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Biden picks for jobs at the Fed face questions on climate, inflation

President Joe Biden’s picks for remaining vacancies at the Federal Reserve faced heated questions from Congress on climate change and the policy response to inflation.

The Senate Banking Committee on Thursday held confirmation hearings for Lisa Cook and Philip Jefferson for Fed governor roles, as well as former Fed governor Sarah Bloom Raskin for the Fed vice chair for supervision job.

Raskin, whose confirmation would make her one of the most powerful bank regulators in Washington, may want to increase scrutiny on the financial risks associated with climate change and the transition away from traditional fossil fuels.

Her writings from 2020 expressed concern over the availability of the Fed’s pandemic-era emergency lending programs to oil, gas, and coal companies.

Immediately out of the gate, Republicans framed Raskin’s thoughts as radical.

“Unelected officials like Ms. Raskin want to misuse bank regulation to impose environmental policies that Congress has refused to enact,” alleged Pennsylvania Sen. Pat Toomey, the top ranking Republican on the Senate Banking Committee.

Raskin clarified in her testimony that the Fed job she’s nominated for does not involve directing banks to bias their lending against any specific sectors.

“It is inappropriate for the Fed to make credit decisions and allocations based on choosing winners and losers. Banks choose their borrowers,” Raskin said, acknowledging “there’s been a lot of speculation” about her prospective approach to regulation.

The Fed, absent Raskin, has already signaled an intention to assess the broad risks to the financial system posed by extreme weather events and a transition to cleaner energy. Fed Chairman Jerome Powell has insisted that the Fed does not intend to discourage lending to the fossil fuel industry.

Threat of inflation

On the remaining two nominees, Toomey voiced approval for Davidson College Professor Philip Jefferson. But he expressed concern over Michigan State Professor Lisa Cook’s nomination, accusing her of not taking the threat of high inflationary pressures seriously.

Dr. Philip Nathan Jefferson, of North Carolina, nominated to be a Member of the Board of Governors of the Federal Reserve System, answers a question to U.S. Senator Raphael Warnock (D-GA), during a Senate Banking, Housing and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington, D.C., U.S., February 3, 2022. REUTERS/Ken Cedeno/Pool
Dr. Philip Nathan Jefferson, of North Carolina, nominated to be a Member of the Board of Governors of the Federal Reserve System, answers a question to U.S. Senator Raphael Warnock (D-GA), during a Senate Banking, Housing and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington, D.C., U.S., February 3, 2022. REUTERS/Ken Cedeno/Pool

The Fed is currently in the process of pulling its extraordinary pandemic-era monetary stimulus as the rapid pace of price increases bleed through many sectors of the economy.

Recent government data showed prices in the United States rising by 5.8% in December, the fastest pace of year-over-year growth seen in the Personal Consumption Expenditures Index since 1982.

Cook responded that she would want to look at the data before committing to any Fed actions, which could include higher interest rates (the Fed’s primary tool for curbing demand, and thus, inflation).

But Cook, who would be the first Black woman to ever serve as a Fed governor if confirmed, emphasized her commitment to addressing any inflation that harms American purchasing power.

Dr. Lisa DeNell Cook, of Michigan, nominated to be a Member of the Board of Governors of the Federal Reserve System, is sworn in before a Senate Banking, Housing and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington, D.C., U.S., February 3, 2022. Bill Clark/Pool via REUTERS
Dr. Lisa DeNell Cook, of Michigan, nominated to be a Member of the Board of Governors of the Federal Reserve System, is sworn in before a Senate Banking, Housing and Urban Affairs Committee confirmation hearing on Capitol Hill in Washington, D.C., U.S., February 3, 2022. Bill Clark/Pool via REUTERS

“I’ve lived in countries and advised countries in a situation of hyperinflation, so I am motivated by seeing the suffering of workers and businesses just trying to plan their everyday lives in facing an inflationary environment,” Cook told Congress.

Path to confirmation

Senate Banking Committee Chair Sherrod Brown (D-Ohio), told Yahoo Finance earlier in the week that despite the political pushback from some of the Fed candidates, all three are expected to secure the majority needed for confirmation.

“We’re going to confirm all three of them. I would assume almost all of them would get a significant amount of Republican votes in the end,” Brown said Tuesday.

A committee vote is scheduled for Feb. 15 for the three Fed nominees — in addition to the nominations of Jerome Powell for a second term as chair and current Fed Governor Lael Brainard for a promotion to vice chair. A vote from the full 100-member Senate, where Democrats and Republicans are split 50-50, would follow.

Isaac Boltansky, director of policy research at BTIG, told Yahoo Finance Thursday that Jefferson, Powell, and Brainard should win full confirmation by the end of the month, but warned that Cook and Raskin may have their nominations held up.

“The odds favor Professor Cook a little bit more. I would say probably a 70-75% likelihood at this very moment than Sarah Bloom Raskin, who is a little bit lower,” Boltansky said. He added that their fates could rest in the hands of centrist Democrats like Joe Manchin of West Virginia.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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