President Biden’s plans to reshape the Federal Reserve suffered a setback on Tuesday as Republicans delayed a key vote on his five nominees for his board of governors.
Republicans did not show up for a committee decision that would have advanced the full Senate nominees for a confirmation vote. Since a majority of Senate Banking Committee members must be physically present for those votes to count, their blockade effectively halted the process.
The unusual move, led by Sen. Patrick J. Toomey of Pennsylvania, was prompted by Republican opposition to Mr. Biden’s choice for the nation’s top bank cop, Sarah Bloom Raskin.
The president reappointed Jerome H. Powell as Fed chairman and named Lael Brainard, a current Fed governor, as vice chairman. He also named economists Lisa D. Cook and Philip N. Jefferson as Fed governors. But Ms. Raskin — a longtime Washington policymaker and lawyer whom Mr. Biden has chosen as vice president for banking supervision — has garnered the most backlash.
To prevent his nomination from advancing to the full Senate, Republicans delayed voting on the five nominees.
Democrats and the White House have slammed Republicans for staging a boycott and raced to find a solution that could get the candidates to a confirmation vote. Sen. Sherrod Brown, an Ohio Democrat and chairman of the Banking Committee, rejected on Tuesday the idea that he would separate Ms. Raskin from the other candidates to allow others to advance. Ms. Raskin could have a strong chance of succeeding, especially on her own.
By appointing five of the Fed’s seven governors and all of its most senior leaders, Mr. Biden had a chance to shake up the institution. While some of his picks — like Mr. Powell — represented continuity, together they would have made up the most racially and sexually diverse Fed leadership team.
Sarah Binder, a political science professor at George Washington University who co-authored a book on Fed policy, said Democrats should come up with a strategy for overcoming the Republican bloc or candidates could get stuck in the traps. limbo.
“It’s really a delay – it could still sabotage Raskin,” she said. She noted that Democrats could split the nominations or try to garner enough support among the full Senate to override the rules and push nominees through the committee, though that could be a challenge.
“It’s pretty unexplored, and they’re going to have to find a way,” Dr Binder said.
Molly Reynolds, senior fellow in governance studies at the Brookings Institution, said outside of trying to change Senate rules — which she called the “nuclear option” — Democrats’ clearest path was probably to negotiate with the Republicans.
“They just need a Republican to show up,” she noted, explaining that the senator wouldn’t even need to vote yes for the committee to get a majority and advance the candidates.
Tuesday’s maneuver was Mr. Toomey’s final step opposition campaign against Ms. Raskin, who would arguably be the country’s most important banking regulator if confirmed.
Mr Toomey criticized Ms Raskin for the past climate commentary regulation, fearing that it is too militant in banking supervision. More recently, he asked for more information about her interactions with the Fed while serving on the board of a fintech company that was pushing for a potentially lucrative central bank account.
“Until the basic issues have been adequately addressed, I do not believe the committee should proceed to a vote on Ms. Raskin,” Mr. Toomey said in the statement.
White House officials criticized his decision as inappropriate as the Fed grapples with rapidly rising prices and prepares to raise interest rates next month.
“It’s totally irresponsible, in our view – having confirmed leadership at the Fed has never been more important,” said Jen Psaki, the White House press secretary. She added that the administration was now focused on moving nominees on the committee and called Mr. Toomey’s investigation into Ms. Raskin’s background “false allegations”.
The dispute centers on the revolving door between government regulators and the mysterious world of fintech.
Mr. Toomey and his colleagues said that Ms. Raskin, a former Fed and Treasury official, contacted the Federal Reserve Bank of Kansas City on behalf of Reserve Trust, a fintech company. Reserve Trust obtained a strategically important account at the Fed while serving on its board: to date, it advertises that it is the only company of its kind with what is called a “master” account.
Main accounts allow companies to access to the infrastructure of the American payment system, allowing companies to transfer money without working with a bank, among other advantages.
Ms Raskin said in written responses to Mr Toomey’s questions earlier this month that she ‘did not recall any communication I had made to assist Reserve Trust in obtaining a primary account’. But Mr. Toomey said in a later letter that Kansas City Fed President Esther George told her staff that Ms. Raskin called her about the account in 2017.
The Kansas City Fed insisted that he follow its normal protocol for granting the main Reserve Trust account and noted that speaking with members of a company’s board of directors was “routine”. But Mr Toomey continued to push for more information.
“Significant questions about Ms. Raskin’s use of the ‘revolving door’ remain unanswered in large part because of her repeated insincerity with the committee,” Mr. Toomey said in his statement Tuesday.
Democrats pointed out that Ms Raskin had recently pledged to a new set of ethical standards, agreeing not to work for financial services companies for four years after leaving government – a pledge that Ms Cook and Mr. Jefferson also took, at the request of the senator. Elizabeth Warren, Democrat of Massachusetts.
Ms. Brainard agreed to a weaker version of that pledge that would bar her from working at bank holding companies and depository institutions outside of mission-driven exceptions like banks that target underserved communities, a senior official said on Tuesday. spokesperson for Ms. Warren’s office.
Mr Powell declined to make a similar pledge, the spokesperson said. The Fed Chairman has signaled that he will abide by the administration’s ethics rules, that prohibit paid work tied to the civil service for two years after leaving office.
On Tuesday, a dozen Republican chairs in the room where the committee met stood empty as Democrats took their seats on the other side of the room. Democrats voted to show their support, although it was not binding, and Mr Brown pledged to postpone.
“Few things we do as senators will do more to help address our nation’s economic concerns than to confirm this slate of nominees, the most diverse and qualified slate of Fed nominees ever offered,” he said. said Mr. Brown, blaming Republicans for skipping the session.
“They’re taking away probably the most important tool we have — and that’s the Federal Reserve — to fight inflation,” he later added.
The Fed has four current governors, in addition to its 12 regional presidents, five of whom vote on monetary policy at any one time. Mr. Powell has already served as interim president, since his tenure as director officially expired this month.
Even if the candidates advance, Ms. Raskin may struggle to pass the full Senate. Winning confirmation would require that she maintain the full support of the 50 lawmakers who caucus with Democrats and that all of those lawmakers be present unless she can win Republican votes. Senator Ben Ray Luján, Democrat of New Mexico, has been missing while recovering from a stroke.
“Republicans are playing hard because they can,” said Ian Katz, managing director of Capital Alpha Partners. “At least it delays his confirmation. This could have the ultimate effect of killing him.
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