Obama's Fed team takes shape with Fischer, Brainard
WASHINGTON (MarketWatch) - President Barack Obama's team at the Federal Reserve took shape Friday when he announced he intended to nominate Stanley Fischer and Lael Brainard to the central bank's board of governors.
The selections have an international feel. Fischer has most recently been the head of the Bank of Israel. He also spent two decades in Washington dealing with global economic crises as the No.2 at the International Monetary Fund.
Brainard was the Obama administration's point person on global economic matters as Treasury undersecretary for international affairs. In that role, she often met with finance ministers from the world's leading economies and represented the United States at global economic forums like the G-20.
Obama also announced that he intended to re-nominate Jerome Powell to a full 14-year term on the Fed board. Powell, a former investment banker and veteran of Republican administrations, joined the central bank board in 2012.
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Reports that the White House was mulling Fischer and Brainard for the Fed first surfaced late last year.
There has been some talk on Wall Street that Fischer might serve as a brake on new Fed chairwoman Janet Yellen's dovish tendencies.
As a result, liberal Senate Democrats seem leery of his nomination. Sen. Elizabeth Warren, the Massachusetts Democrat who championed Yellen for the top Fed spot, said in a television interview that the jury was still out on Fischer.
But Joseph Gagon, a former Fed staffer and now a senior fellow at the Peterson Institute for International Economics, said that Yellen and Fischer would be 'natural allies' on the central bank. against some of the regional Fed bank presidents who want the central bank to follow a more rules-based monetary policy and end the controversial bond-buying program.
'They are of like-minds. People are looking too hard for differences,' Gagnon said.
Analysts have often pointed to comments from Fischer last fall expressing some skepticism of 'forward guidance' as a policy tool, which the Fed, led by Yellen, has embrace
An example of this tool is the wording in its Fed's latest policy statement that it intends to keep short-term interest rates close to zero until 'well past' the point that the unemployment rate falls below 6.5%.
Many market participants and Fed watchers have their doubts about forward guidance, noting that every Fed statement is not a promise and remains conditional on the economy's actual performance.
Gagnon said forward guidance is a new tool, and there is a risk it can be done poorly, but he doesn't think that Fischer would ever forswear using it.
Obama's three selections Friday do not end all of the questions about the composition of the Fed board going forward.
Fed Gov. Sarah Bloom-Raskin remains at the central bank awaiting Senate action on her nomination to be the Treasury Department's No. 2 official. Her departure would create another vacancy.
The Fed board in Washington has seven members. In addition, there are 13 regional Fed district bank presidents.
Every six weeks, these officials gather in Washington for meetings of the 12-momber Fed's monetary policy committee. Fed governors always have votes on this panel. The district presidents share five votes between them.
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