The top Republican on the banking committee has written to President Joe Biden questioning the geographic and industrial diversity of his Federal Reserve picks, raising the specter of legal problems that could threaten the nominations.
Sen. Pat Toomey raised the problems about the people Biden recently nominated for crucial positions at the central bank in a Tuesday letter to the White House. The Pennsylvania Republican hinted that Biden’s picks could be in violation of the Federal Reserve Act and said he is seeking clarification on the matter.
The act says that presidents can select “not more than one” pick from each Federal Reserve district and that the choices should “have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.”
Toomey wrote that if Biden’s choices are confirmed, a majority of the Fed’s Board of Governors would hail from the central bank’s Fifth District, which encompasses Washington, D.C., and its surrounding suburbs in Virginia and Maryland as well as North Carolina, South Carolina, and West Virginia.
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Biden’s nominee to lead the central bank for another term, Fed Chairman Jerome Powell, is listed by the White House as of Maryland. His choice for vice chairwoman, Lael Brainard, is listed as of Washington, D.C. Sarah Bloom Raskin, Biden’s pick for vice chairwoman of supervision, resides in Maryland. Philip Jefferson, another board pick, lives in North Carolina.
“What District do you believe each of these individuals will represent, and what specific characteristics qualify each of them as being from that District?” Toomey asked Biden in the letter. “In what circumstances can a current board member’s District be changed and how?”
Toomey also raised concerns about fair representation of the economy. He said that if the nominees are confirmed, only two board members would have “any significant experience” in the private economy. He also said that no board members would have experience working in energy, one of the country’s largest economic sectors.
To the contrary, he dinged Raskin and her views on climate change.
“While a lack of expertise at the Federal Reserve Board in any particular industry is inevitable, the demonstrated hostility of one nominee, Sarah Bloom Raskin, towards a sector that supports employment for millions of Americans, is unacceptable,” Toomey said.
Raskin, who previously served as a governor at the Fed from 2010-14, has suggested that she sees climate change as a systemic risk to the U.S. financial system and that the Fed should play some form of mitigating role in that risk. Toomey and some committee Republicans have argued the Fed is at risk of exceeding the dual mandate given by Congress, which is maximizing employment and price stability.
“Sarah Bloom Raskin has specifically called for the Fed to pressure banks to choke off credit to traditional energy companies and to exclude those employers from any Fed emergency lending facilities,” Toomey said earlier this month. “I have serious concerns that, if nominated, she would abuse the Fed’s narrow statutory mandates on monetary policy to have the central bank actively engaged in capital allocation. Such actions not only threaten both the Fed’s independence and effectiveness but would also weaken economic growth.”
In closing out the letter, Toomey asked Biden to describe how he has complied with the Federal Reserve Act’s diversity mandate with his recent central bank picks. He asked for responses to the questions prior to the nominees’ hearings.
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The White House maintains that Biden’s picks are legally sound. A White House official pointed the Washington Examiner to a 1977 legal opinion by the Office of Legal Counsel that found that the legal requirement was not a strict residency requirement.
Bloomberg reported that Raskin will reportedly represent Boston, where she was born and attended school. Jefferson will represent New York, where he attended school and worked at the New York Fed. Lisa Cook, who is not mentioned in Toomey’s letter, will represent Atlanta, where she was born.
The move is not without precedent. Former President Donald Trump nominated Randal Quarles to the Fed board to represent the Kansas City district, although he mainly grew up in Utah.
