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    Biden’s Fed Nominees Are Frozen as One Faces Republican Questions

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    Sarah Bloom Raskin, his choice for the Federal Reserve’s head of bank oversight, has faced staunch G.O.P. opposition over her climate views. Yet her private sector work is holding up her nomination.President Biden’s nominee for the top banking cop at the Federal Reserve was expected to face Republican backlash over her views on how finance should guard against climate change and her preference for tough regulation.She has. But it is Sarah Bloom Raskin’s tenure on the board of a financial technology company that has given Republicans a cudgel that they are trying to use to quash her nomination.Senate Republicans are preventing a vote on Ms. Raskin, a former Fed governor and Treasury official during the Obama administration, as they press for answers about whether she used her central bank connections to help the company, Reserve Trust, gain access to a lucrative Fed account in 2018. They have boycotted her nomination, refusing to show up to vote on it until she provides more details.By holding Ms. Raskin’s nomination hostage, Republicans on the Senate Banking Committee are also preventing Mr. Biden’s four other Fed nominees from advancing since Democrats have grouped the officials together. That includes the renomination of Jerome H. Powell, the Fed chair, who testified before lawmakers on Wednesday and was set to return on Thursday.Senator Sherrod Brown, Democrat of Ohio and the head of the committee, plans to try to hold another vote on Ms. Raskin and the other nominees as soon as possible, a spokesperson for the committee said Tuesday.“This is not the moment for political stunts,” Mr. Brown said on the Senate floor this week.Democrats have dismissed the opposition to Ms. Raskin as politically opportunistic and baseless, a crude attempt to tank a candidate whom bank-friendly Republicans dislike for her views on regulation. Senator Patrick J. Toomey, the Pennsylvania Republican who is leading the effort to kill her nomination, opposed Ms. Raskin from the outset because of her climate views.But interviews and nomination filings suggest that Ms. Raskin may not have been entirely forthcoming about what role she played in helping Reserve Trust secure its sought-after Fed account. She may have leveraged her connection to the Fed to try to help the company, whose board she sat on between 2017 and 2019.Ethics experts said that even if she had petitioned on the company’s behalf, that was likely neither illegal nor against ethics rules. But when questioned, Ms. Raskin has repeatedly said she does not remember what happened.Republicans have blasted Ms. Raskin’s lack of responsiveness and highlighted her payout from the firm, suggesting that she may have benefited financially from helping the company, taking part in the revolving door that many Democrats have denounced. She sold her stock for $1.5 million in 2020.The White House continues to support Ms. Raskin. Michael Gwin, an administration spokesman, said she had “earned widespread support in the face of an unprecedented, baseless campaign that seeks to tarnish her distinguished career in public service and her commitment to upholding the highest ethical standards any administration has ever put forward.”But the controversy surrounding her nomination could prove uncomfortable for Democrats, who are trying to prevent regulators from so frequently leaving the government to advise the sort of companies they once policed. “The Republicans do this all the time because they are seen as the party of business,” said Meredith McGehee, a longtime Washington ethics expert. “The vulnerability is that here you have a Democrat who’s in this position that’s in conflict with the rhetoric of the Democratic Party.”The issue centers on a wonky but increasingly important corner of finance.Ms. Raskin started on the board of Reserve Trust, a Colorado-based trust company that now calls itself a financial technology firm, shortly after leaving a top role at the Treasury Department in 2017. From 2010 to 2014, she served as a Fed governor.When she joined the board, the Kansas City Fed had recently rejected the firm’s first application for a so-called master account with the central bank. Such accounts allow firms to tap the Fed’s payment infrastructure, enabling them to carry out services for clients without relying on an external partner. They are hot commodities, and nonbank financial firms often strive but struggle to qualify for them.To qualify for the account, the firm changed its business model and reapplied in 2017.Dennis Gingold, a founder of Reserve Trust who was a longtime acquaintance of Ms. Raskin’s and who has donated to the political campaigns of her husband, Representative Jamie Raskin of Maryland, said in an interview that he had helped to bring Ms. Raskin to the company.Mr. Gingold said Ms. Raskin had called the Fed about the master account at his behest, because he was worried that the central bank was not giving the reapplication a fair consideration. From his Washington office, she phoned Esther George, the Kansas City Fed president. The call lasted two minutes and was “insignificant,” Mr. Gingold said, noting that Ms. Raskin simply “asked that the decision be made on the facts.”Mr. Gingold said he could not remember the date of the call. Mr. Toomey has said staff at the Kansas City Fed told his office that a call between Ms. Raskin and Ms. George happened in August 2017.Mr. Gingold does not know what led the Fed to approve the account, which he said it did in mid-2018, noting that it happened months later and after what he described as an opaque process.No evidence has suggested that Ms. Raskin’s intervention was the decisive factor in the approval, and the Kansas City Fed has issued a statement saying it followed its usual practices in approving the account in 2018.The account does appear to have been lucrative: Reserve Trust still prominently advertises its rare access.When another company took over the firm in 2020, it paid $7.50 per share for it — which was how Ms. Raskin made money from the company. Mr. Gingold said that Ms. Raskin had been given shares from his portfolio, and that he believed she acquired them in January 2018, which would have been after the reported call with Ms. George. She did not receive director’s compensation, as other board members did, he said.Nothing that happened obviously conflicted with ethics rules, experts said. The trouble for Democrats is that many of the details that have emerged either conflict with things Ms. Raskin has said or provide answers to questions that she did not respond to in her filings or confirmation hearing.In Ms. Raskin’s written responses to senators’ questions, she said that she could not recall who had recruited her to Reserve Trust’s board and that to the best of her recollection she had “received shares in Reserve Trust upon joining” the board. She did “not recall any communications I made to help Reserve Trust obtain a master account,” she said.