Biden's Fed nominees draw fire from a Republican senator

[January 26, 2022]  By Ann Saphir

(Reuters) - Signaling U.S. President Joe Biden's picks for the Federal Reserve may face a tough confirmation process in the closely divided Senate, Republican Senator Pat Toomey on Tuesday raised questions over whether they fairly represent the nation.

"I write to express my concerns with the significant lack of diversity in geography and professional experience in your recent slate of nominees to serve on the Board of Governors of the Federal Reserve System," Toomey, the top Republican on the Senate Banking Committee, told Biden in a letter made public by Toomey's office.

Biden late last year renominated Fed Chair Jerome Powell and picked current Governor Lael Brainard to be Fed vice chair. Earlier this month he nominated former Federal Reserve Governor Sarah Bloom Raskin to be the central bank's vice chair for supervision, and two Black economists, Lisa Cook and Philip Jefferson to the Board.

Those choices would make the seven-member Fed Board the most diverse, by race and gender, it has ever been.

But by profession and region, Toomey said Tuesday: not so much.
 

All but one, Michigan State University's Cook, are from the Richmond Fed district, Toomey said in the letter. There are 12 Fed districts covering the country. And most, he said, are from academia.

Toomey reserved his sharpest comments for Raskin, saying she has "demonstrated hostility" toward the oil and gas sector, making her "unacceptable."

The banking committee must approve Fed nominees before they are considered by the full Senate, and held confirmation hearings for Powell and Brainard earlier this month.

Toomey said at the time he planned to support Powell's renomination, but his and other Republicans' questioning of Brainard suggests an uphill battle for other nominees.
 

Ranking member Sen. Pat Toomey (R-PA) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington, DC, U.S., September 28, 2021. Kevin Dietsch/Pool via REUTERS/File Photo

Toomey released the letter as Powell convened the first Fed policy setting meeting of the year, during which it is expected to begin to chart a path toward higher interest rates and a smaller balance sheet after two years of super-easy monetary policy to fight the pandemic recession.

DIVERSITY

Senators have historically accepted a wide range of interpretations of the Federal Reserve Act's requirement that no more than one Fed governor shall be "selected from any one Federal Reserve district," says Fed historian Kaleb Nygaard, a sernior research associate at Yale's Financial Stability Program.

Some have had to reach back to birth or early childhood to establish a connection with a Fed district not already "taken" by a sitting governor. In 2011, Senator Richard Shelby, helped sink one Fed nominee, Nobel Prize laureate Peter Diamond, in part on the basis of his place of residence.

"It's completely appropriate for the Senate to ask and the White House to have to defend their picks based on geography," Nygaard said, referring to the governing law.

Senate Banking panel chair Sherrod Brown expects to hold confirmation hearings for the Board seats next month.

(Reporting by Ann Saphir; Editing by Richard Chang, Andrea Ricci and Karishma Singh)

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