By Pete Schroeder and Michelle Price
(Reuters) - U.S. President Joe Biden is considering former Federal Reserve Governor Sarah Bloom Raskin to lead regulation and supervision at the central bank as part of a slate of three nominees to its Board of Governors, the Wall Street Journal reported on Tuesday.
Raskin, who served in the Treasury Department in the Obama administration, could bring a tougher regulatory profile to the country's most powerful bank oversight role, a position recently vacated by Randal Quarles, a Donald Trump appointee who riled progressives with a more Wall Street-friendly approach.
Biden is also considering two Black economists - Lisa Cook from Michigan State University and Philip Jefferson from Davidson College in North Carolina - for seats on the Fed Board, which would help fulfill a goal of diversifying the leadership of the U.S. central bank. All current governors including Chair Jerome Powell are white, and the Fed has had just three black governors in over a century of existence, all men. Cook, if appointed, would be the first-ever Black woman on the Fed Board.
Reuters was not immediately able to confirm the Journal's report, and the White House did not immediately respond to a request for comment. Raskin, Cook and Jefferson could not be reached for comment.
The vice chair of supervision is the most consequential of the vacancies on the Fed's seven-member board available to be filled by Biden, giving the first-term Democrat an opportunity to leave a lasting imprint on both Wall Street oversight and U.S. monetary policy.
The industry, progressive lawmakers and advocacy groups have been waiting anxiously for the White House to name the new supervision chief who will drive policy on thorny issues including climate change financial risks, community lending rules, and financial technology companies.
Biden has already decided to renominate Powell to a second term as Fed chair, which rankled progressive Democrats. He also nominated Governor Lael Brainard to the Fed's other vice chair slot, which is focused on the Fed's economic and monetary policy agenda.
Progressive groups want Biden to install a tougher Wall Street cop who will tighten up rules introduced following the 2007-2009 global financial crisis and which Quarles has eased. These include regulations on speculative bank investments, derivatives, capital and liquidity.
Quarles, who formally stepped down from the supervision role in October and plans to leave the Fed by year end, said he tailored the rules to banks' risks and that the industry's stellar performance https://www.reuters.com/business/finance/top-us-banks-smash-profit-estimates-rebounding-economy-2021-07-14 amid the pandemic shows he did not weaken the system.
Powell, who like Quarles is a former partner at private equity giant Carlyle Group (NASDAQ:CG), backed Quarles' changes but has said he will allow the new supervision chief to take the lead on regulation.
Jeff Hauser, founder and director of the Revolving Door Project, said Biden was under pressure from progressives.
"The Biden Administration is under considerable pressure to mitigate how much Biden's financial regulation and bank consolidation agenda was undermined by renominating Powell, and a strong Vice Chair for Supervision actually empowered by the Fed Chair would help," he said.
EYES ON MONETARY POLICY, TOO
Raskin's name has been among several in circulation for the supervision role in recent months. That includes Richard Cordray https://www.reuters.com/business/finance/white-house-consider-richard-cordray-top-fed-banking-regulator-wsj-2021-11-30, the former head of the Consumer Financial Protection Bureau, who like Raskin is looked on favorably by some of the party's most vocal Wall Street critics like Senator Elizabeth Warren of Massachusetts.
For its part, the industry had been pushing for Atlanta Fed President Raphael Bostic, seen as a more moderate pick willing to listen to the industry, according to two industry insiders.
Whoever Biden nominates must be confirmed by a closely divided Senate. Raskin has been confirmed twice before, although those votes predated the current partisan rancor that pervades Capitol Hill.
A Harvard-trained lawyer with an undergraduate degree in economics from Amherst College, Raskin served on the Fed Board from 2010 to 2014 before moving to Treasury as deputy secretary.
While her role then did not specifically involve bank oversight, Raskin made her positions clear on key elements of the regulatory reform efforts the Fed undertook after the 2008-2009 financial crisis. She slammed, for instance, proprietary trading as of "low or no real economic value". She also pushed for a strict interpretation of the "Volcker Rule," a major reform curbing such speculative investments that Quarles then helped to relax over the past four years.
If appointed, Raskin and the other prospective new Board members will also arrive at the Fed at a critical juncture for the central bank's stewardship of the U.S. economy and its recovery from the COVID-19 pandemic that triggered a short but historically deep recession in 2020.
While employment remains nearly 4 million jobs below pre-pandemic levels, the Fed in late 2021 shifted its policy stance in the face of an inflation rate that is running at nearly three times the central bank's 2% flexible annual target.
The surging prices for consumer goods and services, initially dismissed as a pandemic-oriented overhang that would be "transitory," has grown into a substantial headache for both Biden and the Fed.
Earlier this month the Fed opted to accelerate the winding down of its bond-buying program, and projections from policymakers have signaled as many as three interest rate increases next year.
Raskin appears to have leaned to the dovish side in her four years at the Fed, transcripts of policy-making meetings show. But even the central bank's most ardent advocates of loose policy have recently shifted given the hefty toll they fear inflation is inflicting upon American workers.