Fed board nominees face tough questions on independence, inflation

Lawmakers on Thursday grilled three nominees to the Federal Reserve Board of Governors on issues around Fed independence, climate change and inflation during a confirmation hearing before the Senate Banking Committee.

Sarah Bloom Raskin, nominated last month by President Joe Biden to serve as the Fed's vice chairwoman for supervision, drew the most attention, particularly from Republicans who oppose her nomination. Those Republicans, including Sen. Pat Toomey of Pennsylvania, the committees' ranking member, worried Ms. Raskin would use her influence at the Fed to steer capital away from oil and gas companies.

Ms. Raskin wants to "misuse banking regulatory powers to impose environmental policies that Congress has refused to enact," Mr. Toomey said. "Ms. Raskin has repeatedly and specifically advocated that the Fed allocate capital away from the fossil fuel industry as a way to combat climate change. She says the quiet part out loud."

Ms. Raskin said repeatedly throughout the hearing that it is inappropriate for the Fed to make credit decisions and allocations. "Banks choose their borrowers, not the Fed," she said. "It's inappropriate for the Fed to choose winners and losers; doing so is not the proper institutional role of the Fed. That's a cardinal principle of Fed supervision."

Ms. Raskin was on the Fed board from 2010 to 2014 and was then second in command at the Treasury Department, serving as deputy secretary from 2014 to 2017. She is currently the Colin W. Brown Distinguished Professor of the Practice of Law at Duke University.

Also appearing before the committee were nominees Lisa D. Cook, a professor of economics and international relations at Michigan State University, and Philip N. Jefferson, vice president for academic affairs, dean of faculty and the Paul B. Freeland professor of economics at Davidson College, to serve on the Fed board.

Each nominee said addressing inflation will be a top priority, if confirmed.

"High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity," Ms. Cook said. "That is why I am committed to keeping inflation expectations well anchored."

In recent months, Mr. Biden has also renominated Jerome Powell as Fed chairman and nominated current board member Lael Brainard as vice chairwoman. Both Mr. Powell and Ms. Brainard had confirmation hearings before the Senate Banking Committee in January.

If all Mr. Biden's nominees are confirmed, he will have nominated five of the Fed board's seven members.

Chairman Sherrod Brown, D-Ohio, said the committee will vote on each of the Fed nominations on Feb. 15.

At its most recent two-day meeting that concluded Jan. 26, the Fed kept interest rates near zero but signaled it will raise rates at its next meeting in March.