Three of President Biden’s nominees to the Federal Reserve testified before lawmakers Thursday morning, where they were questioned on inflation, climate change and the Fed’s stewardship of the broader economy.
“These three experienced public servants understand the importance of empowering workers through full employment, and the need to combat inflation so paychecks go farther,” Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, said Thursday.
It appears that Raskin, Cook and Jefferson will receive enough votes to be confirmed, creating the most diverse Fed board in the central bank’s 108-year history. Cook, an economist at Michigan State University, would be the first Black woman on the Fed board. Jefferson, an economist at Davidson College, would be the fourth Black man appointed to the board.
Yet many Republicans have come out strongly against Raskin and Cook for their longtime focus on climate change, and racial inequality in the economy, respectively.
Cook is a renowned economist whose work has focused on macroeconomics, economic history, international finance and innovation, particularly on how hate-related violence has reduced U.S. economic growth. She worked on the White House’s Council of Economic Advisers during the Obama administration and has held visiting appointments at the National Bureau of Economic Research, the University of Michigan, and the Federal Reserve Banks of New York, Chicago, Minneapolis and Philadelphia. Cook holds a PhD in economics from the University of California at Berkeley.
“Everyday Americans are suffering,” Cook said Thursday. “I am motivated by seeing the suffering of workers, of businesses, in just trying to plan their everyday lives facing an inflationary environment.”
Yet Cook has come under attacks from Republicans who say she is “fundamentally not qualified.” Many conservatives have dismissed Cook’s academic and professional credentials as irrelevant to the work of setting monetary policy, while also casting her as a radical racial justice activist — rather than an economist. (Fed Chair Jerome H. Powell, by comparison, does not have a PhD in economics.)
During Thursday’s hearing, Sen. Bill Hagerty (R-Tenn.) asked Cook about her credentials and their relevance to Fed policymaking. Cook said that she knew she has “been the target of anonymous and untrue attacks on my academic record.” As she began detailing her experience — including her work through multiple financial crises working with officials at the Treasury Department and the White House — Hagerty cut her off.
Raskin served as deputy secretary of President Barack Obama’s Treasury Department from 2014 to 2017, and as a governor on the Fed board from 2010 to 2014. Her recent work in academia has also focused on climate risk, and she has called on regulators to examine how they can address climate change in their work.
Sen. Patrick J. Toomey (Pa.), the top Republican on the Senate Banking Committee, has long argued that climate change is not the purview of the central bank, but should rather be addressed by elected lawmakers. Toomey warns the Fed about “mission creep” beyond its defined mandate around stable prices, full employment and oversight of the banking system.
“Ms. Raskin’s proposals would have devastating consequences not just for energy workers, but also consumers, who’d pay much more for energy. On what basis could she justify this idea that the Fed exercise these extraordinary powers?” Toomey said at Thursday’s hearing.
Raskin, responding to questions, outlined her approach to the Fed’s regulation and supervision of banks. Raskin said that banks choose their borrowers — not the Fed — and that it would be inappropriate for the Fed to make credit decisions and allocations. Raskin also said that any actions from the Fed would have to be within its defined mandate, as opposed to encroaching on turf meant for elected lawmakers.
Many Democrats and economists also note that Raskin’s general remarks on climate change are not out of step with what Fed leaders, including Powell, already support. The Fed has been slower than its international peers in incorporating climate issues into their regulatory framework, like through exercises that can help banks measure their exposure to climate risk. Raskin’s proponents hope she will add specificity and urgency to the work the Fed has already taken on.
“I understand the role. I understand the law,” Raskin said Thursday.
In one exchange with Sen. John Neely Kennedy (R-La.), Raskin was asked about a New York Times opinion column from May 2020, in which she wrote about oil and gas companies that could receive federal aid as the economy was gutted by the coronavirus pandemic. That included fossil fuel companies that were eligible for government assistance through the Fed’s Main Street Lending Program, which was for small businesses struggling during the coronavirus crisis.
“The decision to bring oil and gas into the Fed’s investment portfolio not only misdirects limited recovery resources but also sends a false price signal to investors about where capital needs to be allocated,” Raskin wrote at the time.
On Thursday, Raskin defended the column, saying it was important to differentiate the Fed’s emergency lending program from its oversight of Wall Street banks.
“This was a special program, set up by the Cares Act by the Congress, that appropriated taxpayer money. This was an issue quite unlike the issue of supervision,” Raskin said. “That article did not have to do with supervision and regulation.”
The nominations of Raskin, Cook and Jefferson will be voted on by the Senate Banking Committee, before going to the full Senate. Biden has also nominated Powell for a second term as chair, and Fed governor Lael Brainard to be the Fed’s vice chair. If all of Biden’s picks are confirmed, the Fed would have a full slate of seven governors for the first time in years.