The nomination of Federal Reserve Board Governor Douglas Elmendorf to head the New York Fed was announced yesterday and his confirmation appears likely. Ms. Shelton, President Trump’s nomination to chair the Board of Governors of the Federal Reserve System is still in the air.
Senator Sherrod Brown has thus far been the lone Democrat to voice concerns with the nomination. While Ms. Shelton has stated that she wants to try and do away with the phrase “on hold” for people under active investigation for tax evasion, it is not clear where that position comes from. She has also mentioned she has difficulty reading the FASB regulations that govern banks’ accounting and gave vague explanations about the balance sheet management practices that prompted her questioning. Senator Brown and other members of the Financial Services Committee have not yet had a chance to review her writings on the subject, and are planning a hearing on the nomination for later this month.
Still, analysts such as Gregory Weldon of RBC Wealth Management believe she has the votes to be confirmed, but thinks she will still be subjected to a lot of questions.
“From what we have seen, it appears likely that she will be confirmed,” Weldon wrote in a research note.
While President Trump has made some important picks, namely Richard Clarida for vice chairman, Tarullo’s departure is a major coup for the central bank. Roubini Global Economics (RGSE) analyst Emmanuel Cau believes it was partially for this reason that President Trump has raised the stakes with his various nominations for the Fed: by naming Fed governors who could move the Fed away from its traditional focus on maximizing profits for bankers, he hopes to make the Fed more accountable to the public. Although, as RGE Economist Mark Thoma wrote, this need not mean that Wall Street will be favoured over Main Street.
This pressure will play out over the next few years, leading to a system of reforms that enhance the Fed’s independence but also provide more responsibility for the politicians to whom it reports. This is not likely to be accomplished until after the next presidential election, when the candidates will make their statements on whether or not they believe monetary policy should continue the current course.