesla=y

https://www.federalreserve.gov/aboutthefed/fract.htm

 

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