“Based on what is in the public now, I think she complied with the relevant rules,” said Kedric Payne, senior director of ethics at the Campaign Legal Center. “The practical point is: Even if there’s no legal violation, the public wants to know if there is full transparency there.”Seats for Republican senators were empty last week on Capitol Hill during a scheduled vote on Ms. Raskin’s nomination.Sarahbeth Maney/The New York TimesRepublicans have pointed out that Ms. Raskin and her husband have also repeatedly failed to disclose her involvement with Reserve Trust on government filings.Ms. Raskin left her Reserve Trust service off her original questionnaire to the Senate Banking Committee, according to a Republican committee aide, though she did note her sale of Reserve Trust shares in her simultaneously filed financial disclosures to the Office of Government Ethics.Mr. Raskin failed to note the Reserve Trust shares on his financial filings in 2018 and 2019, and disclosed the 2020 share sale eight months late. He has attributed the late 2020 filing to a family tragedy — the Raskins’ son died by suicide on Dec. 31, 2020. The lawmaker’s office, when asked by email, did not explain why the shares were left off the earlier disclosures.If Ms. Raskin leveraged Fed connections, that would not have been unusual: People often profit from prior government positions. But the situation could look bad, as both the Biden administration and Senator Elizabeth Warren, a Massachusetts Democrat and one of Ms. Raskin’s champions on Capitol Hill, try to put a lock — or at least a temporary stopper — on the revolving door between Washington and Wall Street.Ms. Raskin has signed an ethics pledge that Ms. Warren asked all Fed nominees to sign, which would prevent her from working in financial services for four years after she left the Fed if confirmed to her new post.If Ms. Raskin’s nomination does come up for a vote, it “could be an issue,” said Ian Katz at Capital Alpha, a Washington research firm. “If it’s a close call and there are any questions of propriety, sure, it could sway a senator. We just don’t know that yet.” More

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    Senate Republicans Stall Crucial Vote on Fed Nominees

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    President Biden’s plans to reshape the Federal Reserve suffered a setback on Tuesday as Republicans delayed a key vote on his five nominees for its Board of Governors.Republicans did not show up for a committee decision that would have advanced the nominees to the full Senate for a confirmation vote. Because a majority of the Senate Banking Committee’s members need to be physically present for such votes to count, their blockade effectively halted the process.The unusual maneuver, spearheaded by Senator Patrick J. Toomey of Pennsylvania, was driven by Republican opposition to Mr. Biden’s pick for the nation’s top bank cop, Sarah Bloom Raskin.The president has renominated Jerome H. Powell as Fed chair and has tapped Lael Brainard, a current Fed governor, as vice chair. He has also nominated the economists Lisa D. Cook and Philip N. Jefferson as Fed governors. But Ms. Raskin — a longtime Washington policymaker and lawyer whom Mr. Biden has picked as vice chair for bank supervision — has garnered the most pushback.To prevent her nomination from advancing to the full Senate, Republicans held up the vote on all five nominees.Democrats and the White House criticized Republicans for engineering a boycott and scrambled for a solution that could get the nominees to a confirmation vote. Senator Sherrod Brown, Democrat of Ohio and chair of the Banking Committee, on Tuesday shot down the idea that he would separate Ms. Raskin from the other nominees to allow the rest to advance. Ms. Raskin could face tough odds of passing, especially on her own.By nominating five of the Fed’s seven governors and all of its highest-ranking leaders, Mr. Biden had a chance to shake up the institution. While some of his picks — like Mr. Powell — represented continuity, together they would have made up the most racially and gender-diverse Fed leadership team ever.Sarah Binder, a professor of political science at George Washington University who co-wrote a book on the politics of the Fed, said Democrats would need to come up with a strategy to overcome the Republican block or the nominees could get stuck in limbo.“It is really a delay — it might yet scupper Raskin,” she said. She noted that Democrats could break the nominations up or try to garner enough support among the full Senate to override the rules and get the nominees past the committee, though that might be a challenge.“It’s pretty uncharted, and they’re going to have to find a way,” Dr. Binder said.Molly Reynolds, a senior fellow in governance studies at the Brookings Institution, said that outside of trying to change Senate rules — which she called the “nuclear option” — Democrats’ clearest avenue was probably to negotiate with Republicans.“They just need a Republican to show up,” she noted, explaining that the senator would not even need to vote yes for the committee to secure a majority and move the candidates along.Tuesday’s maneuver was the latest step in Mr. Toomey’s opposition campaign against Ms. Raskin, who would serve as arguably the nation’s most important bank regulator if confirmed.Mr. Toomey has criticized Ms. Raskin for past comments on climate-related regulation, worrying that she would be too activist in bank oversight. More recently, he has pressed for more information about her interactions with the Fed while she was on the board of a financial technology company that was pushing for a potentially lucrative central bank account.“Until basic questions have been adequately addressed, I do not think the committee should proceed with a vote on Ms. Raskin,” Mr. Toomey said in the statement.White House officials criticized his move as inappropriate when the Fed is wrestling with rapidly rising prices and preparing to raise interest rates next month.“It’s totally irresponsible, in our view — it’s never been more important to have confirmed leadership at the Fed,” said Jen Psaki, the White House press secretary. She added that the administration’s focus now was moving the nominees through the committee and called Mr. Toomey’s probing of Ms. Raskin’s background “false allegations.”The dispute centers on the revolving door between government regulators and the arcane world of financial technology.Mr. Toomey and his colleagues have said Ms. Raskin, a former Fed and Treasury official, had contacted the Federal Reserve Bank of Kansas City on behalf of Reserve Trust, a financial technology company. Reserve Trust secured a strategically important account at the Fed while she was on its board: To this day, it advertises that it is the only company of its kind with what’s known as a “master” account.Master accounts give companies access to the U.S. payment system infrastructure, allowing firms to move money without working with a bank, among other advantages.Republicans are blocking the process over concerns about one of the nominees, Sarah Bloom Raskin.Pool photo by Ken CedenoMs. Raskin said in written responses to Mr. Toomey’s questions early this month that she did “not recall any communications I made to help Reserve Trust obtain a master account.” But Mr. Toomey said in a subsequent letter that the president of the Kansas City Fed, Esther George, had told his staff that Ms. Raskin called her about the account in 2017.The Kansas City Fed has insisted that it followed its normal protocol in granting Reserve Trust’s master account and noted that talking with a firm’s board members was “routine.” But Mr. Toomey has continued to push for more information.