WASHINGTON A bipartisan coalition of lawmakers is pushing the Obama administration to nominate someone with community banking experience to the Federal Reserve Board.
The move comes amidst considerable turnover at the top of the agency. The Senate Banking Committee approved three nominations to the Fed board on Tuesday, but the White House still has one vacancy to fill. Officials also have yet to name a successor for Jeremy Stein, an academic, who announced in April that he will return to Harvard University in late May.
In light of Stein's impending vacancy, several lawmakers are renewing calls that Obama nominate someone with experience in community banking or the supervision of small banks, because the agency plays such a key role in overseeing the industry. The absence has been felt more keenly, observers have said, with the recent departures of Elizabeth Duke and Sarah Bloom Raskin, former Fed governors with small-bank expertise.
"We feel strongly that the President needs to focus on appointing people with community banking experience," Sen. Heidi Heitkamp, D-N.D., told attendees at a Washington policy summit hosted by the Independent Community Bankers of America on Wednesday. "Somehow I have learned that it is best to tell the president this before he makes appointments. So he is forewarned. And he knows that if the next nominee doesn't fit the bill I think he knows that he's in for a rocky road."
Sen. David Vitter, R-La., reiterated that the board should contain at least one member with community banking experience. That was at Tuesday's vote on Stanley Fischer, a former governor of the Bank of Israel, and Lael Brainard, a senior Treasury Department official, to join the Fed, and on the renomination of current Fed Gov. Jerome Powell. All three passed by voice vote and will now advance to consideration by the full Senate. Vitter was the only panel member to request a recorded vote of his opposition.
"Fed membership has dramatically shifted away from community bank experience and toward academic and economist experience, despite their greatly expanded role in bank supervision. Community banks have been getting the short end of the stick in the financial sector and it's only gotten worse since the financial crisis and megabank bailouts. They're literally being squeezed out of existence by Dodd-Frank and 'too big to fail,' " the Louisiana Republican said in a statement Wednesday. "Our entire financial system would benefit from requiring at least one member of the Board of Governors to have either community bank or community bank supervisory experience."
In April both Heitkamp and Vitter, along with Sens. Mark Kirk, R-Ill., and Mary Landrieu, D-La., introduced legislation mandating that at least one Fed governor have community banking or relevant supervision experience.
Lawmakers have also been sending letters to the White House, further urging administration officials on the issue.
"Nominating an individual with community banking or supervisory experience would ensure that future Federal Reserve actions and regulations are tailored and reflect a nuanced understanding of the regulatory and economic environment faced by community banks, and that the role that these institutions play in their communities and in our financial system is not diminished," said one letter from April 10, signed by 16 senators on and off the banking panel.