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Biden to nominate Sarah Bloom Raskin as vice chair for supervision at Fed

Sarah Blum Raskin, in her capacity as Deputy Secretary of the Treasury at the Washington Department of the Treasury, October 2, 2014.

Yuri Grybas | Reuters

President Joe Biden will nominate Sarah Blum Raskin to be the next vice chair of the Federal Reserve to oversee, arguably the most powerful banking regulator in the country, according to people familiar with the matter.

Biden will also nominate Lisa Cook and Philip Jefferson to be Federal Reserve governor, according to the people, who asked not to be named in order to speak freely.

Each candidate in the coming weeks will face questioning from the Senate Banking Committee, the congressional body responsible for vetting presidential appointments to the central bank. Should the Senate confirm their nominations, Cook would be the first black woman to serve on the Federal Reserve’s board while Jefferson would be the fourth black man to do so.

On Tuesday, that committee held a nomination hearing for Federal Reserve Chairman Jerome Powell, whom Biden chose as his nomination for a second term. The committee held a similar hearing for Fed Governor Lael Brainard on Thursday, who was chosen by Biden to be the next vice president of the central bank.

In selecting Raskin for oversight vice president, Biden is looking to deliver on Democrats’ promises to strengthen laws passed in the wake of the financial crisis and restore aspects of former Federal Reserve Chairman Paul Volcker’s so-called rule that limited banks’ capacity. To trade for their own profit.

Raskin has experience at the Federal Reserve and served as central bank governor from 2010 to 2014 before serving as Deputy Secretary of the Treasury under the Obama administration. Raskin is married to Representative Jimmy Raskin, D-Maryland.

While Jefferson’s name has recently surfaced in closed discussions to serve as governor, Cook’s nomination has been well communicated. CNBC reported in May that it was the top choice for Senator Sherrod Brown, the chair of the Banking Committee and Democratic Representative for Ohio, to serve as governor.

Cook is Professor of Economics and International Relations at Michigan State University. She is also a member of the steering committee of the Center for Equitable Growth, a Washington-based progressive think tank that includes many of Biden’s top economists among its alumni. She also served as a senior economist on the Obama Administration’s Council of Economic Advisers.

Meanwhile, Jefferson serves as Vice President for Academic Affairs and Dean of College at Davidson College. His decades-long career in academics focused on labor markets and poverty.

His notable work includes a 2005 study that evaluated the costs and benefits of monetary policy promoting a “high pressure economy” in which the Federal Reserve allows easy access to cash and lowers interest rates to stimulate tighter labor markets.

He and other economists, including Brainard – in general and excluding extraordinary economic conditions – have argued that the additional benefits of lower rates on maximum employment are worth the prospect of warmer inflation.

Raskin and organization

Since leaving the government, Raskin has lobbied the Federal Reserve and other financial regulators to take a more proactive role in addressing the financial risks posed by climate change.

“While none of its regulators are specifically designed to mitigate the risks of climate-related events, each has a mandate broad enough to include these risks within the range of tools that Congress has already given them,” Raskin wrote in September.

“In light of the unpredictable – but clearly – changing effects of climate on the economy, US regulators will need to leave their comfort zone and act early before the problem worsens and it becomes more costly to address,” she added.

Former Vice President of Supervision Randall Quarles, who recently left the Federal Reserve, has played a key role in reducing capital requirements for US banks with less than $700 billion in assets and relaxing the Volcker rule scrutiny of trades made by JPMorgan Chase, Goldman Sachs and other investment banks.

CNBC Politics

Read more CNBC’s political coverage:

Fed officials in favor of an easier regulatory stance say the industry is well capitalized and does not need some of the more restrictive measures enacted in the wake of the crisis.

Several Democrats, including Senator Elizabeth Warren of Massachusetts, have backed down and said the pullbacks make the banking sector more vulnerable to shocks and exposed to excessive risk.

Inflation battle

The nominations come at an uncertain time for the Federal Reserve, which in recent weeks has begun to wind down its accommodative fiscal policies in the face of a job recovery and the highest level of year-on-year inflation since 1982.

In times of normal economic activity, the Fed adjusts short-term interest rates to increase employment and stabilize prices.

When the Fed wants to heat up the economy, it can lower borrowing costs to stimulate the housing market and broader economic activity as well as employment. But if she is concerned about an overheating economy or runaway inflation, she can raise interest rates to make borrowing more expensive.

In times of economic emergency, a central bank can also take advantage of broader powers and purchase massive amounts of bonds to keep borrowing costs low and boost financial markets with easy access to cash. It did so in 2020 with the arrival of the Covid-19 pandemic, a move that calmed traders and companies worried about liquidity.

Bond yields fall as their prices rise, which means that those purchases forced prices lower. But ending those kinds of emergency liquidity measures – and the potential for higher interest rates – could have the opposite effect on markets.

The release of the minutes of the last meeting of the Federal Reserve earlier in January, which showed many officials in favor of lowering the balance sheet and raising interest rates soon, sparked a sell-off on Wall Street.

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