Fed Vacancies – The Dilemma

As the Biden administration begins to float the names of potential cabinet members, an interesting scenario and potential dilemma faces the Federal Reserve Board.

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Normally, there are seven members of the Federal Reserve Board, but at present, there are only five, with two vacant positions. One vacancy has existed since March 2014 when Sarah Bloom Raskin retired, and the other has existed since February 2018 when Janet Yellen retired. Two nominees – Judy Shelton and Chris Waller – were put forward on January 28, 2020, by President Trump and voted out of the Senate Judiciary Committee. Judy Shelton was nominated to fill a term that expires in January 2024, and Chris Waller from the Federal Reserve Bank of St Louis was nominated to fill a term expiring January 2030.

Chris Waller’s is not a controversial nomination, whereas Judy Shelton’s nomination has been contentious and is opposed by many, including more than 100 economists (including 7 Nobel Prize laureates) who signed a letter urging senators to vote against her nomination. Senator McConnell scheduled a vote on Judy Shelton’s nomination before the full Senate on November 17, and the nomination was rejected by a vote of 50-47, given opposition from three Republican senators – Alexander, Collins, and Romney – and the absence of Senators Scott and Grassley, who were in quarantine. (Senator Alexander was absent for personal reasons.) Faced with rejection, Senator McConnell also voted against the nomination in a parliamentary move to retain the option to bring the nomination back to the Senate floor at a later date.

But time is running out, since the Senate is now in recess until November 30; and when it returns, Arizona Republican Senator McSally will be replaced by Democratic Senator Mark Kelly. Kelly’s win further narrows the Republican margin from 52 to 51 versus 47 Democrat members and 2 independents (Bernie Sanders and Angus King, both of whom caucus with the Democrats), bringing the post-Thanksgiving balance of power in the Senate to 51 Republicans and 49 senators voting with the Democrats. If the three Republicans who opposed Judy Shelton’s nomination continue in opposition, there is no hope for a post-Thanksgiving vote in favor of her nomination. With the new Congress’s coming into session in 2021, the nominations will expire. In that case, then-President Biden will have to make two nominations, and the vetting and approval process will start over. Of course, should Georgia elect one or two Democratic senators, then the balance of power in the Senate could change, making it difficult for Republicans to thwart new nominations.

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