President Biden is considering nominating Lisa Cook, an economist at Michigan State University, to hold an open seat on the Federal Reserve, say people familiar with Axios.
Why it matters: The appointment would be historic, as Cook would be the first black woman to join the Fed. It will also reveal the new president’s preferences for monetary policy and how he can restore the Fed, including the presidency.
- Chairman Jerome Powell’s term begins in February 2022, but presidents usually announce the summer before the expiration whether he will reappoint the chairman. It would be this summer – enough time for the financial markets to adjust to the change.
- The White House declined to comment and Cook did not respond to a request for comment.
The big picture: Under Powell, the Fed has taken on an extraordinary role in trying to limit the economic consequences of the coronavirus. It has reduced the standard lending rate to zero and pumped trillions of dollars through asset purchases into the economy.
- Powell continued to warn on Wednesday about the challenges facing the economy, suggesting that the 6.3% unemployment rate dramatically underestimated the real conditions in the labor market.
- Biden’s economic advisers have insisted they are not worried that its $ 1.9 billion stimulus package will lead to inflation, as Larry Summers, a former secretary of the Democratic Treasury, warned in a comment this week.
Details: Cook’s academic writing suggests that she’s a pigeon, which means she’s less worried about inflation and more focused on improving labor market conditions.
- She also wrote about the broader consequences of racial prejudice and how ‘discrimination is a huge cost to the entire economy.’
- Cook served as a senior economist on the Board of Economic Advisers under President Obama and was a member of Biden’s transition team.
Between the lines door: President Trump has repeatedly attacked the Fed’s independence, demanding that it lower interest rates and insisting that he have the authority to fire Powell, a controversial proposal that he ultimately never tested.
- Last week, Biden withdrew the name from Judy Shelton, Trump’s controversial Fed choice, whose nomination in the Senate was based on her unorthodox view.
What we are looking at: In addition to setting interest rates, the Fed also regulates financial institutions. That role expanded with the government’s response to the 2008-’09 financial crisis.
- Biden has an opportunity to nominate a vice president for oversight when the term of current resident Randal Quarles expires in October.
- He will also be able to replace Richard Clarida, the other vice-chairman, when his term ends in January 2022.
- Lael Brainard, a current Fed governor who considered Biden as secretary of the Treasury, could be elevated to one of two positions.
- Cook may also be elevated to one of them, requiring a separate Senate confirmation vote.