"When Fed governorships are allowed to sit vacant, some of the most important decisions about our economy are left to a smaller group of people, usually individuals who are more concerned with banking interests than with the interests of workers."

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Fed Up With the Senate
Senate Republicans are playing nomination games with Federal Reserve appointees.
By Djuan Wash, April 26, 2016

Right now, there are key vacancies at a vital government institution. President Barack Obama has fulfilled his duty and put forward eminently qualified nominees to fill the vacancies. Yet despite the nominees' strong credentials, Republicans in the Senate have dragged their feet, and the chair of the committee whose job it is to consider the nominees has refused to even schedule hearings.

No, this isn't the high-profile battle to fill the seat of the late Supreme Court Justice Antonin Scalia. While the fight over Scalia's replacement may be stealing headlines, Republican obstructionism is actually preventing another important government body from functioning as it should: the Federal Reserve. Two vacant spots on the seven-person Federal Reserve Board of Governors have sat unfilled since 2014.

Obama nominated former community banking CEO Allan Landon to be a Federal Reserve governor in January 2015, yet Senate Banking Committee Chairman Richard Shelby has let Landon's appointment languish for over a year. Last summer, Obama nominated Kathryn Dominguez, an economist at the University of Michigan, to fill the second open spot. But Shelby has reiterated that he will not schedule hearings for Landon or Dominguez.

Shelby's inaction has real consequences for working people. The Fed, like the Supreme Court, functions best when there are no vacancies. Fed governors hold permanent voting positions on the Federal Open Market Committee, the body that sets interest rates and makes crucial decisions that affect unemployment and wages for millions of Americans. When Fed governorships are allowed to sit vacant, some of the most important decisions about our economy are left to a smaller group of people, usually individuals who are more concerned with banking interests than with the interests of workers.

Five seats on the committee are held by regional Federal Reserve Bank presidents. Unlike Fed Chair Janet Yellen and the Board of Governors, regional bank presidents are not accountable to the public. Instead, they are chosen by the boards of directors at each regional bank, which are dominated by representatives from banks and major corporations.

Regional banks' boards tend to fill their presidencies with people who look and think like them; in fact, one-third of the current regional bank presidents have strong ties to a single firm, Goldman Sachs. Research shows that Federal Reserve Banks have historically held more conservative views about the economy. And when the Federal Open Market Committee voted to intentionally slow down the economy in December, it was mostly due to pressure from regional bank presidents who (mistakenly) believed the economy was close to full employment. At the last committee meeting, regional bank presidents, led by Kansas City Fed President Esther George, continued to advocate an aggressive path of rate hikes.

The Senate's failure to act on Obama's appointees means that the committee is dominated by more conservative, bank-friendly voices. And congressional intransigence has meant that this has been true for most of Obama's presidency. As Stanford scholar Peter Conti-Brown wrote last year, "private bankers effectively held a majority on the [Federal Open Market Committee] 58% of the time [during the Obama administration]."

Shelby says he will not consider the nominees because Obama has not appointed a vice chair for supervision at the Federal Reserve, a new Fed position that was created by the Dodd-Frank financial reform law. Though the Obama administration has not appointed anybody to this position, the Federal Reserve says Fed Governor Daniel Tarullo is currently filling that role.

At a post-Federal Open Market Committee press conference last month, Yellen was asked about the Senate's inaction. "Congress intended for the Federal Reserve Board to have seven members," Yellen said, "and that tends to bring on board people with a wide spectrum of views and experience and perspectives. I think that’s valuable, and I would like to see the Senate move forward and consider these nominees so we could operate with a full complement.”

Yellen's point about a wider spectrum of views is a salient one. If confirmed, Dominguez would join Yellen as only the fifth woman serving on the Federal Open Market Committee, an historically male-dominated institution. And as the former leader of a community bank, Landon comes from the very sector that Republicans are constantly complaining lacks representation at the Fed.

Over 5,000 members of Fed Up, a coalition of community and labor-based organizations that works to bring the voices of low-income communities of color into decisions on monetary policy, agree with Yellen that Shelby must act, and have joined the 10 Democratic members of the Senate Banking Committee in urging him to schedule hearings for Dominguez and Landon.

Yellen's call for the Senate to do its job echoes the sentiments of Supreme Court Chief Justice John Roberts, who, it was reported last month, presciently warned against a dysfunctional confirmation process in a speech given just days before Scalia's death.

To ensure that some of the most important institutions in the country function for the people precisely as Congress intended, the heads of those institutions are imploring the Senate to do its job. For the sake of millions of working Americans, it is time for the Senate to listen.
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