By guest authors Nick Timiraos, Andrew Ackerman and Ken Thomas from the Wall Street Journal. aul Kiernan contributed to this article.
Former No. 2 Treasury official has called for more aggressive climate focus
President Biden will nominate Sarah Bloom Raskin, a former top Treasury Department official, to serve as the Federal Reserve’s top banking regulator, the White House said.
If confirmed by the Senate, Ms. Raskin, a former Fed governor, would become the central bank’s vice chairwoman of supervision, the government’s most influential overseer of the American banking system.
Mr. Biden also plans to nominate two economists for other Fed board seats: Lisa Cook, a professor of economics and international relations at Michigan State University; and Philip Jefferson, a professor and administrator at Davidson College in North Carolina.
The three picks would complete Mr. Biden’s remake of the Fed board, following his decision in November to offer a second term to Fed Chairman Jerome Powell and nominate Fed governor Lael Brainard to become Fed vice chairwoman.
If all of Mr. Biden’s nominees win Senate approval, Mses. Raskin and Brainard would succeed top officials chosen by President Donald Trump. Mr. Biden’s appointees would hold five of the seven board seats. Four positions would be held by women.
The nominations of Ms. Cook and Mr. Jefferson, who are both Black, would help Mr. Biden fulfill his promise to improve diversity atop the central bank, which in its history has had only three Black board members, all of them men. The most recent was former Fed Vice Chairman Roger Ferguson, who left the board in 2006.
Ms. Raskin’s nomination is likely to hearten progressive Democrats, some of whom opposed Mr. Biden’s nomination of Mr. Powell, a Republican first chosen for the top job by Mr. Trump. They have called for the Fed to take a tougher stance in regulating big banks and a bolder approach in addressing financial risks posed by climate change.
But Ms. Raskin’s calls for the Fed to play a more active role on climate change could attract opposition from Republicans.
In a New York Times opinion article in May 2020, Ms. Raskin was critical of broad-based emergency-lending backstops enacted by the Treasury and Fed to assist businesses during the pandemic because she believed they should have taken steps to prevent lending to oil-and-gas concerns.
“The decisions the Fed makes on our behalf should build toward a stronger economy with more jobs in innovative industries—not prop up and enrich dying ones,” she wrote.
Sen. Patrick Toomey (R., Pa.) cited Ms. Raskin’s article as troubling during a confirmation hearing Thursday for Ms. Brainard. Ms. Raskin “explicitly advocated that the Fed allocate capital by denying it to this disfavored sector,” Mr. Toomey said.
With a closely divided Senate, Mr. Biden needs either universal support of Democrats to confirm his nominees or support from some Republicans to overcome holdouts from his own party. Ms. Raskin can be confirmed by the Senate but faces a “tight, contentious vote” with “perhaps…a Republican or two on her side,” said Ian Katz, a financial-policy analyst at Capital Alpha Partners, in a recent note to clients.
Ms. Raskin was confirmed by a voice vote in the Senate for both her Treasury and Fed posts in 2010 and 2014, respectively.
At the Fed, Ms. Raskin maintained a low profile on monetary policy but was deeply involved in behind-the-scenes work to write rules implementing the 2010 Dodd-Frank financial-regulatory overhaul.
In a speech in September 2009, Ms. Raskin blamed the financial crisis on “a deregulatory fervor that marginalized the interests of many” and said the downturn had been “brought upon us through a combination of greed, weak regulation and weak enforcement.”
Ms. Raskin, who has a Harvard University law degree and wrote her undergraduate thesis at Amherst College on monetary policy, served in the Obama administration as deputy Treasury secretary from 2014 to 2017 and as a Fed governor from 2010 to 2014. She was previously Maryland’s state commissioner of financial regulation.
She is currently a law professor at Duke University and is married to Rep. Jamie Raskin (D., Md.). She has served since 2017 on the board of directors of the investment firm Vanguard Group.
Mr. Biden’s picks are unlikely to exert any change in the Fed’s near-term monetary policy plans. Fed officials in recent days have strongly suggested that they are preparing to raise interest rates several times this year, beginning in March, in the midst of heightened concern about the potential persistence of high inflation.
Brisk demand for goods and disrupted supply chains have pushed inflation to its highest readings in decades. Consumer prices were up 7 % in December from a year earlier.
Some progressive Democrats last year urged the White House to install board members who wouldn’t be rushed to remove stimulus. But the recent inflation surge has changed that equation and made rate increases more politically tolerable on both sides of the aisle.
“I don’t see any of these people being notably dovish on the monetary side at this juncture,” said Adam Posen, president of the Peterson Institute for International Economics.
Mr. Jefferson, vice president for academic affairs and dean of faculty at Davidson College, has been an academic for nearly the entire time since 1990, when he earned his doctorate in economics, specializing in monetary economics and finance, at the University of Virginia. He was an economics professor at Swarthmore College from 1997 to 2019 and spent a year as a staff economist in the division of monetary affairs at the Fed board in the 1990s.
His research has focused on labour markets and poverty, including a 2008 paper that examines economic volatility faced by African-American families and female-headed households and its relationship to declining volatility in economic output. In 2005, he analysed the costs a In a 2018 interview with a publication of the Minneapolis Fed, Mr. Jefferson discussed the importance of including more diverse voices in policy-setting roles. “When you are a person who represents diversity, and you are engaged in the conversation, it changes the nature of the conversation. We need to be sitting around the table,” he said. “I think it is crucially important for public policy that we hear voices that represent diversity.”nd benefits of policies that promote a “high-pressure economy” to spur tighter labour markets, arguing that the latter outweighed the former.
In a 2018 interview with a publication of the Minneapolis Fed, Mr. Jefferson discussed the importance of including more diverse voices in policy-setting roles. “When you are a person who represents diversity, and you are engaged in the conversation, it changes the nature of the conversation. We need to be sitting around the table,” he said. “I think it is crucially important for public policy that we hear voices that represent diversity.”
Ms. Cook formerly served as a senior economist on the White House Council of Economic Advisers in the Obama administration. She has a doctorate in economics from the University of California, Berkeley, and bachelor’s degrees from Spelman College and the University of Oxford.
She wrote her doctoral dissertation on the underdevelopment of Russia’s banking system after the collapse of the Soviet Union, a feature she attributed to weak property rights.
Ms. Cook expressed support for programs in Mr. Biden’s economic agenda during a recent Fed conference on gender and the economy. Asked on a November panel to identify three policies that would be most effective in addressing discrimination and lack of opportunity, Ms. Cook cited child-care and elder-care support, paid family leave and infrastructure. All are included in either the bipartisan infrastructure package enacted in 2021 or in the social-spending and climate legislation that passed the House, but has stalled in the Senate.
The Fed’s regulatory agenda is likely to include addressing the rapid rise of cryptocurrencies and the question of how aggressively the central bank should pursue the adoption of a digital dollar.
Another issue is how banks must treat Treasurys and deposits they hold at the central bank under capital requirements known as the supplementary leverage ratio. The Fed allowed a temporary, pandemic-related reprieve from the capital requirements to expire last year, but promised to consider a broader revamp to the rule’s treatment of ultrasafe assets.