US President Barack Obama is expected to announce this week his choice of Federal Reserve Bank of San Francisco President Janet Yellen as vice-chairman of the Fed Board of Governors, according to congressional sources.
President Barack Obama will also announce the names of Sarah Bloom Raskin, Maryland’s Commissioner of Financial Regulation, and Peter Diamond, an economics professor at the Massachusetts Institute of Technology, for the two remaining open seats on the central bank’s seven-person board, reports Bloomberg.
The trio would lend support to Fed Chairman Ben S. Bernanke as he keeps interest rates low to ensure a sustained recovery and prepares for a potentially reduced role in bank supervision. Janet Yellen would replace Donald Kohn, who said in March he would step down June 23 after a 40-year Fed career.
“This will be a group of doves slanted toward job creation and growth, increasing the likelihood of rates staying low for a long time,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
If confirmed by the Senate, the three would give the Fed a full seven-member complement of governors for the first time since April 2006. President George W. Bush tried to fill the slots with three nominees in 2007: Elizabeth Duke was approved in 2008, while Larry Klane and Randall Kroszner were blocked by Senate Democrats. Obama appointed Fed Governor Daniel Tarullo in January 2009.
“The new nominees, particularly Yellen and Diamond, are widely respected centrists who will help the chairman ensure that reason prevails in FOMC decisions,” said New York University economist Mark Gertler, who co-wrote research with Bernanke. Yellen, 63, would gain a more prominent role in Fed policy. The move would give her a permanent vote on monetary policy, instead of having a vote one year out of every three as a regional Fed chief. All governors have a vote on rate decisions.
In an April 15 speech, Yellen said she’s increasingly certain the US economy is “on the right track” and that officials will “at some point” need to lift borrowing costs. Still, “it’s important not to lose sight of just how fragile this recovery is,” she said.
Yellen spent most of her career teaching economics and researching labor markets, joining the University of California at Berkeley in 1980. She and her husband, George Akerlof, a Nobel Prize-winning economist, have written more than a dozen papers that included studies on unemployment, wages, street gangs and out-of-wedlock births.
In 1994, then-President Bill Clinton appointed Yellen to be a Fed governor in Washington, serving until 1997, when he moved her to the White House to chair the Council of Economic Advisers. She left the position in 1999 to return to Berkeley. Yellen rejoined the Fed in 2004 as president of its San Francisco district bank, which represents the largest region by area and economic output. She has always voted with the majority of policy makers on interest-rate decisions.
Raskin, a 49-year-old attorney, was appointed in August 2007 as Maryland’s top banking regulator. She was previously managing director of Promontory Financial Group, a consulting firm, and worked at the New York Fed and as a counsel for the Senate Banking Committee. She graduated from Harvard Law School in 1986. Her husband, Jamie Raskin, is a law professor and a Democratic Maryland state senator.
Senate lawmakers are preparing to debate an overhaul of financial legislation that currently includes provisions to strip the Fed of oversight of about 5,000 banks across the U.S. and focus its role on supervising about 36 large firms with assets of more than 50 billion. Tarullo is leading an internal revamping of Fed supervision.
Diamond, a specialist in taxation and behavioral economics has written widely on overhauling entitlement programs. His 2003 book “Saving Social Security” was co-written with Peter Orszag, director of the Office of Management and Budget. He joined MIT’s faculty in 1966.