As was leaked previously, on Thursday night the White House said that Joe Biden – still reeling from what many said was the worst day in his presidency hammered by the Sinema/SCOTUS double whammy – will nominate Sarah Bloom Raskin, a former top Treasury Department official, to serve as the Federal Reserve’s top banking regulator post.
If confirmed by the Senate, Raskin, a former Fed governor, would become the central bank’s vice chairwoman of supervision, the government’s most influential overseer of the American banking system.
Rounding out his “diversity hiring mandate”, Biden will also nominate two economists for other Fed board seats: Lisa Cook, a professor of economics and international relations at Michigan State University; and Philip Jefferson, a professor and administrator at Davidson College in North Carolina.
Each nominee will in the coming weeks face questioning from the Senate Banking Committee. The three picks complete Biden’s remake of the Fed board, following his decision in November to offer a second term to Fed Chairman Jerome Powell and nominate Fed governor Lael Brainard to become Fed vice chairwoman who replaces Richard Clarida whose last day is tomorrow as his Fed career was cut short by the stock-trading scandal.
If all nominees win Senate approval, Raskin and Brainard would succeed top officials chosen by Donald Trump. Biden’s appointees would hold five of the seven board seats, with four positions held by women.
The nominations of Cook and Jefferson, who are both black, would help Biden fulfill his promise to improve diversity atop the central bank, which according to the WSJ, has had only three Black board members, all men. The most recent was former Fed Vice Chairman Roger Ferguson, who left the board in 2006.
Raskin’s nomination is meant to satisfy progressive Democrats, some of whom – especially Elizabeth Warren – opposed Biden’s nomination of Powell, a Trump-picked Republican. They have called for the Fed to take a tougher stance in regulating big banks and a bolder approach in addressing financial risks posed by climate change, although to this day it remains unclear just how or why the Fed intends to regulate “climate change risk.”
Former Vice Chair for Supervision Randal Quarles, who recently left the Fed, played a major role in reducing capital requirements for U.S. banks with less than $700 billion in assets and relaxing the Volcker Rule’s audit rules for trades made by JPMorgan Chase, Goldman Sachs and other investment banks.
Fed officials in favor of easier regulatory stance argue the industry is well-capitalized and not in need of some of the more restrictive measures enacted in the wake of the crisis. Many Democrats, including Massachusetts Sen. Elizabeth Warren, have pushed back and said rollbacks leave the banking sector more vulnerable to shocks and liable to excess risk taking.
There is a risk that Raskin’s calls for the Fed to play a more proactive role on climate change could attract opposition from Republicans. In a New York Times opinion article in May 2020, Raskin was critical of broad-based emergency-lending backstops enacted by the Treasury and Fed to assist businesses during the pandemic because she believed they should have taken steps to prevent lending to oil-and-gas concerns.
“The decisions the Fed makes on our behalf should build toward a stronger economy with more jobs in innovative industries—not prop up and enrich dying ones,” she wrote.
As the WSJ notes, with a closely divided Senate, Biden needs either universal support of Democrats to confirm his nominees or support from some Republicans to overcome holdouts from his own party. Raskin can be confirmed by the Senate but faces a “tight, contentious vote” with “perhaps…a Republican or two on her side,” said Ian Katz, a financial-policy analyst at Capital Alpha Partners, in a recent note to clients.
At the Fed, Raskin maintained a low profile on monetary policy but was deeply involved in behind-the-scenes work to write rules implementing the 2010 Dodd-Frank financial-regulatory overhaul. In a speech in September 2009, Raskin blamed the financial crisis on “a deregulatory fervor that marginalized the interests of many” and said the downturn had been “brought upon us through a combination of greed, weak regulation and weak enforcement.”
Raskin, who has a Harvard University law degree and wrote her undergraduate thesis at Amherst College on monetary policy, served in the Obama administration as deputy Treasury secretary from 2014 to 2017 and as a Fed governor from 2010 to 2014. She was previously Maryland’s state commissioner of financial regulation.
She is currently a law professor at Duke University and is married to Rep. Jamie Raskin (D., Md.). Ironically, she has served since 2017 on the board of directors of investment giant Vanguard Group.