With the filibuster gone, President Obama now has a chance to dramatically reshape the Federal Reserve, and offer Republicans exactly nothing in exchange.
In a span of only a few months, Obama is expected to appoint at least four of the Fed’s seven governors to the influential board that sets America’s monetary policy. These picks will show just how aggressively the White House plans to exploit its appointment powers in the new filibuster-free Senate.
Previous attempts to install his economist of choice at the Fed were met with Republican opposition, and ultimately obstruction. Remember Nobel Prize winner Peter Diamond, who withdrew amid united GOP opposition in 2011.
Obama then resorted to appointing a Democrat and Republican together to mollify the GOP minority and break the confirmation logjam. (No president had appointed a Fed governor of the opposite party since 1988, although a handful of reappointments were made.)
Now, such appeasement is unnecessary and unlikely.
“The Republican point of view is so diminished at this point it’s almost irrelevant,” said a senior Senate Republican aide.
In practical terms, this means Obama could put forward a series of doves — economists largely favored by Democrats because they support lower interest rates and looser monetary policy — instead of the hawks that Republicans typically prefer.
But political party doesn’t always align with hawkish and dovish tendencies. And for Obama to take full advantage of the new filibuster restrictions, he will need to ensure all Democratic senators get in line because he is unlikely to get any Republican support on any nominee after Democrats took away the GOP’s most powerful tool.
“What the nuclear option has done is unified Republicans. With few exceptions they will vote against every nominee,” says Brian Gardner, senior vice president of Washington research at investment firm Keefe, Bruyette & Woods. “If it emboldens the White House to get more liberal, they may find that a number of Democrats are going to abandon them and there’s no way they can attract Republicans in some of these circumstances.”
Indeed, while Janet Yellen’s nomination to replace Bernanke as Fed chief is likely not at risk — she already cleared the Banking Committee with some GOP support and is expected to retain the support of at least 51 Democrats — Obama has to be careful with other picks.
And he’ll need to act quickly if he wants Yellen to start her term with a full-strength committee. Most prominent among the names floated to fill vacant spots at the Fed is Lael Brainard, who served as the Treasury Department’s undersecretary for international affairs for the past three and a half years. Brainard advised Obama during his 2008 presidential campaign and was also an adviser to the Clinton administration.
Brainard’s name was floating around prior to the filibuster reform’s passage last week; new names have yet to surface for the board in the interim.
One position, formerly held by Elizabeth Duke, has been vacant since summer. Another board member, Sarah Bloom Raskin, has been nominated to a position at Treasury, and the Senate Finance Committee held her confirmation hearing last week.
And those seats could be just the start. Jerome Powell’s term ends in January, although the president could reappoint him. There has been talk Jeremy Stein may decide to depart next year to keep his tenure at Harvard. And there are questions about whether Daniel Tarullo, another Fed governor, will want to stick around once Yellen is in charge.
Obama and Senate Democrats, if they stay united, alone can determine all of the replacements. And Republicans are left to fret from the sidelines.
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