Yet, there has been little progress in the nominating process since names of potential candidates began circulating months ago, delaying the already-slow process of getting a nominee confirmed by the Senate. Many are puzzled by the hold up, especially those who want to see Biden move faster to name a Black economist to the Fed board.
“In addition to dealing with the pandemic, the success or failure of the Biden administration will turn on the performance of the economy, which will depend in large part on the monetary, supervisory and financial regulatory policies of the Federal Reserve,” said Dennis Kelleher, chief executive of Better Markets, which advocates stronger market regulation. “That’s why it is imperative that the president prioritize filling the openings.”
The Fed board has operated with at least one open slot for the past 8 years. The Biden White House has been consumed with myriad pressing economic policy concerns, as the administration took office during a rocky point in the recovery. The White House declined to comment for this article.
The White House moved quickly to pass a $1.9 trillion stimulus package during Biden’s first few weeks in office. Proposals for a $2 trillion jobs and infrastructure plan, plus a $1.8 trillion families plan, soon followed. In a major win for the administration, the Group of Seven advanced economies recently agreed on a 15 percent minimum global tax rate.
Meanwhile, the administration is grappling with the ongoing toll of the pandemic recession. The labor market is still down 7 million jobs. A slew of other factors — from supply chain bottlenecks to labor shortages — complicate the recovery even further.
Many close to the Fed acknowledge the open seat should not be at the top of Biden’s economic agenda. But they are still confused and frustrated that the administration has not seized on the vacancy to make an early mark on the central bank.
In the Fed board’s entire history, only three governors have been Black. During the past year, the Black Lives Matter movement has drawn particular attention to structural racism in the economy, as well as other parts of society. Biden himself has spoken about the toll discrimination has on the economy. On the campaign trail, he called for an amendment to the Federal Reserve Act that would require the central bank to regularly report on racial gaps and explain what the Fed is doing to close them.
Moreover, many economists are concerned that the pandemic recession exacerbated economic inequality. Low interest rates and a rising stock market tend to benefit those who can take advantage of cheap loans or who hold investments in the markets. For many Americans of color, the return to the labor market has not come quickly. In May, the Black unemployment rate was 9.1 percent. The unemployment rate was 5.1 percent for White Americans.
Two of the country’s most prominent Black economists have emerged as leading candidates for the open slot: Lisa Cook and William Spriggs.
Cook, an economist at Michigan State University, has focused much of her research on economic history and innovation. Cook also served as a senior economist for the Obama administration’s Council of Economic Advisers. In the 1990s, when Cook was in graduate school at the University of California at Berkeley, Cook was mentored by now-Treasury Secretary Janet Yellen.
Cook did not respond to a request for comment.
Spriggs is chief economist to the AFL-CIO and a professor in Howard University’s Department of Economics. During the Obama administration, he served as assistant secretary for the Office of Policy at the Labor Department, a role that required Senate confirmation. Spriggs told The Washington Post he had not heard from the Biden administration about the open Fed seat. He said he would accept the nomination if offered.
“I do hope they start filling in soon,” Spriggs said in an email. “The Fed and the labor market are facing head winds of people thinking the recession is over, and we have a tight labor market. The Fed needs to be at full strength to debate the situation.”
Biden’s Fed picks are about much more than just filling vacant slots, said Fanta Traore, co-founder of the Sadie Collective, which works to bring more Black and Brown women into economics. Traore said the entire profession has historically done a poor job of examining race in economic policy and research.
Traore said Biden’s picks for the Fed have the power to send a signal to economists of color who have rarely been represented at the central bank. She hopes the signal comes soon.
“When it comes to the issue of race, there has always been an urgency for Black people,” said Traore, who has been mentored by both leading candidates for the Fed, Spriggs and Cook. “It’s just constant. As far as [Biden] distinguishing himself, this is what would be pretty game changing.”
The current vacancy is just the first of decisions Biden will have about the Fed. The most consequential choice revolves around Powell. Biden can either replace Powell when his term ends in February 2022, or renominate him to another four-year term. Powell, who was originally nominated to the Fed board by President Barack Obama, has largely been praised by Republicans and Democrats for his handling of the coronavirus crisis. But some on the left argue Powell has been too soft on banking regulation.
A few months before Powell’s chairmanship expires, Biden will face another choice. Randal Quarles’s term as the Fed’s vice chair for supervision — essentially the Fed’s top banking regulator — is up in October. Because of how the Fed is structured, Quarles could still serve out the remainder of his governor term until 2032.
Few people expect Quarles to stay on. Quarles has led the charge on rolling back banking regulations put in place after the Great Recession, moves Democrats strongly oppose.
During a recent Senate hearing, Elizabeth Warren (D-Mass.) told Quarles that “our financial system will be safer when you’re gone.”
But Quarles raised eyebrows earlier this month when he suggested he might not leave so quickly.
“My term as a governor of the Fed, as you know, extends until 2032,” Quarles told Politico. “There’s a tradition in our family that people serve out their full terms on the Federal Reserve Board of governors, even if they are no longer the chair or the vice chair still.”
(Quarles is related by marriage to former Fed chair Marriner Eccles, who stepped down as chair in 1948 and stayed on the Fed board until 1951.)
Some wonder if the White House is putting off an announcement on the Fed’s current vacancy until Quarles’s seat as vice chair opens this fall. The thinking goes that the administration could put forward two nominees at once, rather than stagger separate confirmation tracks.
The Fed stakes much of its reputation on its independence from the White House and Congress. But when it comes to nominees, it cannot escape Washington’s political machine. Democrats hold a razor-thin majority in the Senate, and the administration cannot afford to lose any support for a Fed confirmation. Republicans suffered the consequences last November when the GOP-held Senate narrowly blocked the nomination of Judy Shelton, Trump’s highly controversial nominee.
“You cannot disentangle their choice of nominees from what they’re hearing from the key players in the Senate,” said David Wilcox, senior fellow at the Peterson Institute for International Economics and a former director of the domestic economics division at the Federal Reserve. “Everything is balanced on such a thin knife edge. Their nominees have to be confirmable.”