Tags: Senate | Fed | nominee | Warren

Senate Banking Committee Hears Fed Nominees

By    |   Tuesday, 18 Mar 2014 06:39 AM

The Senate Banking Committee held a hearing March 13 on five pending nominations for federal regulatory positions, a hearing that had been postponed due to the series of storms that has battered the East Coast this winter.

This article will cover only the three nominees to fill open seats on the Board of Governors of the Federal Reserve System. The fact that the Committee would also tack on two insignificant nominations is just a small lesson in the way the Senate does business.

The bottom line is that the nominees are all outstanding, and there is no controversy as to whether they will be confirmed. In this circumstance, the reason to write about the hearing is that there is much to be learned about the thinking of the senators and the nominees. Since citizens are not privy to the private meetings at which senators make decisions, any hearing of an important committee provides a window into what is going on.

For example, Chairman Tim Johnson, D-S.D., and ranking Republican Michael Crapo, R-Idaho, used this occasion, when they knew there would be press interest, to announce that they have agreed to take up legislation sponsored by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., that is supposed to reform the mortgage finance system long dominated by Fannie Mae and Freddie Mac, which have been in government conservatorship for five years. I use the term Corkercare to describe what is cooking, and there will be plenty of time to talk about why this is a gift to the industry rather than something that will benefit the economy.

The three nominees, now likely to be confirmed as soon as the Senate returns from its St. Patrick's Day break, are Stanley Fischer, a renowned economist who taught Ben Bernanke, Larry Summers and Mario Draghi and in 2013 concluded eight years as head of the central bank of Israel, who will be vice chairman of the Fed; Jerome Powell, an accomplished lawyer and economist who is currently serving on the Board and has been nominated for another term; and Lael Brainard, who has served Democratic administrations as their leading voice on Free Trade.

Two passages stand out, one for what it indicates about how these nominees will perform, and the other as an example of better than usual political theater.

As always, the senators used the hearing to jawbone for favorable treatment for clients, in this case the insurance industry, the fund management industry and community banks. When asked whether the Fed has the authority to tailor the regulation of the largest insurance companies, two of the three nominees, Fischer and Brainard, deferred to the legal staff at the Fed. Also, when asked how to address the subsidies that the "too big to fail" banks enjoy, Powell responded that he doesn't trust those numbers. These answers suggest that lowered expectations are in order.

Finally, Elizabeth Warren, D-Mass., asked Fischer, a former, though briefly, high official of Citibank, whether Citi has been getting too many appointments under Democratic administrations. He ably dodged the question, but it was remarkable that Warren asked it.

(Archived video and witness statements can be found here.)

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Robert-Feinberg
The Senate Banking Committee held a hearing March 13 on five pending nominations for federal regulatory positions, a hearing that had been postponed due to the series of storms that has battered the East Coast this winter.
Senate,Fed,nominee,Warren
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2014-39-18
Tuesday, 18 Mar 2014 06:39 AM
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