Fischer poised for confirmation to Fed board

The U.S. Senate is preparing to confirm Stanley Fischer to the Federal Reserve Board of Governors, bolstering its membership as the Fed winds down the most aggressive easing in its 100-year history.

The final vote is scheduled today for about 12:15 p.m. Washington time following yesterday’s 62-35 vote to advance the nomination of Fischer, a former governor of the Bank of Israel.

The Senate will vote at “some later time” on confirming Fischer as vice chairman of the board, Majority Leader Harry Reid, a Nevada Democrat, said today on the chamber’s floor. Republicans are forcing a delay in that vote, though the minority party doesn’t have the power to block confirmation. Two other nominations for the Board of Governors, Lael Brainard and Jerome Powell, won’t be voted on this week.

Even with delays, the three probably can be sworn in before the June 17-18 Federal Open Market Committee meeting, according to a report yesterday by Citigroup Inc. economist William Lee and Matthew Dabrowski, a political analyst.

“Unless these three board nominees are seated, market uncertainty about the future course of Fed policy will grow,” wrote Lee and Dabrowski, both based in New York.

“This is especially true in the case of Fischer, who is expected to influence heavily” how the Fed signals changes in policy, and how concerns about financial stability “are to be integrated with the dual mandate” for full employment and price stability, Lee and Dabrowski wrote.

 

Three Members

Today’s vote would prevent the board from falling to three members late this month. Without Fischer’s confirmation, Governor Jeremy Stein’s planned departure May 28 to return to Harvard University would leave Fed Chair Janet Yellen with just two other governors: Daniel Tarullo and Jerome Powell, potentially limiting the board’s ability to conduct business.

A short-staffed Board of Governors would reduce how much policy makers can communicate with the public in speeches and focus on other regulatory and supervision matters.

“It’s unfortunate we’re in this situation,” said Peter Hooper, chief economist at Deutsche Bank AG in New York and an economist at the Fed board in Washington for 26 years. “It certainly is a significant pinch on resources and leadership. You’re putting a lot more stress on the people who are there.”

All three nominees were approved by the Senate Banking Committee on April 29. Reid told reporters yesterday that he will bring Brainard and Powell’s nominations to a vote “as soon as I can” in June.

 

Yellen’s Deputy

Fischer, 70, is poised to become Yellen’s top deputy as policy makers start to scale back the most aggressive monetary stimulus in the central bank’s 100-year history. The Fed has held the benchmark interest rate near zero since December 2008 and more than quadrupled its balance sheet to a record $4.34 trillion with large-scale asset purchases.

Policy makers, saying the economy shows signs of picking up and the job market is improving, pared the Fed’s monthly asset- buying to $45 billion in their fourth straight $10 billion cut. They said further reductions in “measured steps” are likely.

Though Republicans can delay a confirmation vote, they can’t prevent it altogether. Reid altered Senate rules last year so that almost all nominees can be confirmed by a simple majority, ending Republicans’ ability to block nominations in a chamber where Democrats control 55 of 100 seats.

 

Rand Paul

Even so, Republican Senator Rand Paul of Kentucky threatened to stall the nominations. The potential presidential contender in 2016 said this month he may try to delay nominees for the central bank unless the Senate has a chance to vote on his bill calling for public audits of Fed monetary policy.

Fischer has spent much of the past quarter century involved in global policy making as a former World Bank chief economist and top official at the International Monetary Fund. Fischer would fill the No. 2 role vacated by Yellen in February when she succeeded Chairman Ben S. Bernanke.

“Fischer’s the one with the greatest star power,” said Sarah Binder, a senior fellow at the Brookings Institution in Washington who studies the relationship between the Fed and Congress.

Brainard is a former U.S. Treasury undersecretary for international affairs. Powell, an attorney and former executive at private-equity firm Carlyle Group LP, joined the Fed in 2012 and has been nominated to a second term.

The White House and lawmakers will need to fill another position on the Fed Board of Governors after Stein’s departure at the end of this month.

Yellen has said she favors having a community banker join the board after two members with industry experience, Elizabeth Duke and Sarah Bloom Raskin, left in the past eight months.

 

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