JPMorgan Loss Helps Senate Confirm Stein, Powell to Fed Board
As consumer panel questions Obama administration's choices for FDIC, Fed and other agencies, Sen. Richard Shelby says nominees will be chosen "on their merits."March 20
WASHINGTON — The $2 billion trading loss at JPMorgan Chase & Co. helped Democrats successfully confirm two nominees to the Federal Reserve's Board of Governors on Thursday, ending a six-year stretch where the board operated at less than full capacity.
Jeremy Stein and Jerome Powell, one a Democrat and the other a Republican, had seen their nominations delayed for months after a few GOP lawmakers argued they would be too supportive of Chairman Ben Bernanke's economic policies.
But Senate Majority Leader Harry Reid used last week's news from JPMorgan to pressure Republicans to act and secure the 60 votes necessary to overcome a hold. The Senate ultimately voted to approve Stein, a Democrat who teaches economics at Harvard University, by a 70 to 24 vote, while it approved Powell, a Republican who served as Treasury undersecretary for finance under President George H.W. Bush, by a 74 to 21 margin.
The confirmations will give the Fed board a full 7-member complement for the first time since April 2006.
Both nominees were overwhelmingly approved by the Senate's Democrats, while the Republican caucus was fairly evenly split on both votes.
The votes were hailed by Senate Banking Committee Chairman Tim Johnson, who said in a written statement: "By coming together to confirm these two well-qualified individuals, we have ensured the nation has a Federal Reserve Board operating at full strength, with strong leaders working to solidify our economic recovery and help prevent another financial crisis."
Industry officials had reportedly been pushing behind the scenes to allow votes on the Fed nominees. On Thursday, Frank Keating, president of the American Bankers Association, applauded the Senate's approval of Stein and Powell.
"Their strong backgrounds and extensive experience will prove invaluable as they work on our nation's banking, economic and financial issues," Keating said in a written statement.
Brian Gardner, a policy analyst at Keefe, Bruyette & Woods Inc., said that he does not expect the two new board members to have a major impact on the Fed's monetary policy views or regulatory activities.
Regulatory policy at the Fed is mostly managed by Gov. Daniel Tarullo, Gardner said, a situation unlikely to change with the addition of Stein and Powell.
President Obama made the two nominations more than four months ago, after Republicans blocked the nomination of M.I.T. economist Peter Diamond to fill one vacancy on the board.
At a time of partisan gridlock in Congress, the confirmation votes gave Republicans and Democrats a rare opportunity to pat each other on the back for working together in a cooperative way.
GOP Sen. Lamar Alexander said in a speech on the Senate floor that the president is to be commended for nominating a Republican, and conservative GOP senators deserve credit for declining to mount a filibuster in light of their opposition to the Fed's actions since 2008.
"In these votes, the Senate will be acting in the way that it should," Alexander said.
But not every Republican senator was willing to give ground. The nominees were temporarily held up by Republican Sen. David Vitter of Louisiana, who voted Thursday against both nominees.
In a speech on the Senate floor, Vitter argued that Bernanke's monetary policy is dangerously accommodative, and that he believes Powell and Stein will support it.
Vitter also argued that a seven-member board will result in a move leftward in the Fed's approach to implementing regulations under the Dodd-Frank Act.
"Those Dodd-Frank regulations coming out of the Fed need five affirmative votes," he said. "Right now there are five members of the Board of Governors. So they need to reach complete unanimity with regard to those regulations."
"When the negative impact, possible impact of those regulations is such a threat, I think that required unanimity is actually very healthy and a real protection," Vitter continued.
"These two new members of the Fed changed the map, changed the requirement from needing five out of five to needing five out of seven. I think that will significantly push these regulations to the left, if you will."
Powell, who is currently a visiting scholar at the Bipartisan Policy Center, has experience as a lawyer and investment banker on Wall Street.
Stein, who has focused as an economist both on monetary policy and financial regulation, currently serves as a member of the New York Fed's financial advisory roundtable.
The five other members of the Board of Governors are Bernanke, Vice Chair Janet Yellen, Daniel Tarullo, Elizabeth Duke and Sarah Bloom Raskin.