“Important questions about Ms. Raskin’s use of the ‘revolving door’ remain unanswered largely because of her repeated disingenuousness with the committee,” Mr. Toomey said in his statement Tuesday.Democrats have emphasized that Ms. Raskin recently committed to a new set of ethics standards, agreeing not to work for financial services companies for four years after she leaves government — a pledge Ms. Cook and Mr. Jefferson also made, at the urging of Senator Elizabeth Warren, Democrat of Massachusetts.Ms. Brainard agreed to a weaker version of that commitment that would bar her from working at bank holding companies and depository institutions outside of mission-driven exceptions like banks that target underserved communities, a spokesperson for Ms. Warren’s office said Tuesday.Mr. Powell declined to make a similar commitment, the spokesperson said. The Fed chair did signal that he would adhere to the administration’s ethics rules, which ban paid work related to government service for two years upon leaving office.On Tuesday, a dozen Republican chairs in the room where the committee met remained empty while Democrats occupied their seats across the room. Democrats took a vote to show support, though it was not binding, and Mr. Brown pledged to reschedule.“Few things we do as senators will do more to help address our country’s economic concerns more than to confirm this slate of nominees, the most diverse and most qualified slate of Fed nominees ever put forward,” Mr. Brown said, chiding Republicans for skipping the session.“They’re taking away probably the most important tool we have — and that’s the Federal Reserve — to combat inflation,” he later added.The Fed has four current governors, in addition to its 12 regional presidents, five of whom vote on monetary policy at any given time. Mr. Powell has already been serving as chair on an interim basis, since his leadership term officially expired this month. Even if the nominees advance, Ms. Raskin may struggle to pass the full Senate. Winning confirmation would require her to maintain full support from all 50 lawmakers who caucus with Democrats and for all those lawmakers to be present unless she can win Republican votes. Senator Ben Ray Luján, Democrat of New Mexico, has been absent as he recovers from a stroke.“The Republicans are playing hardball because they can,” said Ian Katz, the managing director at Capital Alpha Partners. “At the least, it delays her confirmation. It could have the ultimate effect of killing it.” More

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    Sarah Bloom Raskin Faces a Contentious Senate Hearing

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    Sarah Bloom Raskin is a longtime Washington policy player with progressive credentials and a track record of speaking out against the fossil fuel industry, qualities that helped her to win the White House’s nomination to be America’s top bank cop.But those same views could leave her with a narrow path to confirmation as the Federal Reserve’s vice chair for supervision — especially if Senator Ben Ray Luján, a New Mexico Democrat who is recovering from a stroke, is not present for her vote before the full Senate. (A senior aide to Mr. Luján said he was expected to make a full recovery, and would return in four to six weeks, barring complications.)And Ms. Raskin’s views are almost certain to ignite sparks at her hearing before the Senate Banking Committee on Thursday.Ms. Raskin has been nominated alongside Lisa D. Cook and Philip N. Jefferson, both economists up for seats on the Fed’s Board of Governors. Ms. Raskin, Dr. Cook and Dr. Jefferson will field questions from the Senate Committee on Banking, Housing and Urban Affairs at 8:45 a.m. on Thursday.Ms. Raskin, a former Fed governor and high-ranking Treasury official who was most recently a professor at Duke Law School, is seen as a known entity by the banking industry that she would oversee. But business groups have been critical of her attention to climate issues — including an opinion piece she wrote in 2020 criticizing the Fed’s decision to design one of its emergency loan programs in a way that allowed fossil fuel companies to access emergency loans.“I’m deeply concerned that Sarah Bloom Raskin has — let’s be honest, she has explicitly, publicly advocated that the Fed use its powers to allocate capital,” Senator Patrick J. Toomey of Pennsylvania, the top Republican on the committee, said in an interview on Tuesday. “I think that’s disqualifying, and I think that is going to be a topic of discussion.”Such full-throated opposition from Republicans may mean more than just a heated hearing — Ms. Raskin may need to maintain the support of every Democrat in the Senate to stay on the narrow path to confirmation. If Democrats were to lose their fragile grasp on the Senate majority because Mr. Luján has not returned yet, it is not clear that she would garner the votes she would need to pass.Fed nominees need a simple majority to clear the Senate Banking Committee and then to win confirmation from the Senate as a whole, meaning that it is possible that Ms. Raskin could skate through if all 50 senators who caucus with Democrats vote in her favor, with Vice President Kamala Harris breaking a tie.Vice chair for supervision is arguably the most important job in American financial regulation, and given those high stakes, Ms. Raskin’s chances are being closely watched.“I’m not expecting her to get many, if any, Republican votes,” said Ian Katz, a managing director at Capital Alpha Partners, explaining that he thinks she will ultimately secure enough Democratic support to pass, assuming all the Senators, including Mr. Luján, vote. “You hear different things from the industry: You hear some concerns that she is too progressive, but you also hear that she’s well within the mainstream.”Oil and gas businesses are mounting a campaign against more decisive climate monitoring by the Fed, worried that the central bank will subject banks to stringent oversight that dissuades them from lending money to the industry. This could bring skeptical questioning for all three nominees.“I am concerned about all of the Fed nominees and their apparent willingness, despite what some of them said, to include bank and financial regulations designed to prohibit legal industries from operating in the United States borrowing money,” Senator Jerry Moran of Kansas, a Republican who sits on the committee, said on Wednesday.Mr. Toomey said during an interview on Wednesday that he also had some reservations about Dr. Cook.Lisa D. Cook, a Michigan State University economist well known for her work in trying to improve diversity in economics, will also face questions from the committee on Thursday.Brittany Greeson for The New York TimesMuch of the opposition coming from Republicans and lobbyists alike is aimed at Ms. Raskin, though. She argued in a Project Syndicate column recently that “all U.S. regulators can — and should — be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risk.”But Ms. Raskin struck a gentler tone in her prepared testimony for the hearing, released Wednesday night, noting that the role does not involve excluding certain sectors and asserting that bank supervisors must ensure that “the safety of banks and the resilience of our financial system are never compromised in favor of short-term political agendas or special interest groups.”It is unclear at this point whether those assurances will be enough for her critics.The Chamber of Commerce, in a letter to the Senate committee last week, urged lawmakers to ask Ms. Raskin about her position on whether the Fed’s regulatory approach should try to curb credit access for oil and gas companies. The business group asked whether Ms. Raskin would be independent of politics. After Democratic members of the Federal Deposit Insurance Corporation board clashed with and ultimately precipitated the resignation of the Trump appointee Jelena McWilliams, who was the regulator’s chairwoman, some Republicans have raised concerns that something similar could happen at the Fed. In December, partisan politics helped to scupper the nomination of Saule Omarova, who withdrew herself from consideration to be comptroller of the currency after attacks from Republicans and banking lobbyists, and as she struggled to draw wide enough support from Democrats.By contrast, the banking industry has taken a more benign view of Ms. Raskin. The Financial Services Forum, which represents the chief executive officers of the largest banks, congratulated Ms. Raskin and the other White House Fed picks in a statement after their nominations were announced, as did the American Bankers Association.Ms. Raskin is seen as a qualified candidate who understands the roles various regulators play in overseeing banks, according to one banking industry executive who asked not to be identified discussing regulatory matters. Even though bankers expect Ms. Raskin to be confirmed, they are awaiting more clarity around her stance on climate finance and disclosures, the executive said.As she is received as a mainstream pick, centrist Democrats have sounded content with Ms. Raskin.