August 19, 2022

Frustration Grows as Nominee for the Fed Withdraws

The candidate, Peter A. Diamond, an economics professor at the Massachusetts Institute of Technology and a Nobel Prize laureate for his work on labor markets, cited Republican opposition in asking the White House to withdraw his nomination.

But Democratic leadership did not press for a vote on the nomination, and Congressional aides said that the White House invested relatively little energy in fighting for Mr. Diamond. Moreover, they said that the administration had not submitted nominations for vacancies atop several of the federal agencies charged with overhauling and improving financial regulation in the wake of the 2008 crisis.

“There’s a deep feeling of frustration,” said one Democratic aide, who spoke on the condition of anonymity because of the sensitivity of the subject. “No one wants to insult the administration or put them in a position that’s uncomfortable for them or worse for them. So you’re just sitting around waiting for them to take the lead.”

The White House press secretary, Jay Carney, said on Monday that the White House did everything it could to push the nomination, and he lamented the “partisan obstructionism” that had prevented approval of Mr. Diamond.

“I don’t have a tick-tock on the different actions that different members of the administration took in support of this nomination,” Mr. Carney said in response to a question from a reporter. “We strongly supported it. We thought he was highly qualified. We regret that it’s come to this and he’s withdrawn his nomination.”

The withdrawal leaves two empty seats on the Fed’s seven-member board, which, along with selected presidents of the Fed’s regional banks, sets monetary policy. The position of vice chairman for supervision, created last year as a top bank regulatory post, also is vacant.

President Obama has not nominated a head for the Office of Comptroller of the Currency, which oversees national banks, or a new chairman for the Federal Deposit Insurance Corporation, which insures bank deposits and cleans up failed banks. There is no nominee to lead the new Consumer Financial Protection Bureau, or the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

The White House has said for months that it will submit nominations “as soon as possible.” On Monday it promised action “in short order.” It is widely expected to nominate the F.D.I.C.’s vice chairman, Martin J. Gruenberg, to replace Sheila C. Bair, who ends her term as chairwoman in July. Mr. Gruenberg, seen as relatively noncontroversial, could be packaged with other nominees in the hope of a halo effect.

Democrats say that they hold Republicans responsible for preventing votes. In addition to derailing Mr. Diamond, Republicans forced the withdrawal earlier this year of a nominee to head the Federal Housing Finance Agency, and have said they will not allow a vote on any nominee to lead the consumer agency until the bureau is restructured.

There are also strategic considerations. A senior White House official said that the Obama administration had to weigh the costs of trying to pressure Senator Harry Reid, the majority leader, to push for cloture votes in the face of Republican opposition.

“We could go for a symbolic cloture vote. It would burn 30 hours on the clock. That’s 30 hours that the Senate is in session. So it’s a big ask of Harry Reid to say ‘put aside your legislative agenda and go for a cloture vote,’ ” the official said.

Mr. Diamond focused his criticism on Republicans in a sharply worded opinion article published Monday in The New York Times. “We should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight,” he wrote.

Mr. Diamond said that Republicans were mistaken to treat his expertise in labor economics as irrelevant to decisions about monetary policy. “Understanding the labor market — and the process by which workers and jobs come together and separate — is critical to devising an effective monetary policy,” he wrote.

Senator Richard C. Shelby of Alabama, the senior Republican on the Banking Committee, reiterated on Monday his belief that Mr. Diamond had lacked the necessary qualifications.

“It is my hope that President Obama will now nominate someone capable of garnering bipartisan support in the Senate,” Mr. Shelby said in a statement Monday. “It would be my hope that the president will not seek to pack the Fed with those who will use the institution to finance his profligate spending and agenda.”

Mr. Shelby added that he had great respect for Mr. Diamond and wished him the best.

The Fed board of governors has long been populated with a mix of people including lawyers, bankers and economists with a wide range of specialties. Mr. Shelby himself has voted for a labor economist on at least one previous occasion: he supported the 1994 nomination of Janet Yellen, now the Fed’s vice chairwoman.

But the nomination became a proxy for a broader fight between the White House and Congressional Republicans over the government’s role in the economy. Mr. Diamond publicly supported a continuing Fed program to stimulate growth by purchasing $600 billion in Treasury securities. Mr. Shelby and other Republicans described the program as a backdoor method of lending the government more money.

Helene Cooper contributed reporting.

Article source:

Speak Your Mind