Senate confirms 1st black female Fed governor

Diving Brief:

  • The Senate, by a vote of 51 to 50 on Tuesday, confirmed Lisa Cook, an economist from Michigan State University, to the Federal Reserve Board of Governors, making her the first black woman to serve on the panel of seven seats.
  • Cook, whose term expires in January 2024, garnered no Republican support, and Democrats needed Vice President Kamala Harris to launch a tiebreaker vote on Tuesday.
  • Cook is the second of President Joe Biden’s central bank nominees to be confirmed. The Senate last month approved the elevation Lael Brainard to the Vice Chairman of the Fed by a vote of 52 to 43. The votes on Davidson College economist Philip Jefferson and the renomination of Fed Chairman Jerome Powell could take place this week, according to The Wall Street Journal. Little opposition is expected for either candidate. Jefferson in March received unanimous support from the 24-member Senate Banking Committee, and only one senator — Elizabeth Warren, D-MA — opposed a second term for Powell.

Overview of the dive:

Cook’s confirmation adds a fifth governor to the Fed’s board of directors, leaving two positions open: the seat for which Jefferson is nominated and the position open for vice president of oversight. Biden nominated Michael Barr for the position, but the Senate Banking Committee has yet to hold a hearing for him.

Democrats had planned to vote on Cook’s nomination late last month – directly after Brainard’s vote – but asked Republicans to delay the count after Harris and two senators tested positive for COVID-19, which which makes it unlikely that Democrats will have enough support to confirm Cook.

Republicans declined, forcing a 51-47 vote against Cook’s nomination. However, Senate Majority Leader Chuck Schumer, D-NY, filed a motion to reconsider the nomination at a later date.

Sen. Sherrod Brown, D-OH, chairman of the banking panel, said Cook “would provide a priceless point of view while implementing the Federal Reserve’s dual mandate and protecting its independence.

The dual mandate refers to the central bank’s mission to support as many jobs as possible while maintaining price stability. This latter notion, however, has been the subject of much debate in view of inflation in recent months. The Fed approved a half-point interest rate hike last week — the second increase in two months — and signaled two more upward adjustments were likely in June and July.

“Tackling inflation remains a top priority for the Biden-Harris administration as we work to cut costs for hard-working families,” a White House official said. told CNBC tuesday. “It’s important to have a full Federal Reserve that can meet these challenges for the American people.”

Sen. Pat Toomey, R-PA, the ranking member of the banking panel, on Tuesday challenged Democrats correlating the Fed’s monetary policy moves with its level of endowment.

“If confirming Fed nominees is so important in the fight against inflation, this Democratic vote-canceling strategy begs the question: why wait? Why wait to confirm Powell and Jefferson? Toomey said tuesday. “The Democrats know Professor Cook is totally unqualified to serve on the Fed. And they don’t want to leave her stuck as the last Fed nominee to seek confirmation. And so they’re holding Powell’s nominations and Jefferson hostage in order to pass their favorite candidate.

During his nomination hearing in February, some Republicans took issue with Cook’s level of experience in monetary policy. Sen. Bill Hagerty, R-TN, for his part, said Cook’s academic background — with its focus on the cost of racial disparities — “doesn’t seem related to the mission of the Federal Reserve.”

Cook at the hearing called high inflation a “grave threat to a long and sustained expansion, which we know raises the standard of living for all Americans and leads to widespread shared prosperity.” , and pledged to keep inflation “well”. anchor “.

In his statement Tuesday, Toomey said the Senate risked installing an “inflation dove” by confirming a candidate whose views on inflation lacked specifics.

Cook and the other potential new faces at the Fed, however, are unlikely to deviate from the board’s consensus on monetary policy, Tim Duy, chief U.S. economist at SGH Macro Advisors, told The Wall Street Journal.

“New additions will likely fit more into the existing institution rather than the other way around,” he said.

Toomey accused Democrats of using Cook as a vehicle to advance “far-left political advocacy” on issues such as climate change and social justice in “historically independent” regulatory bodies.

At a separate event on Tuesday, Fed Governor Christopher Waller appeared to reinforce Toomey’s view that climate change policy is the domain of elected officials. Waller told the Economic Club of Minnesota on Tuesday that it was “the job of Congress” to determine the role that environmental, social and governance standards play in regulations and reporting requirements, according to American banker.

The Fed should focus on the outcome of shocks, not their causes, said Waller, a Trump-era Fed appointee.

“We give you an economic scenario, unemployment goes to 10%, property prices collapse to 30%. We’re not saying why, we’re just saying it’s the data, process it,” he said. “In a way now, with climate change, we give a specific cause and say, ‘OK, how are you going to address this specific cause?’ It’s a very different exercise.