President Biden is considering nominating Lisa Cook, an economist at Michigan State University, to fill an open spot on the Federal Reserve Board, people familiar with the matter tell Axios.
Why it matters: The appointment would be historic, as Cook would be the first black woman to join the Fed. It would also reveal the new president’s preferences for monetary policy and how to reconstruct the Fed, including the presidency.
- Chairman Jerome Powell’s term of office expires in February 2022, but presidents will typically announce a replacement, or that they will rename the chair, in the summer before it expires. That would be this summer – enough time for the financial markets to adjust to the change.
- The White House declined comment, and Cook did not respond to a request for comment.
The big picture: Under Powell, the Fed has taken on an extraordinary role to contain the economic consequences of the coronavirus. It cut benchmark interest rates to zero and pumped trillions of dollars into the economy through asset purchases.
- Powell continued to warn on Wednesday of the challenges facing the economy, suggesting that the 6.3% unemployment rate “dramatically underestimates” actual labor market conditions.
- Biden’s economic advisers have insisted they are not concerned that his $ 1.9 trillion stimulus package will lead to inflation, as Larry Summers, a former Democratic Treasury secretary, warned in an op-ed this week.
DetailsCook’s academic writing suggests she’s a pigeon, meaning she’s less concerned about inflation and more focused on improving labor market conditions.
- She has also written about the broader effects of racial bias and how “discrimination creates staggering costs throughout the economy.”
- Cook served as a senior economist on the Council of Economic Advisers under President Obama and was a member of Biden’s transition team.
Between the linesPresident Trump repeatedly attacked the Fed’s independence, demanded lower interest rates, and insisted that he had the authority to fire Powell, a controversial proposal he never ultimately tested.
- Last week, Biden withdrew the name of Judy Shelton, Trump’s controversial Fed choice, whose Senate nomination failed due to her unorthodox views.
What we’re looking at: In addition to setting interest rates, the Fed also regulates financial institutions. That role was expanded with the government’s response to the 2008-2009 financial crisis.
- Biden will have the opportunity to appoint a vice chair for oversight when the tenure of the post’s current resident, Randal Quarles, ends in October.
- He will also be able to replace Richard Clarida, the other Vice President, when his term ends in January 2022.
- Lael Brainard, a current Fed governor considered by Biden as Secretary of the Treasury, could be elevated to either position.
- Cook could also be made one of them, which would require a separate vote to confirm the Senate.