President Biden is considering appointing Lisa Cook, an economist at Michigan State University, to fill a vacancy on the Federal Reserve Board, people familiar with the matter told Axios.
Why does it matter: The nomination 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 he can reconstitute the Fed, including the presidency.
- President Jerome Powell’s term of office ends in February 2022, but presidents usually announce a replacement, or if they should rename the presidency, in the summer before expiration. That would be this summer – a long time for financial markets to adjust to change.
- The White House declined to comment and Cook did not respond to a request for comment.
The big picture: Under Powell, the Fed took on an extraordinary role in trying to contain the economic consequences of the coronavirus. He reduced the basic interest rate to zero and injected trillions of dollars into the economy through the purchase of assets.
- Powell on Wednesday continued to warn of the challenges facing the economy and suggested that the 6.3% unemployment rate “dramatically underestimated” real labor market conditions.
- Biden’s economic advisers have insisted that they are not concerned that his $ 1.9 trillion stimulus package will lead to inflation, as former Democratic Treasury Secretary Larry Summers warned in an article this week.
Details: Cook’s academic writings suggest that she is a dove, which means that she is less concerned with inflation and more focused on improving labor market conditions.
- She also wrote about the wider effects of racial prejudice and how “discrimination inflicts an impressive cost across the economy”.
- Cook served as a senior economist on President Obama’s Council of Economic Advisers and was a member of Biden’s transition team.
Between the lines: President Trump repeatedly attacked the Fed’s independence, demanding lower interest rates and insisting that he had the authority to fire Powell, a controversial proposal he never tested.
- Last week, Biden withdrew the name of Judy Shelton, the controversial choice of the Trump Fed, whose nomination sank in the Senate because of his unorthodox views.
What we’re watching: In addition to fixing interest rates, the Fed also regulates financial institutions. This role expanded with the government’s response to the 2008-09 financial crisis.
- Biden will have the opportunity to appoint a vice president for oversight when the term of the current incumbent, Randal Quarles, expires in October.
- He may also replace Richard Clarida, the other vice president, when his term ends in January 2022.
- Lael Brainard, a current Fed governor that Biden considered Treasury secretary, could be elevated to either position.
- Cook could also be elevated to one, which would require a separate confirmation vote in the Senate.