“I’ve been very impressed with her,” Senator Mark Warner, Democrat of Virginia, said on Tuesday, adding that he had not met her yet but that he was “favorably inclined” and noting that banks have expressed comfort with her.Senator Joe Manchin III from West Virginia, a key centrist Democrat, said on Wednesday that he hadn’t yet studied the nominees, adding that he’s “going to get into that” because he’s “very concerned” about issues including inflation.A Harvard-trained lawyer, Ms. Raskin is a former deputy secretary at the Treasury Department, where she focused on financial system cybersecurity, among other issues. She also spent several years as Maryland’s commissioner of financial regulation. Ms. Raskin is married to Representative Jamie Raskin, a Maryland Democrat.If confirmed, she would be only the second person formally appointed as the Fed’s vice chair for supervision, succeeding Randal K. Quarles, a Trump administration pick who typically favored lighter and more precise regulation. Ms. Raskin, by contrast, has a track record of calling for stricter regulation. Dr. Cook and Dr. Jefferson might both might be quizzed about their views on policy and professional backgrounds. The Fed has seven governors — including its chair, vice chair and vice chair for supervision — who vote on monetary policy alongside five of its 12 regional bank presidents. Governors hold a constant vote on regulation.Philip N. Jefferson, an administrator and economist at Davidson College who has worked as a research economist at the Fed, is also a nominee for the Fed’s board.John Crawford/Davidson CollegeDr. Cook, who would be the first Black woman ever to sit on the Fed’s board, is a Michigan State University economist well known for her work in trying to improve diversity in economics. She earned a doctorate in economics from the University of California, Berkeley, and was an economist on the White House Council of Economic Advisers under President Barack Obama.“High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity,” Dr. Cook said, after emphasizing her decades of experience, calling tackling America’s current burst in prices the Fed’s “most important task.”Dr. Jefferson, who is also Black, is an administrator and economist at Davidson College who has worked as a research economist at the Fed. He has written about the economics of poverty, and his research has delved into whether monetary policy that stokes investment with low interest rates helps or hurts less-educated workers.He seconded that the Fed must “ensure that inflation declines to levels consistent with its goals,” speaking in his prepared testimony.Dr. Cook, Dr. Jefferson, and Ms. Raskin are up for confirmation alongside Jerome H. Powell — who had previously been renominated as Fed chair — and Lael Brainard, a Fed governor who is the Biden administration’s pick for vice chair. Senator Sherrod Brown of Ohio, the committee chairman, said all five candidates will face a key committee vote on Feb. 15, and that Senator Chuck Schumer of New York, the majority leader, “knows to move quickly” for a full floor vote.If all pass, the Fed’s leadership will be the most diverse in both race and gender that it has ever been — fulfilling a pledge of Mr. Biden’s to make the long heavily male and white central bank more representative of the public that it is intended to serve. More

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    Biden Will Nominate Three New Fed Officials

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    The nominees would bring more diverse leadership to the Fed, which has struggled to expand its ranks.President Biden plans to nominate three new Federal Reserve officials as he seeks to remake the central bank at a critical economic moment, a White House official familiar with the matter said on Thursday.If confirmed, his picks would result in the most diverse Fed board in the institution’s history.The White House plans to nominate Lisa Cook, an economist at Michigan State University who has researched racial disparities and labor markets, and Philip Jefferson, an economist and administrator at Davidson College, to open seats on the Fed’s Board of Governors. Both Ms. Cook and Mr. Jefferson are Black.Mr. Biden will also nominate Sarah Bloom Raskin to serve as the Fed’s vice chair for supervision, a job created to help police the nation’s largest banks after the 2008 financial crisis.Mr. Biden had previously nominated Jerome H. Powell for a second stint as Fed chair and Lael Brainard, now a governor, as vice chair of the central bank. If they are confirmed to their posts, the seven-person Fed board would have four women, one Black man and two white men — the most diverse team in the Fed’s roughly 108 years of existence.The administration had promised to make the Fed — historically dominated by white men — look more like the public it served, and prominent lawmakers have pushed for a focus on tougher financial regulation. The picks seek to deliver along those dimensions.“The headline is, and should be, about diversity,” said Kaleb Nygaard, a senior research associate at the Yale Program on Financial Stability who studies the Fed, explaining that personnel choices are a big moment for Mr. Biden. “This is the biggest chance he’s got to send a message about what he wants the Fed to be focused on.”Ms. Raskin, who served as a Fed governor during the Obama administration, has a track record of arguing for more forceful bank oversight and would be likely to usher in an era of stricter rules for the titans of global finance, a priority of some powerful congressional Democrats.If confirmed, Ms. Raskin would be in charge of determining the need for new financial regulations, enacting existing rules and running large and globally important banks through their annual health checks, which are commonly called stress tests.Ms. Raskin would succeed Randal K. Quarles, who was appointed by former President Donald J. Trump and had criticized some of the rules that were imposed on banks after the 2008 financial crisis. As vice chair, Mr. Quarles instituted a number of adjustments to regulation and supervision that made oversight less onerous for banks, and that critics argued weakened financial rules.Mr. Quarles’s term as vice chair expired in October, and he left the Fed at the end of December.Ms. Raskin, a Harvard-trained lawyer who studied economics as an undergraduate at Amherst College, has spent time in the private sector. She is a former deputy secretary at the Treasury Department, where she focused on