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Trump's nominee for the Federal Reserve Board could be in trouble

Brian Cheung
Nellie Liang Photo Credit: Bloomberg/Andrew Harrer

President Donald Trump’s most recent nomination to the Federal Reserve could be in trouble.

In September, Trump named former Fed official Nellie Liang to take the seventh seat on the Board of Governors. But Republicans have been lukewarm to Liang’s track record on regulatory policy, spurring concerns that Trump’s pick may not be confirmed.

Trump also has two other nominees in the pipeline: economist Marvin Goodfriend and Kansas banking commissioner Michelle “Miki” Bowman. With the midterm elections coming, the fate of all three nominees is uncertain.


Liang’s nomination has anti-regulation Republicans scratching their heads.

In Liang’s 11 years of experience at the Fed, she watched the financial crisis unfold and headed the central bank’s efforts to monitor financial stability. As the head of the Office of Financial Stability Policy and Research, Liang helped steer the Fed’s post-crisis reforms that led the creation of new regulatory tools like stress testing and living wills.

“She’s part of the old-school or Obama Fed in that regards,” said Paul Kupiec, a resident scholar at the Washington, D.C.-based think tank American Enterprise Institute.

Some Republicans on the Senate Banking Committee feel her efforts to install Obama-era regulations threaten Trump’s de-regulatory agenda. Shortly after taking office, Trump promised to do a “major haircut” on the Dodd-Frank regulatory bill that implemented a number of post-crisis controls on the banking industry. In May 2018, the White House signed a package bill that offered mid-size regional banks and community banks some relief from certain Dodd-Frank regulations.

Sen. Pat Toomey, R-Pa., told Politico in September that he has “concerns” about her views on financial regulation. Sen. Thom Tillis, R-N.C., expressed “serious concerns” because of comments that she made at the Brookings Institution, the think tank that she has worked at since February 2017.

“It is not clear that Ms. Liang will be an advocate for reducing some of the undue burden regulations place on banks all across the U.S.,” Tillis spokesperson Adam Webb said in a statement.

Liang has yet to face the Senate Banking Committee for her hearing. The committee confirmed to Yahoo Finance that it is out of session and will not hold any hearings until after the midterm elections.

Goodfriend and Bowman

The Fed Board’s fifth and sixth seats are also still in the wings.

Bowman, selected to bring a community bank perspective to the board, has also been waiting for developments on her confirmation, although she was already cleared by the Senate Banking Committee in June. The Senate has filed paperwork to advance her confirmation to a full floor vote but it has not been scheduled yet.

Goodfriend’s nomination, meanwhile, could be in jeopardy. The conservative professor from Carnegie Mellon University won a narrow green light from the committee in February but Senate leadership has yet to move on any procedural motions to bring his nomination to a full vote.

Once the new Congress forms after the election, the White House will need to renominate any candidates that were not fully confirmed, raising the question of whether the administration will reconsider the Liang and Goodfriend nominations.

Ian Katz, an analyst at Capital Alpha Partners LLC, said in an interview that the White House will have to consider the outcome of the midterm elections in its re-nominaton process.

If the Republicans keep hold of the Senate, Katz says there is little pressure for them to vote on a nominee they’re not thrilled about. The Fed is already functioning with four members — Chair Jerome Powell, Vice Chairs Randal Quarles and Richard Clarida and Governor Lael Brainard. Assuming Bowman joins, the Fed Board will have five members — the same amount the Fed had at the end of the Obama administration.

“Republicans don’t actually have to act on her nomination anytime in the near future so I don’t see any real incentive for them to do it,” Katz said.

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Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.

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