As Clock Ticks on Fed Picks, Biden Has Scope to Add Diversity
(Bloomberg) -- President Joe Biden is on the verge of nominations that could reshape the Federal Reserve, a group that could collectively usher in an era in which the U.S. central bank’s governing board will have more women and people of color and put more weight on reducing economic inequality.
The members of the Fed board face the ongoing challenge of repairing the U.S. economy from damage caused by the coronavirus pandemic and the newer task of confronting an inflation surge. They’ll need to decide whether to accelerate a pullback in support for the recovery and when to raise interest rates from the rock-bottom levels that have fueled a housing boom and sent stocks soaring to record highs since last year.
Biden is expected to name his pick for chair around the Thanksgiving holiday, which falls on Nov. 25 this year. He has as many as four slots to fill on the Board of Governors. Bloomberg has reported that Biden is considering either reappointing Jerome Powell for a second term as chair or elevating Governor Lael Brainard to the top job.
Progressive Democrats are urging the Biden administration to shape Fed leadership so that the central bank uses its tools to better promote job gains across racial groups, keep Wall Street banks in check and combat climate change. The president himself has made a more equitable labor market a centerpiece of his agenda.
“It is about justice,” Biden said in a campaign speech last year. “For generations, Americans who are Black, Brown, Native American, immigrant, haven't always been fully included in our democracy or our economy.”
The current board of Fed governors has six members and an open seat. Each is picked by the president and then subject to Senate confirmation. Powell was nominated to the board by former President Barack Obama and then elevated to the chair position by former President Donald Trump.
Biden has a chance to fill the positions of chair, vice chair, vice chair of supervision and the vacant board seat.
Many economists expect Biden to resume a decades-long tradition of reappointing a presidential predecessor’s Fed chief, in a nod to the central bank’s independence from the White House. Trump broke the pattern in elevating Powell, then a Fed governor, to chair in 2018 rather than giving Janet Yellen, now Treasury secretary, a second term as Fed chair.
While Powell has been seen as the most likely pick, some progressive activists have been urging Biden to pick Brainard instead, given her opposition to deregulation moves under Powell.
For the other potential openings, Fed watchers consider multiple people from current and former Fed policy makers to academics and a Wall Street economist as contenders.
Many of them held posts in the Obama administration at the Fed, Treasury Department or Council of Economic Advisers including Lisa Cook, Sarah Bloom Raskin, Karen Dynan and Seth Carpenter.
William Spriggs, chief economist at the AFL-CIO labor federation, is an outspoken advocate for pro-worker policies across racial groups. And Cecilia Rouse is currently the first African-American to chair the White House Council of Economic Advisers, a position also held by Ben Bernanke and Yellen before they became Fed chairs.
Another possibility is former Fed vice chair Roger Ferguson, who was previously considered by Biden to be his top White House economic adviser. Earlier this week, private equity firm Apollo Global Management Inc. reversed course on a prior announcement that Ferguson was to join the company, citing unspecified commitments with his prior employer, pension giant TIAA.
Biden is likely to present a decision not just on the Fed chief, but a slate of candidates for open or opening positions on the board, Senate Banking Committee Chair Sherrod Brown said in late October.
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