financial system cybersecurity, among other issues. She also spent several years as Maryland’s commissioner of financial regulation. Ms. Raskin is married to Representative Jamie Raskin, a Maryland Democrat.If confirmed, Ms. Raskin will face a number of pressing issues. The vice chair for supervision serves as the Fed’s chief connection with banks and markets, a role that will take on more prominence as the central bank considers whether to issue a digital currency. The vice chair will have to navigate new technologies, like stablecoins and cryptocurrencies, and assess what those mean for banks.The Fed is developing climate-risk scenarios to judge banks’ exposure, something the vice chair for supervision will be highly involved in. And the person will need to work with other regulators at the Financial Stability Oversight Council — an interagency group focused on guarding against systemic financial risks — to deal with weaknesses in money market funds and other financial instruments that the pandemic laid bare.Mr. Biden’s other picks for the Fed would also enter their jobs at a challenging juncture, as unemployment falls swiftly and inflation remains high, but millions of former workers are still missing from jobs.The Fed is contemplating how quickly to react by removing support from the economy, and all governors hold a constant vote on monetary policy, giving the new picks a potential say in the matter.Dr. Cook — who would be the first Black woman ever to sit on the Fed’s board — is well known for her work in trying to improve diversity in economics, including through the American Economic Association Summer Program, which helps to prepare undergraduates for potential careers in the field.She attended Spelman College and the University of Oxford and earned a doctorate in economics from the University of California, Berkeley. She was an economist on the White House Council of Economic Advisers under President Barack Obama.She has not said much publicly about her monetary policy philosophy, though she has spoken favorably about keeping the Fed independent from politics. Her published work examines a wide range of topics: her doctoral thesis focused on credit markets in tsarist and post-Soviet Russia, while some of the work she is most famous for looked into mortality and race, and segregation and lynching.Dr. Cook is an academic focused on macroeconomics, but “she is not a traditional one — she has looked at what we get wrong, sometimes, in the economy,” Julia Coronado, founder of the research firm MacroPolicy Perspectives, said in an interview before the pick was announced. “She is somebody who can hold her own, I think, in that room.”Mr. Jefferson has worked as a research economist at the Fed board, and studied at the University of Virginia and Vassar College. He has written about the economics of poverty, and his research has delved into whether monetary policy that stokes investment with low interest rates helps or hurts less-educated workers.“My findings suggest that opportunities start to open up for them as the labor market gets tight,” he said in an interview with the Minneapolis Fed in 2018.He has also spoken candidly about his experience as a minority in economics.“In graduate school at the University of Virginia, I was the only African American in the program the entire time there,” he said in that 2018 interview, noting that that had followed him into his professional appointments. “It has been a long, lonely road professionally.”And he said economics needed more diverse voices.“We need to be sitting around the table,” he said. “I think it is crucially important for public policy that we hear voices that represent diversity.”With the new slate of candidates, what is arguably the top policymaking body in global economics will become much more varied in both race and gender.There were briefly three women on the board in the early 1990s, and again in the 2010s. The Fed has had three Black board members in its history, all men, and none of them sat on the board contemporaneously.It is unclear how the reworked board might alter debate over current monetary policy, which could involve sticky choices about how quickly to slow an economy struggling with rapid price increases. The Fed has signaled it is prepared to raise interest rates, which could choke off inflation but also slow the job market and wage growth.Mr. Powell, the Fed chair, emphasized this week that achieving full employment — a goal that the Fed has emphasized in recent years as a way to foster inclusion and opportunity across the economy — depended on maintaining price stability.“If inflation does become too persistent, if these high levels of inflation get entrenched in our economy, and in people’s thinking, then inevitably that will lead to much tighter monetary policy from us, and it could lead to a recession, and that would be bad for workers,” Mr. Powell said while testifying before lawmakers on Tuesday. More

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    Spike in Inflation Reignites Debate on Price Controls

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    A discussion over whether price controls would work to stem inflation is sweeping progressives. So far, it has little political acceptance.America’s recent inflation spike has prompted renewed interest in an idea that many economists and policy experts thought they had long ago left behind for good: price controls.The federal government last imposed broad-based limits on how much private companies could charge for their goods and services in the 1970s, when President Richard M. Nixon ushered in wage and price freezes over the course of a few years. That experiment was widely regarded as a failure, and ever since, the phrase “price controls” has, at least for many people, called to mind images of product shortages and bureaucratic overreach. In recent decades, few economists have bothered to study the idea at all.As consumer prices soared this fall, however, a handful of mostly left-leaning economists reignited the long-dormant debate, arguing in opinion columns, policy briefs and social-media posts that the idea deserves a second look. Few if any are arguing for a return to the Nixon-era policies. Many say they aren’t yet ready to endorse price controls, and just want the idea to be taken seriously.Even so, the renewed discussion brought a swift reaction from many mainstream economists on both the right and left, some of whom suggested it would be a mistake to even open the door to the idea. So far, decision makers in Washington haven’t embraced price caps, even in a more modest form.Here’s what to know about the push for price controls, the history of the idea and the possible outcomes if they were to be tried in 2022.Why do (most) economists dislike price controls?In the most basic economic models, prices are a function of supply and demand. If prices for a product are too high, people won’t buy as much of it. If prices are too low, companies won’t make as much money, and will make less of the product. In a free market, prices naturally settle at the point that balances out those two forces.In that model, when the government imposes an artificial cap on prices, supply falls (since companies won’t make as much money) and demand rises (since more people will want to buy at the government-imposed lower price). As a result, supply can’t meet demand, resulting in shortages.That’s the theory. In the real world, a variety of factors — imperfect competition between producers, unpredictable behavior by consumers, practical limits on how quickly operations can ramp up and down — mean that prices don’t always behave the way simple models predict.Still, most economists argue that the basic logic of that theory still holds: Artificially holding down prices leads to shortages, inefficiencies or other unintended consequences, like an increase in black-market activity. And while some economists say price controls on specific products can make sense in specific situations — to prevent price-gouging after a natural disaster, for example — most argue that they are a poor tool for fighting inflation, which is a broad increase in prices.In a recent survey of 41 academic economists conducted by the University of Chicago’s Booth School of Business, 61 percent said that price controls similar to those imposed in the 1970s would fail to “successfully reduce U.S. inflation over the next 12 months.” Others said the policy might bring down inflation in the short-term but would lead to shortages or other problems.