U.S. President Joe Biden has picked former Federal Reserve Governor Sarah Bloom Raskin for the Fed’s key regulatory post and two Black economists – Lisa Cook and Philip Jefferson – to serve on its board in what would represent a landmark demographic overhaul of the world’s most powerful central bank.
The White House sent the nominations to the Senate late on Thursday, according to two sources familiar with the process.
The appointments would fill out the ranks of a seven-member panel that wields tremendous influence over the world’s largest economy, and would make the Fed’s top leadership the most diverse by race and gender in its 108-year history.
The appointments come as Biden’s own plans to reboot the economy after the COVID-19 pandemic have run into an unexpected spike in inflation. It presents an opportunity for him to leave a lasting imprint on a body that sets economic policies – particularly about interest rates – that reverberate across the globe.
“President Biden has nominated a serious, qualified, nonpartisan group of five nominees for the Board of Governors of the Federal Reserve who together will bring an extraordinary amount of skill, experience, and competence to the Federal Reserve,” said the source familiar with the nominations.
“They will prioritize the independence of the Federal Reserve and are committed to fighting inflation, maintaining stability in our economy in the midst of the pandemic, and making sure our economic growth broadly benefits all 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 rocky, and partisan, nomination process ahead in a legislative body that Democrats control only by virtue of Vice President Kamala Harris’ dual role as president of the Senate.
“I have serious concerns” about Raskin, Senator Pat Toomey of Pennsylvania said in statement, adding he believes she would try to keep banks from lending to oil and gas companies and otherwise stray from the two congressional mandates that steer the Fed’s core mission – maximum employment and price stability.
Toomey and other Republicans repeatedly queried Fed Governor Lael Brainard, nominated to the Fed’s No. 2 role, about her support for climate risk research during her nomination hearing earlier Thursday. He also signaled skepticism toward Cook and Jefferson, saying he will “closely examine” whether they have “the necessary experience, judgment, and policy views to serve as Fed Governors.”
MORE DIVERSE FED BOARD
Cook, a professor of economics and international relations at Michigan State University, would be the first Black woman to serve as a Fed governor. Jefferson, a professor and senior administrator at Davidson College in North Carolina, would be only the fourth Black man to sit 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 has only six members, all white and four of whom are men.
“It’s clearly a changing of the guard,” Harvard University Professor Larry Katz said. This is a “path-breaking new set of nominees who will bring important perspectives and representation to the board.”
Former Fed governor Elizabeth Duke, who served with Raskin, told Reuters that Biden’s nominees will “inspire more and more diverse people to go into economics and to 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 payrolls than they did before the pandemic.
Charged with both keeping prices stable and maximizing U.S. employment, the Fed is debating how fast and how far to raise interest rates and otherwise tighten monetary policy to rein in inflation without short-circuiting the labor market.
Its current leadership has already signaled readiness to start raising interest rates as early as March, dialing back from an ultra-accommodative footing that could test financial markets and influence the pace of recovery during an election year in which control of Congress is on the line.
Leading the pivot is Fed Chair Jerome Powell, whom Biden late last year asked to serve a second four-year term as chairman, starting next month. The Senate Banking Committee held Powell’s nomination hearing on Tuesday, while Fed Governor Lael Brainard, who Biden has nominated to be the central bank’s vice chair, appeared before the panel on Thursday.
Progressives had favored more diverse picks to lead the Fed; the slate Biden put forward Thursday helps meet that demand.
Raskin, who spent four years as a Fed governor before being tapped as a deputy Treasury secretary from 2014 to 2017, is expected to bring tougher oversight to bear on Wall Street than the Fed’s previous vice chair of supervision, Randal Quarles, who left the Fed at the end of last year.
Cook has written extensively about the economic consequences of racial disparities and gender inequality, and growing up lived through the violence of school desegregation in the U.S. 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 serious academic who should be confirmed by the Senate quickly.
“He’s the kind of honorable, serious person the Federal Reserve should have.”