(Jan. 14, 2022) There will soon be three vacancies on the governing board of the nation’s central bank, as the current vice chair resigned, effective today (Jan. 14). Citing only the fact that his term as Federal Reserve Board member expires at the end of the month, Vice Chair Richard Clarida tendered his resignation to the White House from the agency leadership. His resignation will leave three empty seats on the seven-member board. Also empty: the role filled by a sitting governor as vice chair for supervision (vacant since Randal Quarles resigned last month). Lael Brainard has been nominated to replace Clarida as board vice chair; a confirmation hearing was held for her Thursday. If confirmed, her term in that role would run to 2026, the same year her Fed board chair term ends … Meanwhile, in his own confirmation hearing for a reappointment (for a four-year term) as Fed chair, Jerome H. (“Jay”) Powell said that, if confirmed, the Fed “will remain vigilant about new and emerging threats” to financial stability. He also said the agency, while he has been chair, intensified its focus and supervisory efforts on evolving threats such as climate change and cyberattacks, and improved public access to instant payments.
(Jan. 7, 2022) The nomination of Todd M. Harper to be reappointed chairman of the NCUA Board, for a six-year term to run through April 2027, was resubmitted by the White House to the Senate this week – even though Harper in September testified in a confirmation hearing before the Banking Committee.
The resubmission of Harper’s nomination was one of three for federal financial regulators made by the White House this week (and more than 100 submitted overall). The other two were for Federal Reserve Board Chair Jerome H. (“Jay”) Powell and Board Member Lael Brainard. The White House had originally submitted those nominations Dec. 13. Powell has been nominated to be reappointed chair of the board (for a four-year term ending in 2026; Brainard has been nominated to be vice chair of the board, also for term ending in 2026.
The reasons for the resubmittals is largely procedural. Jan. 3 marked the beginning of the second session of the current Congress. Under Senate rules, nominations not confirmed by the end of a legislative session must be returned to the White House and resubmitted. New confirmation hearings for those already conducted (such as Harper’s) are unlikely.
Meanwhile, confirmation hearings for Powell and Brainard for their leadership posts on the Fed Board were announced this week by the Senate Banking Committee. Powell’s hearing will be Tuesday (Jan. 11) and Brainard’s Thursday (Jan. 13).
LINK:
Nominations Sent to the Senate
(Nov. 24, 2021) Leadership at the Federal Reserve would be solidified at least through 2026 if President Joe Biden’s (D) nominations for chair and vice chair of the board, made Monday, are confirmed by the Senate.
Nominated for a four-year term as chair, and a new four-year term for vice chair, Biden tapped Jerome H. (“Jay”) Powell and Lael Brainard to take the two top spots. Biden referred to “decisive action” taken by the pair in helping to steer the nation through the financial impact of the coronavirus crisis and put the economy on the path to recovery.
The president is apparently not done making appointments: the White House indicated that he intends to nominate candidates for three open slots on the Fed Board beginning in December, including that of vice chair of supervision for the agency.
The supervision vice chair appointment has been empty since last month, when the term of Randal Quarles in that job ran out after four years. Quarles has since announced his intention to the leave the Fed Board by the end of next month.
Meanwhile, the term of the current Fed Vice Chairman Richard Clarida (in both that position and as a member of the board) expires in February. Monday’s statement from the White House indicated nothing about keeping Clarida on the board. That position will be one of the three Biden will have to fill, the other two being Quarles’ and a board slot that is now vacant.
Biden said the focus of both Powell and Brainard will be on keeping inflation low, prices stable and “delivering full employment will make our economy stronger than ever before.” He asserted that both share his “deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
“Fundamentally, if we want to continue to build on the economic success of this year we need stability and independence at the Federal Reserve – and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs,” he said.
Powell was confirmed by the Senate for a four-year term as chair of the seven-member board in 2018 after being nominated by then-President Donald Trump (R). His term in that role ends officially in February; his term as a Fed Board member runs to January 2028.