“Price controls can of course control prices — but they’re a terrible idea!” David Autor, an economist at the Massachusetts Institute of Technology, wrote in response to the survey.Have price controls worked in the past?In August 1971, with consumer prices rising at their fastest pace since the Korean War, Mr. Nixon announced that he was imposing a 90-day freeze on most wages, prices and rents. Once the freeze ended, companies were allowed to raise prices, but subject to limits set by a council headed by Donald H. Rumsfeld, who later served as defense secretary for Presidents Gerald R. Ford and George W. Bush.The controls initially looked like a success. Inflation fell from a peak of more than 6 percent in 1970 to below 3 percent in the middle of 1972. But almost as soon as the government began to ease the restrictions, prices shot back up, leading Mr. Nixon to impose another price freeze, followed by another round of even more stringent controls. This time, the controls failed to tame inflation, in part because of the first Arab oil embargo. The price controls expired in 1974, shortly before Mr. Nixon resigned from office.Not all attempts at reining in prices have been such clear failures. During World War II, the Roosevelt administration imposed strict price controls to prevent wartime shortages from making food and other basic supplies unaffordable. Those rules were generally viewed as necessary at the time, and economists have tended to view them more favorably. In fact, there have been plenty of instances of wartime price controls throughout history, often paired with rationing and wage growth limits.Why do some economists want to reopen the debate?Few economists today defend the Nixon price controls. But some argue that it is unfair to consider their failure a definitive rebuttal of all price caps. The 1970s were a period of significant economic turmoil, including the Arab oil embargo and the end of the gold standard — hardly the setting for a controlled experiment. And the Nixon-era price caps were broad, whereas modern proponents suggest a more tailored approached.Many progressive economists in recent years have reconsidered once-scorned ideas like the minimum wage in response to evidence suggesting that real-world markets often don’t behave the way simple economic models would predict. Price controls, some economists argue, are due for a similar reappraisal.“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”Isabella Weber, an economist at the University of Massachusetts Amherst, has pointed to the period after World War II, when the government quickly lifted wartime price controls and inflation spiked. In a recent opinion column in the Guardian newspaper, Dr. Weber argued that had the controls been removed more slowly, as many prominent economists suggested at the time, inflation might have been lower. The huge, unexpected wartime disruption, she said, might offer parallels for today.But other experts said there were key differences between the two periods. Wartime price caps typically came alongside rationing, in which the quantity of goods people were allowed to buy was limited, said Rebecca L. Spang, a money historian at Indiana University.“If you try to have price controls without rationing, you end up with shortages, you end up with purveyors pulling their goods from the market,” she said.Enforcing price controls is also difficult: It requires popular acceptance, agency personnel and wide governmental support. Broad buy-in of shared ideas is not a feature of the modern political landscape.“The cultural context has changed so much,” she said, noting that the world since World War II has begun to treat economics as an individual pursuit, emphasizing freedom and low regulation.What would price controls look like in 2022?Shoppers at a grocery store in Queens, N.Y., last year. As consumer prices soared this past fall, a handful of mostly left-leaning economists argued that price controls deserved a second look.Janice Chung for The New York TimesSo far, few people have offered specific proposals for price controls in response to the recent jump in inflation. But economists who are exploring the idea are focused on areas where the pandemic has disrupted supply chains.Those disruptions, this argument goes, may take time to resolve. In the meantime, if needed products — meat, computer chips, gas — come up short, it is not clear that market forces will be able to rapidly expand production to meet demand. That could lead to a situation where companies can make big profits by charging more for goods in short supply, and in which only the rich can afford some products.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Climate Change an ‘Emerging Threat’ to U.S. Financial Stability, Regulators Say

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    The Financial Stability Oversight Council issued a formal warning on the economic damage that global warming could inflict.WASHINGTON — Federal regulators warned for the first time in an annual report to Congress on Friday that climate change was an “emerging threat” to the U.S. financial system, laying out how the costs associated with more hurricanes, wildfires and floods caused by global warming could lead to a cascade of damage throughout the economy.The Financial Stability Oversight Council, a group of top financial regulators led by the Treasury secretary, offered a grim assessment of how the fallout from rising temperatures could spread, hurting property values and saddling insurers, banks and pensions that are associated with the sector with heavy losses. The report follows a similar analysis of climate risk that the council released in October.