Three strong candidates for the Federal Reserve Board have long been rumored, but now President Obama has made it official:
President Barack Obama announced the nomination of two economists and a lawyer to the Federal Reserve Board, reshaping the central bank's top ranks at a critical period for financial regulation and monetary policy.
The White House tapped Janet Yellen, president of the San Francisco Federal Reserve Bank, to be the board's vice chairman, and Massachusetts Institute of Technology economist Peter Diamond and Maryland state banking regulator Sarah Bloom Raskin to sit on the seven-member board. The Senate is likely to confirm them.
Emphasis mine, article from WSJ.
Why are these good choices, and how will financial reform be affected?
A couple of weeks ago, Morning Feature linked to an Alternet article entitled Obama's New Banking Nominees Have Surprisingly Progressive Creds:
...the names the Obama administration is floating to fill the Fed Board seats have been consistent voices of reason on economic policy: San Francisco Federal Reserve President Janet Yellen, Maryland Commissioner of Financial Institutions Sarah Bloom Raskin and M.I.T. economist Peter Diamond. Moreover, each candidate would help counter fundamental shortcomings in the Fed's policymaking over the past decade.
On Sarah Bloom Raskin:
Raskin actually believes in regulation, and she has worked effectively as a regulator. When banks are too big to regulate, Raskin believes they should be broken up.
On Janet Yellen:
Janet Yellen has long been a lonely voice in the Federal Reserve system demanding serious attention to jobs...
...Yellen stresses that monetary policy--the raising or lowering of interest rates—is the wrong tool for fighting the housing bubble. Raising interest rates inevitably results in job losses. Instead of shedding jobs to fix housing, Yellen argues the Fed should deploy its regulatory arsenal.
On Peter Diamond:
...Diamond actually believes Social Security is a good thing that needs to be preserved. In an era where budget hawks are salivating over the prospect of gutting the program, and even Fed Chairman Ben Bernanke has suggested implementing unnecessary cuts, Diamond would be a critical source of economic sanity.
That Morning Feature diary I mentioned above noted the impact of these new appointees in the broader context of financial reform, and particularly consumer protections:
Does it matter where the CFPA is housed as long as it has a budget to hire people to enforce the new regulations? If we had a CFPA under Bush but he had chosen to not staff it (which happened in many federal agencies) would it have helped? Before we insist that the Fed is not a good place to house it, it is important to realize that the face of the Fed will be changing...
A truly independent CFPA (Consumer Financial Protection Agency) would still be preferable, but if we must have one housed within the Fed, it makes a big difference who's sitting on the board. And it appears we'll now have at least three people who actually believe in regulation and consumer protection.
To quote the Wall Street Journal again:
"The Federal Reserve system is going to be reshaped," said Vincent Reinhart, a former top Fed staffer now at the American Enterprise Institute. "It's more likely to show that it can be activist in its ability to set regulations and enforce those regulations. The governors will influence the direction those actions take."