President Biden is About to Reshape Federal Reserve
Joe Biden isn't done with the Federal Reserve after reappointing Jerome Powell and promoting Lael Brainard to become Vice Chairwoman. Biden has three seats to fill on the board of the Federal Reserve, giving him a chance to put his personalized stamp on the powerful U.S. central bank.
President Joe Biden's decision to stick with Republican Jerome Powell to lead the Federal Reserve caught many Wall Street insiders off balance. Yet his naming of Lael Brainard to become Vice Chairwoman wasn't a surprise. Now Biden has the opportunity to soothe those wanting Brainard appointed to the lead the Federal Reserve by appointing three additional board members who will tilt the Central Bank in a more liberal direction.
One of the seats open of the Federal Reserve Board has been vacant for months. The impending departure of Fed Governors Randal Quarles and Richard Clarida will leave two more seats available. Allowing Biden to bring racial diversity and a heavy liberal slant to the Central Bank's board.
President Biden's statement in the aftermath of the announcement of Powell's and Brainard's continued presence on the Fed Reserve hints we can expect his announcements on nominees as early as next month. These additional appointments will likely generate a more liberal market shift in outlook in monetary policy as we advance the next four years. Especially given Biden's speech mo Monday announcing in which he said the next three picks…
"Will bring new perspective and voices" and "new diversity to the Fed, which is much needed and long overdue."
Biden is well aware that having the right people on the Federal Reserve and controlling monetary policy could become more important for his administration. It faces the possibility of a Republican takeover of Congress next year.
The three additional seats on the Federal Reserve will give a majority of the seven members a liberal focus, focusing on liberal priorities like climate change, racial equity, and stricter Wall Street regulations, given that they are expected to lose control of the House in 2022."
Those fretting over a Republican takeover of Congress worry it will mean taking fiscal stimulus off the table, which means the more dovish Fed Democratic appointees will mitigate the shift in Congress and enable the Fed to rely more on monetary measures to boost the economy heading into 2024.
According to the media report, here are the top five candidates for the three open seats on the Federal Reserve…
Sarah Bloom Raskin is a former Fed Governor. He served under President Obama from 2010 to 2014 when she was tapped to serve as Deputy Secretary of the Treasury.
The Open Markets Institute, an anti-monopoly advocacy group, called on Biden to nominate Raskin to serve as the Fed's vice chairwoman for supervision to lead the central bank's bank oversight efforts. The institute argued she "brings deep regulatory expertise and a proven track record of consumer protection."
It's important to note that Bloom Raskin is the wife of Democratic Rep. Jamie Raskin of Maryland. He was one of the first members assigned to the first impeachment trial of former President Donald Trump.
William Spriggs is chief economist of the AFL-CIO and a professor at Howard University. A Black man, a Spriggs nomination would fulfill the Biden administration's desire to bring more racial diversity to the Fed leadership. At the same time, his association with organized labor would likely garner him the support of that key Democratic constituency.
Bloomberg reported earlier this year that Spriggs has "the backing of several key White House officials and allies" for a role on the Fed board.
Lisa Cook, an economist at Michigan State University, is also being considered by the White House to fill an open seat, according to Axios. She served as a senior economist for President Obama's Council of Economic Advisors. She was a member of President Biden's transition team.
"She would make history as the first black female member of the board and is said to be the choice of Senate Banking Committee Chairman Sherrod Brown," the Ohio Democrat, wrote Ed Mills, a federal policy analyst at Raymond James, in a Monday note to clients.
Raphael Bostic is president of the Federal Reserve Bank of Atlanta and told Axios earlier this year that he often hears speculation he could be named to the board of governors. As a black man, he would add diversity to the body, and racial justice is an issue of concern for him.
Brian Gardner, the chief Washington policy strategist at Stifel, wrote in a Monday note about Bostic...
"Dr. Bostic has written and spoken widely about diversity and inclusion in the banking system. These topics are important themes in the Biden administration, which could make him an attractive candidate."
"However, Bostic's views on prudential regulation and bank mergers are less publicized than his views on diversity and inclusion, so he represents a bit of an unknown regarding financial regulation."
Mary Daly is the president of the Federal Reserve Bank of San Francisco and has served at the regional bank in various capacities for more than two decades. Daly considers Treasury Secretary Janet Yellen a mentor, saying in 2018 that Yellen "made my career kind of explode" while Daly worked under her at the San Francisco Fed.
Daly, viewed as a monetary dove, reportedly turned down a White House offer to join the Fed board to move to Washington.
By the way, either Bostic or Daly would be the first openly gay person to serve as a Fed governor. This will allow Biden to claim it has lived up to his promise of diversity.
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