“Increased frequency and severity of acute physical risk events and longer-term chronic phenomena associated with climate change are expected to lead to increased economic and financial costs,” the new document said.However, the report stopped short of the kinds of policy prescriptions that environmental groups and progressive Democrats have been calling for, such as tougher rules requiring banks to assess their ability to withstand climate-related losses, new capital requirements or curbs on extending financing to fossil fuel companies. Instead, it echoed a set of recommendations from the October report that called for improved data for evaluating climate-related financial risks and more uniform disclosure requirements to help investors make better informed decisions.Climate change was not mentioned last year in the Trump administration’s final F.S.O.C. report.The warning on climate change was one of several looming threats to the financial system, which faces ongoing uncertainty nearly two years into a global pandemic that is being gripped by a new variant.What to Know About Inflation in the U.S.Inflation, Explained: What is inflation, why is it up and whom does it hurt? We answered some common questions.The Fed’s Pivot: Jerome Powell’s abrupt change of course moved the central bank into inflation-fighting mode.Fastest Inflation in Decades: The Consumer Price Index rose 6.8 percent in November from a year earlier, its sharpest increase since 1982.Why Washington Is Worried: Policymakers are acknowledging that price increases have been proving more persistent than expected.The Psychology of Inflation: Americans are flush with cash and jobs, but they also think the economy is awful.In its annual report, the panel also issued a warning about the risk of higher than expected inflation, suggesting that it would lead to higher interest rates and losses at some financial institutions, blunting the momentum of the recovery.The report comes as the Federal Reserve said this week that it would accelerate the end of its monthly bond buying program, which it has used to buttress economic growth during the pandemic, and raise interest rates three times next year to combat inflation.The F.S.O.C. regulators attributed inflation in advanced economies to “an increase in commodity prices, supply chain disruptions, and labor shortages.” They warned that a rapid or unexpected rise in interest rates to blunt rising prices could induce “sharp contractionary forces” and acknowledged that it was unclear how long inflation would persist.“The advent of higher inflation also raises the question of whether longer-term inflation expectations of households and businesses will rise or become unanchored,” the report said.The trajectory of the global economy is also a concern, as lockdowns and downturns in other countries could spill over into the U.S. financial system. Regulators pointed specifically to the prospect of a “hard landing” in China as a potential worry and noted that the Chinese real estate sector is “heavily leveraged.” A slowdown in the real estate market there could hurt global commodity markets because China is such a major consumer of steel, copper and iron ore.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Gig Worker Protections Get a Push in European Proposal

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    A proposal with widespread political support would entitle drivers and couriers for companies like Uber to a minimum wage and legal protections.LONDON — In one of the biggest challenges yet to the labor practices at popular ride-hailing and food-delivery services, the European Commission took a major step on Thursday toward requiring companies like Uber to consider their drivers and couriers as employees entitled to a minimum wage and legal protections.The commission proposed rules that, if enacted, would affect up to an estimated 4.1 million people and give the European Union some of the world’s strictest rules for the so-called gig economy. The policy would remake the relationship that ride services, food delivery companies and other platforms have with workers in the 27-nation bloc.Labor unions and other supporters hailed the proposal, which has strong political support, as a breakthrough in the global effort to change the business practices of companies that they say depend on exploiting workers with low pay and weak labor protections.Uber and other companies are expected to lobby against the rules, which must go through several legislative steps before becoming law. The companies have long classified workers as independent contractors to hold down costs and limit legal liabilities. The model provided new conveniences for traveling across town and ordering takeout, and gave millions of people a flexible new way to work when they want.A courier in Paris last year, when lockdown measures highlighted the fragile nature of gig work.Dmitry Kostyukov for The New York TimesBut in Europe, where worker protection laws are traditionally more robust than in the United States, there has been growing momentum for change, particularly as the pandemic highlighted the fragile nature of gig work when food couriers and others continued to work even amid lockdowns and rising Covid-19 cases.While there have been some important legal victories and laws passed in some countries targeting Uber and others, the policy released by the European Commission, the executive branch of the European Union, is the most far-reaching legislative attempt to regulate companies to date.The rules would affect drivers, couriers, home cleaners, home health care aides, fitness coaches and others who use apps and online platforms to find work. As employees, they would be entitled to a minimum wage, holiday pay, unemployment and health benefits, and other legal protections depending on the country where they worked.“New forms of work organization do not automatically translate into quality jobs,” Valdis Dombrovskis, the bloc’s commissioner for trade, said as he presented the new rules. “People involved in platform work can sometimes find themselves exposed to unsafe living and working conditions.” The European Union estimates that 28 million people work through digital labor platforms in the bloc, with their number expected to grow to 43 million by 2025. The commission said on Thursday that 5.5 million workers were at risk of what it called misclassification, and that up to 4.1 million of them could be reclassified as employees through the directive.“This is not just bike riders in big cities,” said Johanna Wenckebach, a lawyer and scientific director at the Hugo Sinzheimer Institute for Labor and Social Security Law in Germany. “This is a phenomenon with millions of workers and many more ahead.”The rules are part of a broader digital agenda that European Union leaders hope to pass in the coming year. Proposals include tougher antitrust regulations targeting the largest tech companies, stricter content moderation rules for Facebook and other internet services to combat illicit material, and new regulations for the use of artificial intelligence.The new labor rules follow a landmark case in February, when Britain’s top court ruled that Uber drivers should be classified as workers entitled to a minimum wage and holiday pay. In the Netherlands, a court ruled in September that Uber drivers should be paid under collective rules in place for taxi drivers.Dutch Uber drivers calling for expanded workers’ rights outside a court in June that would later rule in their favor.Koen Van Weel/EPA, via ShutterstockSupporters of the new worker regulations said companies like Uber behave like employers by controlling workers through software that sets wages, assigns jobs and measures performance — a practice the commission called “algorithmic management.”The new European rules would require companies to disclose more about how their software systems made decisions affecting workers. For those who may remain independent, the new rules would also require companies to grant more autonomy that self-employment entails.The policy threatens the business models of Uber and other platforms, like the food delivery service Deliveroo, that already struggle to turn a profit. The E.U. law could result in billions of dollars in new costs, which are likely to be passed on to customers, potentially reducing use of the apps.Uber opposes the E.U. proposal, saying it would result in higher costs for customers. The company said roughly 250,000 couriers and 135,000 drivers across Europe would lose work under the proposal.Rather than help workers, Uber said the proposal “would have the opposite effect — putting thousands of jobs at risk, crippling small