Brainard has served on the Fed Board since June 2014 after being nominated by then-President Barack Obama (D); her terms runs until January 2026. While at the Fed, she has been involved in several key issues related to financial institution regulation. Those include: being the Fed’s point person on reform of rules implementing anti-redlining laws (the Community Reinvestment Act (CRA)) and leading the Fed’s efforts in developing a 24-hour, seven-days-a-week payments system (known as FedNow), expected to debut in 2023.
If confirmed, Powell and Brainard would serve terms as chair and vice chair that end in 2026.
LINK:
(May 28, 2021) Discussion of digital currency and if (or when) the Federal Reserve will begin issuing its own version of the new money was ramped up over the last week following comments by the agency board’s chair and the board member who watches over the nation’s payments system.
First up was Fed Chair Jerome H. (“Jay”) Powell, who last week said the development and enablement of a central bank digital currency (CBDC) for use by the general public is among the technological advances being explored by the Federal Reserve. Further, he revealed, the agency plans to publish a “discussion paper” this summer that will delve into the implications of digital payments – including possibly a U.S.-issued digital currency.
The key focus for the Fed, Powell said, is whether or how a CBDC could improve on what he called the existing “already safe, effective, dynamic, and efficient U.S. domestic payments system” in serving households and businesses. In any event, he said the Fed does not see digital currencies as a replacement for cash and coin – at least for now.
“We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials.”
This week, Fed Gov. Lael Brainard (who chairs the Fed’s payments committee) said this summer’s paper on digital money will be used to solicit public comment on a range of questions related to the use of the new currency, including payments, financial inclusion, data privacy and information security.
She also said that a digital dollar would be a new type of central bank money issued in digital form for use by the general public. “By introducing safe central bank money that is accessible to households and businesses in digital payments systems, a CBDC would reduce counterparty risk and the associated consumer protection and financial stability risks,” she said. She added that introducing a CBDC may provide an “important foundation” for beneficial innovation and competition in retail payments in the U.S.
LINKS:
Transcript of Chair Powell’s Message on Developments in the U.S. Payments System
(March 26, 2021) Two new Federal Reserve committees will focus on the impact of climate change on financial stability, Fed Board Gov. Lael Brainard said this week, as the agency finds it “increasingly clear” that climate change could have “important implications” for the central bank in carrying out its responsibilities.
Climate change and its impact on credit union regulation was a key topic at last week’s virtual National Meeting of state regulators, sponsored by NASCUS. Brainard made her remarks in a speech this week to a New York-based group focusing on addressing climate change and other issues.
Brainard said the new Supervision Climate Committee (SCC) will address the microprudential side by strengthening the agency’s ability to consider climate change risk and develop an “appropriate program to ensure the resilience of our supervised firms” to the risks posed.
The second committee – the Financial Stability Climate Committee (FSCC) – will, Brainard said, identify, assess, and address climate-related risks to financial stability through a macroprudential approach (one that considers the potential for “complex interactions across the financial system,” she said). In that regard, she added, it will complement the work of the SCC.
“Microprudential and macroprudential objectives are often aligned,” she said. “For example, consistent disclosures are important not only to enable individual financial firms to measure and manage their exposure to climate-related financial risks, but also to support financial stability more broadly by helping the market to accurately price that risk. Given the importance of consistent, comparable, and reliable disclosures to financial stability and prudential objectives, mandatory disclosures are ultimately likely to be important.”
She also said the Fed is investing in new research, data, and modeling tools to support the work of the committees. “In light of the high uncertainty inherent in estimating climate-related shocks, scenario analysis may be a helpful tool to assess the effects on the financial system under a wide range of assumptions,” Brainard said. “Climate scenario analysis identifies climate-related physical and transition risk factors facing financial firms, formulates appropriate stresses of those risk factors under different scenarios, and measures their effects on financial intermediaries and the financial system.”
LINK:
FRB Gov. Lael Brainard: “Financial Stability Implications of Climate Change”