The Senate has confirmed Jerome Powell and Jeremy Stein as members of the Federal Reserve Board of Governors, marking the first time ever in the Obama Administration’s tenure that there are a full slate of seven governors serving.
The vote resulted from compromise. Stein, a Harvard professor and Democrat, was confirmed 70-24, and Powell, a former Treasury undersecretary for George H.W. Bush and a Republican, was confirmed 74-21. David Vitter led opposition to confirming these two on the grounds that they would be rubber stamps for Ben Bernanke, but that fizzled out. In actuality we don’t know a lot about how Powell and Stein will choose to govern, and we don’t really know much about their views on monetary policy. That blank slate turned out to be a benefit in the modern Senate. Previous candidates that actually professed their views on monetary policy, or anything else conservatives decided not to like, people like Nobel Prize winner Peter Diamond, were rejected for the position and blocked through filibuster. So only this kinder, gentler set of nominees could make it.
Harry Reid overcame the filibuster by allowing two hours of debate on the nominees. Lamar Alexander patted the President on the head for his wise, bipartisan approach:
“I am here today not only to say that I admire the nominees — I know one of them well, Jay Powell, who was undersecretary of the Treasury for the first president Bush in an administration in which I served, he has a fine reputation, he should be a fine member,” Alexander said. “But I want to acknowledge the fact that the president chose to break the stalemate by nominating a Republican as well as a Democrat.
“And I want to acknowledge the fact that several of my Republican colleagues who have deep concerns of the actions of the Federal Reserve Board during this economic crisis have foregone some of their rights to allow us to have an up-or-down vote at noon.”
So endless filibusters of Presidential appointments based mostly on ideology constitutes “rights,” then.
It’s pretty clear that these picks won’t really change the balance of power in the Federal Reserve. But they do rebalance the situation so that the regional Fed bank Presidents, often picked by bank executives, don’t have more power than they ought to, based on the traditional dynamic of the Federal Open Market Committee, with seven Governors chosen by Presidents and confirmed by the Senate, and five regional bank Presidents.
The real issue here is that this is the first time there has been a full complement on the FOMC. Considering the scope of the Great Recession and the need for more accommodative monetary policy, the lax nature of the appointments is really pretty shocking. This was a mistake from the beginning of the first term.
UPDATE: Jonathan Bernstein writes that credit should be given to the recess appointments made by President Obama at the beginning of the year, which far from stalling subsequent appointments have made them move faster, because of the threat of Obama using his constitutional authority. There’s something to that, although you have to add the concession of nominating a Republican in there too. But anyone who looked at the downside of the recess appointments should look at the facts. Lots of appointees, both Presidential and judicial, have been confirmed since the recess appointments.