Senate Banking Republicans double down on boycott of Fed nominees

Republican members of the Senate Banking Committee defended their boycott of a vote on five Federal Reserve Board nominations, saying that nominee Sarah Bloom Raskin's testimony about her work on behalf of the fintech company Reserve Trust was deceptive and inadequate.

During a hearing Thursday on the state of the economy, committee Chairman Sherrod Brown, D-Ohio, criticized his Republican colleagues’ move two days earlier to deny a quorum for a committee vote on the five Fed picks and nomination of Sandra Thompson for director of the Federal Housing Finance Agency. Giving the Fed a full complement of directors would better equip the board to tackle inflation, which Republicans on the committee have expressed as a top concern, Brown argued.

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“At this pivotal moment in our economic recovery, everyone understands we need a full Federal Reserve Board,” Brown said. “It would be the first time in nearly a decade where all seven confirmed members sat at the Fed to help tackle inflation. Republicans have no solutions, only political stunts.”

Sen. Pat Toomey of Pennsylvania, the committee's ranking Republican, retorted that his colleagues were prepared to vote on five of the six nominees but had legitimate questions about President Biden’s pick to serve as the Fed’s vice chair for supervision, former Fed board member Sarah Bloom Raskin. Some of them involve Raskin's service on the board of Reserve Trust after departing the Treasury Department, where she served as deputy secretary in 2017.

“We're perfectly happy to vote on five of the six nominees. That would be four Fed governors and the director of the FHFA. If we did, actually most of them would get considerable Republican support. They'd move on,” Toomey said. “And if there were a concern about vacancies on the Fed, the chairman could fix that very quickly. He chooses not to; he prefers to have the vacancies. That's his choice.”

Sen. Cynthia Lummis, R-Wyo., initially raised the question about Raskin’s involvement in Reserve Trust’s acquisition of a Fed master account during a confirmation hearing earlier this month. Lummis implied that Raskin had used her status as a former Fed governor to encourage the Federal Reserve Bank of Kansas City to grant Reserve Trust’s application for a master account, an implication that Raskin and Reserve Trust’s founder have denied.

The Kansas City Fed acknowledged that Raskin had contacted her on behalf of Reserve Trust’s application, which was initially rejected. But it denied that the contact had any bearing on the regional Fed bank’s decision to reconsider Reserve Trust’s application, saying the decision instead was based on a changes to the company’s business model and guidance from Colorado’s banking regulators.

The stalemate over the Fed’s nominees has left the White House with a difficult choice of either moving all of the nominees except Raskin — including Thompson; Jerome Powell, a Republican whom Biden renominated as Fed chairman; Lael Brainard for vice chairman of the Fed; and Lisa Cook and Philip Jefferson as Fed board members — or attempting to bypass the Senate rules regarding a quorum, which would require all 50 Democrats’ assent.

Decoupling Raskin’s nomination from the rest of the Fed slate could imperil her nomination for a critical supervisory role, one that Democrats have never successfully filled. A defeat for Raskin — who had been unanimously approved to the Fed board in 2010 — would make it very difficult for the administration to find a qualified alternative who is palatable to both the liberal and moderate Democrats, especially coming after a contentious nomination process for Cornell Law professor Saule Omarova to serve as comptroller of the currency late last year.

The alternative strategy of changing the Senate rules to allow Raskin’s nomination to proceed might not work. All 50 Democrats in Congress, plus Vice President Kamala Harris, would have to agree to a change, and Sens. Joe Manchin, D-W.Va., and Kyrsten Sinema, D-Ariz., have rebuffed efforts to modify the filibuster to smooth the path of legislation and have resisted changes to nomination procedures before. That strategy would be further complicated by the absence of Sen. Ben Ray Luján, D-N.M., who suffered a stroke earlier this month. He is expected to make a full recovery and return to the Senate sometime next month.

Sen. Jon Tester, D-Mont., who voiced his support for Raskin’s nomination after her confirmation hearing, said that a Trump administration nominee was far less forthcoming about his business dealings than Raskin has been, and that led him to vote against that nominee rather than block the process altogether.

“When a secretary, a very important secretary, came to my office during the Trump administration, and I asked him about disclosure and conflicts of interest, he looked at me and said, ‘That’s none of your guys’ business,’ ” Tester said. “I could have tried to organize so that we couldn’t have a vote on him, but the truth is, I just voted ‘No,’ and that was that. Part of showing up is having that debate.”

Tester’s office declined to provide further information about whom he was referring to.