President Biden plans to nominate three new Federal Reserve officials as he tries to recreate the central bank at a critical economic moment, a White House official familiar with the matter said Thursday.
If confirmed, his election would result in the most diverse Fed board in the institution’s history.
The White House plans to nominate Lisa Cook, an economist at Michigan State University who has researched racial differences and labor markets, and Philip Jefferson, an economist and administrator at Davidson College, to open seats on the Fed̵[ads1]7;s board. Both Ms. Cook and Mr. Jefferson are black.
Mr. Biden will also nominate Sarah Bloom Raskin to serve as the Fed’s deputy supervisor, a job created to help police in the country’s largest banks after the 2008 financial crisis.
Mr. Biden had previously nominated Jerome H. Powell for a new term as Fed Chairman and Lael Brainard, now Governor, as Deputy Governor of the Central Bank. If confirmed for office, the seven-member Fed will have four women, one black man and two white men – the most diverse team in the Fed’s 108 years of existence.
The administration had promised to make the Fed – historically dominated by white men – more like the public it served, and prominent lawmakers have pushed for a focus on tougher financial regulation. The picks seek to deliver along these dimensions.
“The headline is and should be about diversity,” said Kaleb Nygaard, a senior researcher at the Yale Program on Financial Stability who studies the Fed, explaining that staffing is a big moment for Mr. Biden. “This is the biggest chance he has to send a message about what he wants the Fed to focus on.”
Raskin, who served as Fed governor under the Obama administration, has extensive experience arguing for more powerful banking supervision, and is likely to usher in an era of stricter global finance rules, a priority for some powerful people. Congress Democrats.
If confirmed, Raskin will be responsible for determining the need for new financial regulations, adopting existing rules and operating large and globally important banks through their annual health checks, commonly referred to as stress tests.
Raskin was to succeed Randal K. Quarles, who was appointed by former President Donald J. Trump and had criticized some of the rules imposed on banks after the financial crisis in 2008. As deputy chairman, Mr. Quarles made a number of adjustments to regulation and supervision that made supervision less burdensome for banks, and that critics argued for weakened financial rules.
Mr. Quarle’s term as deputy governor expired in October, and he left the Fed in late December.
Ms. Raskin, a Harvard-educated lawyer who studied economics as an undergraduate at Amherst College, has spent time in the private sector. She is a former deputy secretary at the Treasury Department, where she focused on cyber security in the financial system. She also spent several years as Maryland’s Commissioner for Financial Regulation. Raskin is married to Representative Jamie Raskin, a Maryland Democrat.
If confirmed, Raskin will face a number of pressing issues. The Deputy Head of Supervision acts as the Fed’s main liaison with banks and markets, a role that will have more prominence when the central bank considers whether to issue a digital currency. The deputy manager must navigate new technologies, such as stack coins and cryptocurrencies, and consider what they mean for banks.
The Fed is developing climate risk scenarios to assess banks’ exposure, in which the deputy supervisor will be heavily involved. in money market funds and other financial instruments that the pandemic revealed.
Mr. Biden’s second choice for the Fed will also come into their jobs at a challenging time, as unemployment falls sharply and inflation remains high, but millions of former workers still lack jobs.
The Fed is considering how quickly they should react by removing support from the economy, and all governors are holding a constant vote on monetary policy, which gives the new elections a potential say in the matter.
Dr. Cook – who would be the first black woman ever to sit on the Fed’s board – is known for her efforts to try to improve diversity in economics, including through the American Economic Association Summer Program, which helps prepare students for potential careers in the field.
She attended Spelman College and the University of Oxford and earned a doctorate in economics from the University of California, Berkeley. She was an economist in the White House Council of Economic Advisers under President Barack Obama.
She has not said much publicly about her monetary policy philosophy, although she has spoken positively about keeping the Fed independent of politics. Her published work examines a wide range of topics: her doctoral dissertation focused on credit markets in tsarist and post-Soviet Russia, while some of her work is best known for mortality and race, and segregation and lynching.
Dr. Cook is an academic focusing on macroeconomics, but “she is not a traditionalist – she has looked at what we do wrong, sometimes, in economics,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives, in a pre-election interview. was announced. “She’s someone who can stay, I think, in that room.”
Mr. Jefferson has worked as a research economist on the Fed Board and studied at the University of Virginia and Vassar College. He has written about the economy in poverty, and his research has delved into whether monetary policy that stimulates investment with low interest rates helps or harms low-skilled workers.
“My findings suggest that opportunities begin to open up for them as the labor market tightens,” he said in an interview with the Minneapolis Fed in 2018.
He has also spoken openly about his experience as a minority in economics.
“At the graduate school at the University of Virginia, I was the only African-American in the program all along,” he said in that 2018 interview, noting that it had followed him into his professional appointments. “It’s been a long, lonely road professionally.”
And he said economics needed several different voices.
“We have to sit around the table,” he said. “I think it is crucial for public policy that we hear voices that represent diversity.”
With the new list of candidates, what is without a doubt the highest political body in the global economy will be much more varied in both race and gender.
There were briefly three women on the board in the early 1990s, and again in the 2010s. The Fed has had three Black board members in its history, all men, and none of them sat on the board at the same time.
It is unclear how the revised board can change the debate on current monetary policy, which could involve difficult choices about how quickly to slow down an economy that is struggling with rapid price increases. The Fed has signaled that they are prepared to raise interest rates, which could stifle inflation, but also slow down the labor market and wage growth.
Mr. Powell, the Fed’s leader, emphasized this week that achieving full employment – a goal that the Fed has emphasized in recent years as a way to promote inclusion and opportunities across the economy – depended on maintaining price stability.
“If inflation becomes too persistent, if these high levels of inflation become entrenched in our economy and in people’s thinking, it will inevitably lead to much tighter monetary policy from us, and it may lead to a recession, and it will be bad for the workers,” Said Mr. Powell as he testified before lawmakers on Tuesday.