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President Obama announced three nominations to the Federal Reserve Board on Friday, but left the job of a second vice chair in charge of bank supervision unfilled.
January 10 -
The Senate voted 56 to 26 late Monday to confirm Janet Yellen as the next leader of the Federal Reserve Board.
January 6 -
While by law the Federal Reserve Board must worry about price stability and unemployment, Chairman Ben Bernanke appears to have charted a third mandate for the central bank: financial stability.
April 20
WASHINGTON Three nominees to the Federal Reserve Board are set to underscore the growing attention the central bank is paying to financial stability concerns amid its two other mandates of employment and price stability.
Appearing before a Senate Banking Committee nomination hearing on Thursday, all three emphasized financial stability in their prepared testimony, which was released a day earlier.
"The Great Recession has driven home the lesson that the Fed has not only to fulfill its dual mandate, but also to contribute its part to the maintenance of the stability of the financial system," Stanley Fischer, a former governor of the Bank of Israel, said in prepared remarks. "Almost always, these goals are complementary. But each of them must be an explicit focus of Fed policy."
Fischer, who has been nominated to serve as the vice chair, is scheduled to appear alongside Lael Brainard, the U.S. Treasury Department's past undersecretary for international affairs, and current Fed Gov. Jerome Powell.
The focus on preserving the health of the financial system by the president's nominees follows on a pledge made by the Fed Chair Janet Yellen, who assumed office on Feb. 1. She named financial stability as the central bank's third mandate.
Powell, who has served on the board since 2012 and has been nominated for a second term that will expire in 2028, echoed that edict in his testimony.
"The regulation and supervision of financial institutions and markets are as important as anything the Federal Reserve does," said Powell. "This is a time to continue to address the weaknesses that were exposed during the crisis and set the stage for another long period of prosperity."
All three of the nominees acknowledged the progress made by the Fed and the other respective banking agencies in implementing the Dodd-Frank Act of 2010, but they agreed more work needs to be done.
"The Federal Reserve will need to continue robust implementation of financial reform and enhanced supervision to ensure that no financial institution is too big to fail and to discourage the massive leverage and opaque risk taking that contributed to the financial crisis," said Brainard, in her prepared testimony.
Brainard, who had been in charge of currency policy and working with G20 central banks and finance ministers on the European financial crisis and regulatory reform efforts, has been nominated for a 12-year term.
Fischer, a world-renowned economist who previously served as the first deputy managing director of the International Monetary Fund, said regulators must be prepared in guarding against the next crisis through the use of strong regulation and supervision.
"The Fed must remain ever-vigilant in supervising and regulating the financial institutions and markets for which it has been assigned responsibility, and it should be no less vigilant in its surveillance of the stability and resilience of the financial system as a whole."
Those nominees, if confirmed, would fill seats left by former Fed Gov. Elizabeth Duke and former Fed Chairman Bernanke, who left the Fed at the end of January.
