It’s true presidents usually enjoy re-creating the Fed in their likeness whenever possible. There is also the caution of being careful about what you wish for. Dominant issues important to the pace of confirmations and to the identities of the nominees include Americans’ perceptions of inflation, the midterm elections, and the chair, vice chair and vice chair of supervision decisions.
We wouldn’t be surprised if it has happened but cannot immediately recall a president potentially having three new simultaneous appointments. Should President Biden be on a path to renominate Chairman Jerome Powell and move Governor Lael Brainard into the vice chair of supervision, he would be asking the Senate to consider five Fed nominations next quarter (including an overall vice chair).
We expect that White House chief of staff, Ron Klain, and his team, working with Treasury Secretary Janet Yellen, by now have a prioritized list of several candidates. Usually, these things are consulted to varying degrees with the Senate Banking Committee chair, in this case Senator Sherrod Brown of Ohio. A senior Banking Committee staffer this morning observed that the level of conversation about Fed seats among Banking Committee Democrats hasn’t been fulsome. Whatever the quality and frequency of those conversations before today, the value of increasing them is suddenly apparent and necessary.
Speculating further, at least two balancing acts often come into consideration on Fed nominations: experience and ideology. Of course, the ability to be confirmed is the most important consideration. Few presidents engage messaging with Fed picks. Office of the Comptroller of the Currency nominee Saule Omarova, a favorite of the left-to-far-left, will have a tough slog being confirmed, but we question whether she would be subbed into a Fed slot. If not her, no doubt the liberal-progressive wing (represented on the Committee the longest by Senator Elizabeth Warren) will insist on at least one seat.
The Fed Board divides workloads into seven committees (listed below), with a Small Business Subcommittee under the Supervision and Regulation Committee. These three seem to be open to new inputs: Economic and Monetary Affairs, Supervision and Regulation, and Payments, Clearing, and Settlement. Each is top-of-mind in financial services regulation discussions. Payments must include digital money; Supervision subsumes financial stability which has become a flashpoint; Economic and Monetary affairs stretch from the original 1913 charter to the past decade-plus of extraordinary policy.
Board Member Assignments – Board Committees
Committee on Board Affairs
Governor Brainard, Chair and Oversight Governor for the Office of the COO
Governor Bowman, Member
Committee on Consumer and Community Affairs
Governor Bowman, Chair and Oversight Governor for DCCA
Governor Brainard, Member
Committee on Economic and Monetary Affairs
Vice Chair Clarida, Chair and Oversight Governor for R&S, MA, and IF
Committee on Financial Stability
Governor Brainard, Chair and Oversight Governor for FS
Governor Quarles, Member
Committee on Federal Reserve Bank Affairs
Governor Brainard, Chair and Oversight Governor for RBOPS
Governor Bowman, Member
Governor Waller, Member
Committee on Supervision and Regulation
Governor Quarles, Member
Governor Brainard, Member
Governor Bowman, Member
Subcommittee on Smaller Regional and Community Banking
Governor Bowman, Chair
Governor Brainard, Member
Committee on Payments, Clearing, and Settlement
Governor Brainard, Chair
Governor Quarles, Member
Governor Bowman, Member
Source: Federal Reserve System
Other than finding viable nominees, the process probably is the second most consequential decision. Nominating one slate to include a chair, a supervisory chair along with three others – potentially the Richard Clarida seat, the Randal Quarles seat, and the open seat – is a big ask of the Senate. Confirming the chairs first, then the other two or three (if Clarida is re-nominated) would be easier. However, doing a big slate all but dares the Senate to deny a president. Given this will all happen in a midterm election year, Senate Republicans are unlikely to make this easy. That is why it is important to carefully consider the balancing act.
Regardless of the president’s proclivities and his staff’s preparations, the fiscal and monetary policy marks Biden is poised to make in his first year are historic. The import of this development matters more to policy than politics, but as fiscal developments have confirmed, factionalized congressional Democrats will not make easy President Biden’s balancing act at the Federal Reserve.
