Biden’s Latest Fed Picks Set Board on Path Toward More Diversity
(Bloomberg) -- President Joe Biden plans to nominate the first Black woman to the Federal Reserve Board of Governors as well as the first female to be vice chair of supervision.
Lisa Cook will be selected as a governor alongside Philip Jefferson -- who is also Black -- and former Fed Governor Sarah Bloom Raskin, who’s picked to be vice chair of supervision. The three complete Biden’s selections for the U.S. central bank as it tries to curb generation-high inflation without choking off the labor market’s recovery from the Covid-19 pandemic. He has also nominated Jerome Powell to serve a second four-year term as chair and elevated Governor Lael Brainard to be vice chair. All must be confirmed by the Senate.
“The new nominees have generally expressed dovish policy views, but the continuity in Fed leadership and pressing nature of the current inflation overshoot likely means that their near-term monetary policy impact will be limited,’ Goldman Sachs Group Inc. economists including Jan Hatzius said in an emailed note. The bank expects the Fed to raise rates four times in 2022 and start running off its $8.79 trillion balance sheet in July.
Here are key details of the three picks, whose names were made public on Thursday evening by people familiar with the decision:
Lisa Cook is an economics and international relations professor at Michigan State University. If confirmed by the Senate, she will be the first Black woman to serve in the role in the Fed’s more than 100-year history.
Progressives, citing the need for more diversity at the central bank, have for months urged Biden nominate Cook to the Fed.
The pandemic has exacerbated economic inequality in a country that already faced wide disparities between groups of people before the start of the virus in 2020. The Fed has said it will focus more on these differences when setting policy, both via its new framework -- announced in August 2020 -- and the research it highlights and shares.
Cook has dedicated a large part of her career to researching the ways in which economic inequality hampers growth.
Her research has measured the economic costs of inequality in a variety of ways, from the racially uneven distribution of Paycheck Protection Program loans during the pandemic to the impact of post-Civil War violence on Black invention and the lost value to the economy of fewer Black patents.
Cook “is a renowned economist who has dedicated her career to deepening our understanding of women and people of color in the economy, both groups having long been marginalized by the field of economics,” said Michelle Holder, president of the Washington Center for Equitable Growth. “ At a time when racial and gender stratification looms large in the Covid-19 recovery, Lisa’s voice will be a crucial one to have on the board.”
Her research into economic inequality and her career pedigree -- Cook obtained her doctorate from the University of California, Berkeley, and served on President Barack Obama’s Council of Economic Advisers -- have made her a favorite of progressives for a spot on the Fed’s board.
Cook also served on Biden’s transition team earlier this year, helping lead the group that reviewed banking regulators including the Fed.
Sarah Bloom Raskin is a former Fed governor who previously served as No. 2 at the U.S. Treasury during the Obama administration. If confirmed, she’ll become the Fed’s second vice chair for supervision and the first woman to serve in the role since its creation after the financial crisis of 2008-09.
In that role, she’s expected to take a tougher approach to policing the country’s largest banks than her predecessor, Randal Quarles, who was roundly criticized by Democrats as being too lenient on Wall Street.
The Fed’s vice chair for supervision is Washington’s most powerful banking overseer, charged with reviewing rules for the largest banks. Rule changes must be approved by the wider board of governors, but the vice chair controls the process of studying and proposing such changes.
The post also oversees annual stress tests that verify the health of big lenders and would likely play a leading role working with the Biden administration on financial regulatory policies, including those regarding cryptocurrencies.
“I’m glad she accepted the offer; this is going to be a really hard job,” said Betsy Duke, who was nominated to the Fed board by George W. Bush and whose term overlapped with Raskin’s previous stint. “The challenges that are going to face the financial system as well as the Fed are numerous, and she will be good at all of them.”
Senator Elizabeth Warren, a Massachusetts Democrat, and several progressive groups have expressed keen interest in Biden’s pick for vice chair for supervision -- regarding the choice as an opportunity to push the central bank into more aggressive regulation of financial institutions.
Raskin has aired strong views on how regulators should act to prepare the financial system for climate change and for a transition away from the use of fossil fuels. That will likely set up a clash with Republicans during her confirmation hearing, who have warned against the Fed using its regulatory powers to weigh in on the issue.
Duke said her message to Republican senators who have leveled criticism at Raskin is “to talk to her and understand how she thinks, because I just don’t recognize her when I read that stuff.”
Philip Jefferson is the vice president for academic affairs, dean of faculty and an economics professor at Davidson College in North Carolina. If confirmed by the Senate, he would become just the fourth Black man to serve as a Fed governor.
He has worked at the Fed twice before, serving as an economist in the board’s monetary affairs division from 1996 to 1997, and as a research assistant in the fiscal analysis section from 1983 to 1985.
“Phil Jefferson is someone I would have been 100% comfortable telling President Trump to nominate to the Federal Reserve,” said Kevin Hassett, who was chairman of the White House Council of Economic Advisers under Donald Trump. “He’s exactly the kind of person I want at the Fed,” said Hassett, who was a fellow faculty member at Columbia University with Jefferson in the 1990s.
Jefferson has authored and edited books and articles on poverty, and inequality has been one of the focus areas of his teaching. Besides Columbia, he has taught at the University of Virginia, Swarthmore College in Pennsylvania, and was a visiting assistant research economist at the University of California, Berkeley.
Jefferson has published extensively on subjects “that the Fed needs to understand,” said Hassett, who added that he intends to “aggressively support” his former colleague throughout the nomination process. “He’s good. He’s a serious guy.”
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