The Obama administration is considering a Maryland regulator awarded “Consumer Advocate of the Year” and a Massachusetts economics professor known for his Social Security expertise to join Janet Yellen as nominees to the Federal Reserve Board.
Yellen, president of the Federal Reserve Bank of San Francisco, is on the administration’s short list to replace Federal Reserve Board Vice Chairman Donald Kohn, White House spokesman Robert Gibbs said Friday. Sarah Bloom Raskin, Maryland’s commissioner of financial regulation, and Massachusetts Institute of Technology economics professor Peter Diamond are “under strong consideration for additional vacancies” at the Fed, Gibbs said.
Raskin has been outspoken on protecting consumers, the need to preserve state laws from federal preemption, and not having the Fed or any other agency serve as a monolithic systemwide regulator.
Raskin, who last year was awarded the Maryland Consumer Advocate of the Year award from the Maryland Consumer Rights Coalition, has been sharply critical of the “deregulatory fervor” that encouraged abuses against consumers. Not enough people had the courage to raise red flags about predatory practices, she said when accepting the award last September.
“Speaking truth to power is never easy, especially when power is giving you a paycheck,” she said.
Diamond comes from a different background. A noted economist for much of his career, Diamond is known for his work on Social Security and retirement programs, as well as behavioral economics.
Both could add distinct expertise at an important time for the central bank, which is still dealing with the fallout from the financial crisis, how long it should keep interest rates at unusually low levels, and what its role will be under a new regulatory regime being considered by Congress.
Raskin, for one, could add a new dynamic to the Fed’s board on regulatory matters. A colorful speaker who likes to mix in quotations from poets and others in her speeches, Raskin has spoken at length about needed changes to the nation’s regulatory system in the wake of the recent financial crisis. Notably, in an April 29 speech last year, she suggested the Fed or any other regulator shouldn’t be given sole authority to monitor systemic risk.
“There is no single person, and no single agency that can be omniscient about risk,” Raskin said in the speech, warning of a “system with only one pair of eyes watching for risk.”
Additionally, Raskin’s nomination would put a vocal advocate of state regulation over federal preemption in a key policy-making position in Washington.
“I see great potential for the national government to embrace certain state financial regulatory policies,” she said in the speech last April. “Most importantly, let us not allow the failure of federal regulatory oversight and management to be used as an opportunity to erode or abolish state regulatory powers and policies.”
Diamond, meanwhile, could add an expert on key entitlement programs at a time when the future of Social Security remains in flux in Washington. He has authored a series of papers about pensions and social-security systems around the world, and already has a connection with top Washington policymakers: In July 2004 he and current Office of Management and Budget Director Peter Orszag co-authored a paper titled “A Summary of Saving Social Security: A Balanced Approach.”