Senate Banking Committee Advances Four Nominations for Fed Board

The Senate Banking Committee approved March 16 the re-appointment of Jerome "Jay" Powell as Federal Reserve Board Chair, Fed Governor Lael Brainard as the board's vice-chair and economist Phillip Jefferson as board member, following Sarah Bloom Raskin's withdrawal on March 15 to the post of Fed vice-chair for supervision.

Because a fourth nominee, economist Lisa Cook, received a deadlocked vote, 12-12, from the 24-member Senate Banking Committee, she will first face a procedural vote on the Senate floor. The Fed nominees must then be approved by the full Senate before assuming their new roles.

The Banking Committee also advanced the nomination of the Federal Housing Finance Agency's Acting Director Sandra Thompson as the country's top housing regulator. Thompson has been the deputy director of the agency’s Division of Housing Mission and Goals (DHMG) since 2013. 

The Fed Board's New Makeup

If confirmed by the full Senate, Powell will continue to lead the Fed as chairman in his second term, while Fed Governor Lael Brainard will serve as vice-chair. Linda Cook's appointment will be historic. If she is confirmed, it will mark the first time a Black woman serves on the Fed board. Cook is an economist at Michigan State University and known for her work on the impact of racial injustice on the economy. Philip Jefferson, a former Fed economist, who would leave Davidson College for his new role, has focused on poverty, unemployment, and education. The new board faces rising inflation at home and war abroad.

Raskin's Withdrawal Paved Way for Remaining Appointments

Raskin's request that Biden withdraw her nomination clearly made it easier for the Senate's Banking Committee to advance the remaining four Fed nominations. West Virginia's Democratic Senator Joe Manchin, a key vote in a Senate that is evenly split between Democrats and Republicans, said he would not confirm Raskin's nomination to the Fed.

In Raskin's letter to the President Joe Biden, she cited "relentless attacks by special interests" as the reason for her withdrawal and restated her belief that "the perils of climate change must be added to the list of serious risks that the Federal Reserve considers as it works to ensure the stability and resiliency of our economy and financial system.” Some of the Republicans who opposed Raskin think that the Fed instead should focus on ensuring price stability in an inflationary environment and full employment.

Earlier Controversy Over Fintech, Reserve Trust

The face-off between the GOP and Raskin goes back to February when Raskin was questioned about her association with the fintech company Reserve Trust, which procured a Fed master account. A Fed master account facilitates access to the Fed payments system. Raskin was on the board of Reserve Trust at that time and had left her earlier position as the Treasury Department’s deputy secretary. However, some Democrats believe that the debate over Reserve Trust is a front, and that its real roots lie in the GOP's worries about Raskin's criticism of fossil-fuels and their connection to climate change.

With the successful approval of the remaining nominations, the new board will deal with the task of several interest rate hikes to curb the highest inflation the country has seen in four decades.

The Bottom Line

The Federal Reserve Board is likely up for something old and something new. Nearly certain to continue as Fed chair is Powell. The other probable changes are Fed governor Brainard in a new position as vice-chair and economist Jefferson as a new board member. Economist Lisa Cook, a potential new board member, faces a procedural vote on the Senate floor before her nomination advances to the full Senate. The other three Fed nominees and Thompson also undergo a vote by the full Senate.