businesses in the wake of the pandemic and damaging vital services that consumers across Europe rely on.”Just Eat, the largest food-delivery service in Europe, said it supported the policy. Jitse Groen, the company’s chief executive, said on Twitter that it would “improve conditions for workers and help them access social protections.”The E.U. rules are being closely watched as a potential model for other governments around the world. Negotiations could last through 2022 or longer as policymakers negotiate a compromise among different European countries and members of the European Parliament who disagree about how aggressive the regulations should be. The law is unlikely to take effect until 2024 or later.Enforcement would be left to the countries where the companies operated. The policy contrasts Europe with the United States, where efforts to regulate app-based ride and delivery services have not gained as much momentum except in a few states and cities.A protest in Bakersfield, Calif., against Proposition 22, a 2020 state ballot question backed by gig economy companies.Tag Christof for The New York TimesLast year, gig economy companies staged a successful referendum campaign in California to keep drivers classified as independent contractors while giving them limited benefits. Although a judge ruled in August that the result violated California’s Constitution, his decision is being appealed, and the companies are pursuing similar legislation in Massachusetts.The Biden administration has suggested that gig workers should be treated as employees, but it has not taken significant steps to change employment laws. In May, the Labor Department reversed a Trump-era rule that would have made it more difficult to reclassify gig workers in the country as employees.In Europe, Spain offers a preview of the potential effects of the E.U. proposal. The country’s so-called Riders Law, enacted in August, required food delivery services such as Uber and Deliveroo to reclassify workers as employees, covering an estimated 30,000 workers.Uber responded by hiring several staffing agencies to hire a fleet of drivers for Uber Eats, a strategy to comply with the law but avoid responsibility for managing thousands of people directly. Deliveroo, which is partly owned by Amazon, abandoned the Spanish market.The companies prefer policies like those in France, where the government has proposed allowing workers to elect union representation that could negotiate with companies on issues like wages and benefits. Uber also pointed to Italy, where a major union and food delivery companies struck a deal that guarantees a minimum wage, insurance and safety equipment, but does not classify the workers as employees.Kim van Sparrentak, a Green lawmaker in the European Parliament who helped draft a report on platform workers that was published this year, praised the commission’s proposal as “quite radical.”“It can set a new standard for workers’ rights,” Ms. Van Sparrentak said.Adam Satariano More

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    Fed Warns Meme Stocks Could Pose Some Risks

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    Stocks that experience major volatility as a result of social media attention — often called meme stocks — have not threatened broader financial stability so far but could open the door to vulnerabilities, the Federal Reserve said in a report on Monday.The Fed’s twice-yearly update on America’s financial system included a special section on the meme stock phenomenon. It attributed the trend, in which attention on Twitter, Reddit and other platforms encourages rapid inflows into or out of buzzy stocks, to new trading technologies including mobile apps and to changing demographics, as younger people enter the retail trading market.“Along with the rise in risk appetite and the growing share of younger retail investors, access to retail equity trading opportunities has expanded over the past decade,” the report said.Social media can pump up interest in stocks, and it can also create an echo chamber, one in which “investors find themselves communicating most frequently with others with similar interests and views, thereby reinforcing their views, even if these views are speculative or biased.”Still, internet-inspired pile-ons do not necessarily create conditions that will spur a broad market crash, the Fed’s report suggested.“To date, the broad financial stability implications of changes in retail equity investor characteristics and behaviors have been limited,” the Fed said. The central bank specifically assessed what happened to shares of AMC Entertainment and GameStop in January, noting that activity and volatility in those stocks came alongside high activity on Twitter.While the report concluded that “recent episodes of meme stock volatility did not leave a lasting imprint on broader markets,” the Fed said a few trends “should be monitored.”The report pointed out that young and debt-laden investors may be more vulnerable to stock price swings, especially since they are now using “options,” which allow traders to place bets on whether prices will rise or fall and which can magnify leverage and potential losses.The Fed also warned that “episodes of heightened risk appetite may continue to evolve with the interaction between social media and retail investors and may be difficult to predict,” and that financial firms may not have calibrated their risk-management systems to reflect the volatility and losses that meme stock episodes might trigger.“More frequent episodes of higher volatility may require further steps to ensure the resilience of the financial system,” it said.Looking across a broader range of asset classes and recent trading activity, the Fed’s financial stability analysis generally suggested that the vulnerabilities have moderated compared with earlier in the pandemic — but it did flag high asset prices and a number of lingering risks.Stock prices have increased “notably,” the report said, and prices relative to forecast earnings remain near historical highs. Home prices have climbed, it noted, though mortgage lending standards have not deteriorated too badly. When lenders start to lower their standards, that can make the market more vulnerable.The Fed noted that “corporate bond issuance remained robust, supported by low interest rates,” also pointing out that “across the ratings spectrum, the composition of newly issued corporate bonds has become riskier.”And while many markets show signs of investor optimism, some financial strains from the pandemic shock persist.Some commercial real estate sectors continue to face challenges because “office vacancies are elevated and hotel occupancy rates remain depressed,” the report noted. Plus, “structural vulnerabilities persist in some types of money market funds,” which could amplify a future shock to the system.Money market mutual funds melted down during the pandemic and required a Fed rescue for the second time in a dozen years, and regulators are now looking at how to make them more resilient.The report also warned that life insurers might struggle to raise cash in a pinch.And it delved into climate risks. The central bank is among regulators now trying to understand what risks climate change might pose to banks, insurers and the broader financial system.“The Federal Reserve is developing a program of climate-related scenario analysis,” the report noted. “The Federal Reserve considers an effective scenario analysis program, which is designed to be forward looking over a period of years or decades, to be separate from its existing regulatory stress-testing regime.” More