Monday, January 17, 2022

UPDATE 4 Biden wants to reshape the Fed with a historically diverse slate

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(The number of board members scheduled to leave Richard Klard on Friday will be updated; the update date is January 14)

WASHINGTON, Jan. 14 (UPI) – U.S. President Joe Biden has elected former Federal Reserve Governor Sarah Blum Raskin to the Fed’s key regulatory position and two black economists – Lisa Cook and Philip Jefferson – to serve on its board, marking a significant demographic change. the most powerful central bank in the world.

According to two sources familiar with the process, the White House sent the candidates to the Senate on Thursday night.

These appointments fill the ranks of a seven-member panel that has a major impact on the world’s largest economy and make the Fed’s top leadership the most diverse in terms of race and gender in its 108-year history.

The meetings are linked to Biden’s own plans to revive the economy after the COVID-19 pandemic led to an unexpected rise in inflation. This allows it to leave a permanent mark on the body that sets economic policies that resonate around the world, particularly interest rates.

“President Biden has invited a serious, qualified, non-partisan group of five candidates to the Federal Reserve Board of Governors, who together bring great skills, experience and expertise to the Federal Reserve System,” said a source familiar with the matter. nominations.

“They prioritize the independence of the Federal Reserve and are committed to fighting inflation, maintaining stability in our economy during a pandemic, and ensuring that our economic growth benefits all workers.”

The White House declined to comment.

The nominees were immediately fired by the top Republican member of the Senate Banking Committee, indicating that the Democrats have just begun a potentially difficult and partisan nomination process in the legislature, controlled by Vice President Kamala Harris ’dual role as Senate President. .

Pennsylvania Sen. Pat Tumi said he is “seriously concerned” about Raskin and believes he will try to stop banks from lending to oil and gas companies, or else he will deviate from the two congressional mandates that run the Fed’s main mission – the maximum. employment and price stability.

Toomey and other Republicans have repeatedly asked Fed Gov. Lael Brynard, who is a candidate for the Fed’s No. 2 role, to support climate risk research at a hearing on Thursday. He is also skeptical of Cook and Jefferson, saying they will “closely examine” whether they have the “experience, considerations and political views” needed to work as Fed governors.

MORE DIFFERENT FED BOARD

Cook, a professor of economics and international relations at Michigan State University, will be the first black woman to serve as Fed governor. Jefferson, a professor and senior administrator at Davidson College in North Carolina, is the fourth black man sitting on the panel and will be the first in more than 15 years.

Biden’s selection means that four women will also be the first to join the seven-member board. There are currently only five members of the Fed board, all in white, but as announced earlier by Vice President Richard Clarde, after leaving the board on Friday, their number will drop to four – two men and two women.

“It’s definitely a change of guards,” said Larry Katz, a professor at Harvard University. It is “a set of new candidates that will bring significant prospects and representation to the board.”

Former Fed Gov. Elizabeth Duke, who worked with Raskin, said Biden candidates “inspire more and more diverse people to enter the economy and study economic practices.”

Trying to make the Fed look more like America is at a critical juncture. Inflation has reached its highest level in decades. Unemployment has fallen, but U.S. employers ’wages are 3.6 million lower than before the pandemic.

The Fed, which has set itself the task of keeping prices stable and maximizing U.S. employment, is discussing how quickly and to what extent to raise interest rates and tighten monetary policy to curb inflation without otherwise shorting the labor market.

His current leadership said in March it was ready to start raising interest rates, test financial markets and return on a very favorable basis that could affect the pace of recovery in an election year that is under Congress control.

Late last year, Biden was led by Fed Chairman Jerome Powell, who asked to serve as chairman for a second four-year term starting next month. The Senate Banking Committee held a hearing on Powell’s candidacy on Tuesday, with Fed Governor Lael Brynard, who nominated Biden as deputy central bank governor, appeared before the panel here on Thursday.

Progressives preferred more diverse choices to lead the Fed; The slate that Biden put forward on Thursday will help meet that demand.

Raskin, who left the Fed for four years before being appointed Deputy Treasury Secretary from 2014 to 2017, is expected to have tighter controls on Wall Street than former Fed Vice President for Supervision Randal Quarles. at the end of last year.

Cook has written extensively about the economic consequences of racial inequality and gender inequality, and the grown-up child lived through the violence of school desegregation in the southern United States. Jefferson has written extensively about wages, poverty, and income distribution.

Kevin Hassett Jefferson, who chaired the Economic Advisory Board under former President Donald Trump, said he was a “brilliant smart economist” and a serious academic who needed to be approved by the Senate quickly.

“He’s an honorable and serious man who should be in the Federal Reserve.” (Interview by Andrea Shalal; additional report by Trevor Hunnikutt; edited by Dan Burns, Paul Simao and Leslie Adler)

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