(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.
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(Nov. 12, 2021) There will soon be two open seats on the Federal Reserve Board – and maybe three as early as January – because of the announced resignation of the former vice chair for supervision on the board, in what could be some big changes ahead for the central bank’s leadership.
Randal K. Quarles – the first and so far only vice chair of the Federal Reserve Board for supervision – announced his retirement from the agency board Monday, effective in late December. In a letter to President Joe Biden (D), Quarles said after four years as a member of the central bank’s board, and end of his term last month as vice chair of supervision, it was time for him to leave.
“It has been a great privilege to work with my colleagues on the Board, throughout the Federal Reserve System, and among the global central banking and regulatory committee,” Quarles wrote.
Quarles’ resignation will leave two open seats on the Fed Board; no successor has yet been named to him as top supervisor for the agency and the White House has made no nominations to fill the soon-to-be two open board seats.
There could be a third opening on the board within two months: the term of Fed Vice Chair Richard Clarida expires in January (and, likewise, the White House has been mum on a replacement).
And, there remains the question of who will lead the central bank board for the lion’s share of 2022 and beyond: the term of Jerome H. (“Jay”) Powell as chair of the board expires in February. He may continue to serve on the board after that, since his term as a governor runs until January 2028.
Quarles’ four-year term as vice chair for supervision ended last month. He now serves as chairman of the international Financial Stability Board (FSB), which works to coordinate financial stability regulatory programs across the globe. However, the term for that office ends at year’s end.
A former banker, Wall Street lawyer and Treasury Department official, the 64-year-old Quarles was nominated to the position by President Donald Trump (R) in September, 2017; he joined the board in October. His current term was to run until 2032.
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(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
(April 30, 2021) A two-page fact sheet that lays out what’s behind the demise of the London Interbank Offer Rate (LIBOR), a widely used rate used for such lending products as adjustable rate mortgages, has been published by the New York Fed’s Alternative Rate Reference Committee (ARRC). The fact sheet explains (among other things) LIBOR, the problems it poses, why it is being replaced at the start of next year, and the Fed’s favored replacement for the rate, the Secured Overnight Financing Rate (SOFR). A “part II” of the sheet, available separately (and linked to the first fact sheet) outlines how SOFR will work … Readings on inflation are likely to rise more in the coming weeks before moderating,Federal Reserve Chair Jerome H. (“Jay”) Powell said this week, adding that, ultimately, there will only be a “transitory” effect on inflation. Powell said the rise in inflation indicators will be partially due to supply bottlenecks from a rebound in spending as the economy continues to reopen. Those indicators likely will also be driven by emerging reports of a strengthening economy: Real GDP increased at a seasonally adjusted annual rate of 6.4% during the first quarter of 2021, the federal Bureau of Economic Analysis said this week. In the fourth quarter of last year, real GDP increased 4.3%.
LINK:
Background on USD LIBOR