As Seats Go Unfilled, Federal Reserve Board Could Drop to Three Members

Staff Writer
Columbus CEO

c.2014 New York Times News Service

WASHINGTON — Federal Reserve governor Jeremy C. Stein is the chairman of the internal committee that monitors financial markets for signs of trouble, and of the committee that watches the way that banks treat their customers.

He is also the only remaining member of those committees.

Stein has said he will step down from the Fed on May 28.

A string of departures from the Fed’s seven-member board over the past year has left the central bank on the verge of operating with just three governors for the first time in its 100-year history. Three nominees are awaiting Senate confirmation, but so are scores of nominees to other offices, and Senate Democrats say there is a real chance no vote will be held before Stein departs at the end of this month.

The dwindling of the board is straining the Fed’s ability to manage its complex responsibilities, which extend well beyond its enormous economic stimulus campaign and its lead role in the overhaul of financial regulation.

It is also shifting the balance of power on the Fed’s most important group, known as the Federal Open Market Committee, which sets monetary policy. The March and April meetings of that committee — which includes both board members and presidents of the 12 regional reserve banks — represented just the third and fourth times that a majority of the votes were cast by the regional presidents, who are allocated five votes on the committee on a rotating basis.

Unlike the members of the Fed’s board, who are presidential appointees, those officials are selected by business leaders in each district, and they are not subject to Senate confirmation.

“Congress created an FOMC with a majority of presidential appointees on it and it would be unfortunate not to continue that and to honor that,” said Donald L. Kohn, the Fed’s vice chairman from 2006 to 2010, and now a scholar at the Brookings Institution. “It seems to me consistent with democratic accountability.”

The Fed’s predicament is particularly striking because there is no real opposition to the two nominees, who were put forward by President Barack Obama in January. Stanley Fischer, a former head of the Bank of Israel who would become the Fed’s vice chairman, and Lael Brainard, a former Treasury official, advanced through the Senate Banking Committee by a voice vote. Jerome H. Powell, a member of the Fed’s board, is also awaiting Senate confirmation to a new term.

Amy Brundage, a White House spokeswoman, said the administration was “hopeful that the Senate will confirm the three pending nominees without delay.”