Has White House made it harder to install next Fed regulatory chief?

WASHINGTON — President Biden may have ended months of speculation with his renomination of Jerome Powell to serve as chair of the Federal Reserve Board. But the absence of a pick to serve as the Fed’s vice chair for supervision may make it more difficult ultimately to fill that position.

In addition to naming Powell to another term, Biden nominated Gov. Lael Brainard for one of the two vice chair positions on the board. But the other vice chair seat, which oversees regulatory policy for the central bank, is arguably of more importance to the financial services industry.

“It's surprising they wouldn't nominate the vice chair for supervision at the same time, because it's easier to get a slate of nominees through than individuals,” said Aaron Klein, senior fellow in Economic Studies at the Brookings Institution.

Powell and Brainard’s nominations were both expected, and they do not appear to face a difficult Senate confirmation. Powell, who was tapped to lead the Fed by former President Donald Trump in 2017, has been seen as the odds-on favorite to keep his job even amid calls in recent weeks from progressive groups and lawmakers for someone else to get the nod.

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Brainard was nominated for the post currently held by Vice Chair Richard Clarida, whose term as a Fed governor expires on Jan. 31. She was a noted opponent of Trump-era regulatory reforms and Powell’s most likely competition for the Fed’s top job.

But the conspicuous absence of a nomination for the Fed’s vice chair for supervision alongside Powell and Brainard — as well as a nominee for another vacancy on the board — was seen by some analysts as a missed opportunity to move all four as a slate through a fractious Democratic caucus in the Senate.

Biden said he would be making announcements for the remaining positions in the coming weeks. He added that he would be seeking out “new voices” and “new diversity” for the remaining vacancies on the board.

“I look forward in the coming weeks to nominating additional members of the Federal Reserve Board of Governors, including a new vice chair for supervision,” Biden said. “While Jay and Lael bring continuity and stability to the Fed, my additions will bring new perspectives and new voices. I also pledge that my additions will bring new diversity, which is much needed and long overdue in my opinion.”

Biden’s comments suggested to some observers that he has specific candidates in mind and that staggering the nominations was deliberate. But others speculated that the lack of a nomination could mean that the administration has not yet settled on the remaining nominees.

“If they had [the nominees], you would think they would have nominated people,” Klein said.

Ian Katz, director at Capital Alpha Partners, said picking a progressive vice chair for supervision along with nominating a Fed chair could have given some lawmakers on the left more of a reason to support Powell's confirmation.

“If financial regulation is important to the progressives, and progressives’ complaints about Powell are about financial regulation, why not pick a vice chair for supervision already?” Katz said. “I do think it's a missed opportunity for the Democrats, because ... you only have so much time in these jobs.”

The vice chair for supervision is a relatively new role on the Federal Reserve Board. It was created as part of the Dodd-Frank Act. Fed Gov. Randal Quarles, who said he is stepping down at the end of the year, served as the first vice chair for supervision from 2017 until his term expired in October.

A significant part of the administration’s challenge in getting a vice chair for supervision confirmed is political divisions in the Senate and within the Democratic caucus.

A prime illustration of that tension has been the administration’s difficulty installing a Senate-confirmed head of the Office of the Comptroller of the Currency. Many names have been floated and rejected. The current nominee, Cornell Law professor Saule Omarova, faced a brutal confirmation hearing last week in which Republicans were unwilling to support her and some moderate Democrats expressed concerns too.

Whether the administration has a strategy to avoid that kind of monthslong political deadlock over the Fed's top regulatory job is unclear.

“It's difficult to imagine the vice chair for supervision nomination being handled as poorly as the OCC saga has been, but that's only because the OCC saga has been handled terribly,” said Isaac Boltansky, director of policy research at BTIG. “I'm surprised that we didn't see all of the nominations at once, because I was of the view that you would have these relatively middle-of-the-road consensus picks in Powell and Brainard used to help shepherd more progressive picks for the vice chair of supervision and the board through the process.”

It is also possible that the administration chose to present its Fed picks in two or more groups because of the Senate calendar. The current legislative session expires at the end of the year. Upon Congress’s resumption in January, all unconfirmed nominees must be renominated or drop out.

The White House may have decided that there isn’t enough time before the end of the current legislative session to get a full slate of nominees through the confirmation process, and so it simply forwarded the ones it thought would be quickest to confirm, observers said.

“With [Powell and Brainard], they're going to get it done this year,” Boltansky said. “It's not clear to me that we could have done the same if it was five nominees, three of whom are likely new to this level service.”