Biden's Federal Reserve nominees hit speed bumps

WASHINGTON — A weekslong onslaught of Republican opposition to two of the Biden administration's Federal Reserve nominees — Sarah Bloom Raskin and Lisa Cook — tees up a contentious confirmation hearing on Thursday.

Saule Omarova, the White House's pick for comptroller of the currency who ultimately withdrew, faced similar blowback in the fall. But Senate Democrats seem more eager to fight for their president’s picks this time than they did for Omarova, whose prior legal scholarship was criticized by banks and others as being too radical.

The White House announced on Jan. 14 that it would nominate Raskin, Cook and Philip Jefferson to three open seats of the Federal Reserve Board. Raskin, a former Fed governor and senior Treasury Department official, would serve as the central bank’s vice chair for supervision, making her one of the country’s most influential financial regulators.

That potential power of Raskin's post has not been lost on critics; led by Sen. Pat Toomey of Pennsylvania, the ranking GOP member on the Senate Banking Committee, Republicans have mounted a significant assault in recent weeks largely focused on Raskin and her past writings arguing that bank regulation should factor in the risks associated with climate change.

Many in Washington have been struck by the sheer magnitude of opposition generated by Republicans to Raskin and, by extension, her fellow board nominees. Raskin has been confirmed by the Senate twice already for other roles in government by voice vote — a parliamentary procedure indicating she faced no serious opposition as recently as 2014.

“This is one of the strongest slates of Fed board nominees, in my experience, in the last 40 years,” Camden Fine, a former president and CEO of the Independent Community Bankers of America, said in an interview. “The fact that there is pushback to this degree on any of them tells you more about how highly partisan the political atmosphere of Washington has become than it does about any personal or professional weaknesses in the nominees themselves.”

Bloomberg, Duke Law

But other analysts say that GOP lawmakers are responding to the significant potential power over bank policy that Raskin would have as vice chair for supervision — a role created in the wake of Dodd-Frank reform that no Democrat has ever held. Randal Quarles, President Donald Trump's pick for vice chair for supervision in 2017, was the first policymaker to be Senate-confirmed to the role.

“I think the vice chair of supervision is the new [Consumer Financial Protection Bureau] director, and it’s always going to be a party-line vote,” said one financial services lobbyist, comparing the Fed post to another political lightning rod.

“Republicans are not going to view that role as a regular Fed board position anymore," said the lobbyist, who didn't want to be quoted by name. "It’s going to be viewed as an über-financial services regulator, and because the Fed is such an important regulator, they’re always going to find a reason to not like a Democratic nominee."

Unlike with Omarova, the Cornell University law professor who was fiercely opposed by much of the banking industry, GOP opposition to Raskin has focused on supporting the energy sector. Days before Raskin’s nomination was announced by the White House, Toomey blasted the former Fed governor, warning she could move to “choke off credit” to politically unpopular industries, namely oil and gas firms.

Sen. John Barrasso of Wyoming, the ranking Republican on the Senate Committee on Energy and Natural Resources, wrote in a letter this week to the banking committee that he was “strongly opposed” to Raskin’s nomination. Her candidacy was “part of President Biden’s war on American oil, natural gas and coal,” he wrote.

Raskin has not hidden her interest in folding safeguards against the risks posed by climate change into bank supervision. In May 2020, she criticized a Fed decision during the Trump administration that allowed struggling oil and gas firms to access the central bank's lending facilities.

While most of the GOP’s opposition has fallen on Raskin, Cook has been criticized by some Republicans as unqualified to be a Federal Reserve governor, despite serving on the White House’s Council of Economic Advisors in the Obama administration. Cook, currently a professor of economics and international relations at Michigan State University, would be the first Black woman to serve as a Fed governor.

In mid-January, Toomey's office circulated a report published by the Daily Caller that quoted several conservative officials and economists who claimed that Cook was "not qualified for such an important job and [had] mischaracterized her economics experience." Among their complaints were that Cook had been appointed to be on the Federal Reserve Bank of Chicago's board of directors just days before being nominated by the White House.

A Hoover Institution economist also claimed her academic work did not have enough experience in monetary policy.

Thursday’s hearing “will be contentious, even though these are three of the most qualified people ever nominated for the Federal Reserve,” Senate Banking Chair Sherrod Brown, D-Ohio, said in an interview streamed by Yahoo Finance on Tuesday.

The Fed nominees' prospects for confirmation will likely rest with centrist Democrats. Early signs have been positive for them: Sen. Joe Manchin, D-W.Va., appeared to support the nominees on Tuesday, describing them as “extremely qualified,” according to a Bloomberg News article. And Sen. Jon Tester, D-Mont., who publicly signaled his wariness to Omarova before her nomination hearing in November, said a meeting he’d had with Raskin on Monday “went well,” the article said.

At the same time, there is near-term uncertainty about Democrats’ voting majority in the Senate; Sen. Ben Ray Luján, D-N.M., was hospitalized late last week after a stroke, meaning that Democrats will not have enough votes to advance any White House nominees who are opposed by all 50 Republican senators.

Brown has told reporters he intended to hold a committee vote on the Biden administration’s Fed nominees as soon as Feb. 15. In addition to Raskin, Jefferson and Cook, current Fed Chair Jerome Powell was renominated to lead the central bank by the Biden administration, while Fed Gov. Lael Brainard was nominated to become the agency's vice chair. All five await approval from the Senate Banking panel before heading to a floor vote from the full chamber.

But Senate Democratic leaders may have to wait to hold key nomination votes until Luján returns to ensure they have enough support. The chamber will be deadlocked 50-50, even with Vice President Kamala Harris's tiebreaker vote as the Senate's presiding officer, until Luján returns to office.

Away from Capitol Hill, Democrats have had little difficulty in finding supporters for Raskin, Cook and Jefferson from both sides of the aisle. In repeated emails to reporters in recent days, Brown’s office has touted support for the Fed nominees from Glen Hubbard, chair of the Council of Economic Advisers during the Bush administration, as well as Kevin Hassett, the Council of Economic Advisers’ chair under Trump.

Raskin has also assembled a significant amount of support from community bankers in Maryland, where she served as the state’s top bank regulator from 2007 to 2010. Kathleen Murphy, who served as president and CEO of the Maryland Bankers Association until 2020, praised Raskin’s “steady leadership” in the years after the 2008 financial crisis. “Sarah’s collaborative approach brought all voices to the table as she influenced legislative and regulatory changes to strengthen consumer protection while also preserving banks’ ability to support their clients and the local economy,” Murphy said.

Raskin’s nomination was also endorsed by the Conference of State Bank Supervisors in a letter dated Feb. 2 and addressed to the Senate Banking Committee. John Ryan, the organization’s president and CEO, wrote that she had “proved herself to be a strong advocate of the state system of financial regulation, an opponent of federal preemption of state laws, and a state regulator committed to protecting citizens while ensuring a safe and sound financial system.”