Peter Diamond’s withdrawal from the Fed nomination process after fourteen months means that the Obama administration now needs to come up with two new candidates for the Board of Governors. It will not be easy.
You could characterise the two gaps as the ‘economist’ governor and the ‘financial markets’ governor.
It looks like the Nobel-prize winning MIT economist is going to get blocked by the Republicans again in his nomination to the Fed’s Board of Governors. Either the Democratic majority is going to have to force a vote on this, and see if there are 60 votes to overcome a filibuster, or Mr Diamond’s nomination is going to fall by the wayside. Here is Senator Richard Shelby at the nomination hearing today:
“Today we are considering the nominations of three economists. Two to be members of the Council of Economic Advisors and one to be a member of the Board of Governors.
To say that Janet Yellen, Sarah Bloom Raskin and Peter Diamond got off lightly at their confirmation hearing before the Senate banking committee would be an understatement.
With most members distracted – or absent- by the imminent final vote in the Senate on financial regulatory reform, the event itself only lasted about 90 minutes. And if ever it was in doubt, it now seems abundantly clear that the three nominees will be comfortably, and swiftly, confirmed to the Federal Reserve board of governors.
Nevertheless, I was able to extract a few interesting nuggets from question-and-answer period. The most timely question came from Jeff Merkley of Oregon for Janet Yellen, who is slated to take over from Don Kohn as vice-chair. He asked where she stood on the dominant debate over US fiscal policy – should there be more stimulus or should authorities immediately start reining in the deficit ?
Janet Yellen has just released her statement to the Senate banking committee, where she – along with Sarah Raskin and Peter Diamond, other nominees to the Federal Reserve board - faces a grilling from lawmakers today on her bid to become vice-chair of the Federal Reserve replacing Don Kohn.
Ms Yellen, president of the San Francisco Fed, is predictably cautious as she introduces herself to the panel: “I am wholeheartedly committed to pursuing the Fed’s congressionally mandated goals of maximum employment and price stability and to strengthening our programme of supervision and regulation, building on the lessons learned during the financial crisis.”
Her statement gets a little meatier later on, and, reading through the lines, there are two main messages. On monetary policy, Ms Yellen still believes plan A is an eventual tightening. And to Congress, Ms Yellen is very clear: independence is crucial to central banking, so hands off the Fed !
Don Kohn is set to end his tenure as vice-chairman of the Federal Reserve tomorrow, but, at the request of his boss Ben Bernanke, he will be staying on as governor until September 1 at the latest.
The hope within the central bank is that as early as next month the Senate will begin to move towards confirming Mr Kohn’s replacement, Janet Yellen, currently president of the Federal Reserve Bank of San Francisco.
Also on the Senate’s docket are the nominations of Peter Diamond, the Massachusetts Institute of Technology economist, and Sarah Bloom Raskin, the Maryland banking regulator, which would complete the seven-member board of governors.
Their nominations have stalled in Congress mainly for logistical reasons:
Peter Diamond, the Massachusetts Institute of Technology economist, is arguably the most interesting of the three nominations by President Barack Obama to the Federal Reserve Board of Governors.
Janet Yellen, president of the San Francisco Fed, is a consummate monetary economist close to Don Kohn in her views on interest rates, and has already been at the heart of many of the US central bank’s decisions during chairman Ben Bernanke’s tenure.
The big news is that Janet Yellen is set to be tapped by President Barack Obama to replace Donald Kohn as the Fed’s second in command. But two other seats are still open, and it looks like Mr Obama may, after 14 months of silence on the open seats, be set to announce his nominations.
Sarah Raskin, the top banking regulator for the state of Maryland, and Peter Diamond, a Massachusetts Institute of Technology economist, are also under consideration for Fed board vacancies, the official said.
Sarah Bloom Raskin, official bio: