EXCLUSIVE: Republicans have stiff opposition to Lael Brainard as vice chairman of the Federal Reserve, Senate officials told FOX Business.
According to sources familiar with the plan, Republicans will focus on voicing concerns that Brainard may seek to expand the Federal Reserve’s narrow purview to include progressive policy measures if appointed to the second post.
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Advisors say they plan to deepen Brainard’s advocacy for climate change and what Republicans call “awakened” activism. A sticking point are fears that Brainard could fuel progressives’ goal of using regulatory tools to force banks to stop lending to fossil fuel companies after saying the Fed should assess “the resilience of individual financial institutions and the financial system to” climate risks .
“She campaigned for more regulatory power than I think it should be,” Senator Pat Toomey, R-Pa., Senior member of the Senate Committee on Banking, Housing and Urban Affairs, told FOX Business in an interview last month. “She has also encouraged the Fed to diverge from what I believe to be its really narrow mandate requirement and venture into areas like social justice and climate issues that I believe are beyond the Fed’s purview.”
Another cause for concern arises after Brainard signaled its support for the use of central bank digital currency to set up retail bank accounts with the Federal Reserve for Americans. Critics say the proposal would give the central bank too much control over personal finances and politicize the independent institution.
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The struggle comes at a high pressure time for the Biden government. As inflation climbs to 30-year highs, the US Federal Reserve will be scrutinized more closely. Current Federal Reserve Chairman Jerome Powell told lawmakers last week it was probably time to pull the word “temporarily” back, admitting that the increased rates are going on for longer than officials expected.
Questions also arise as to what the nomination of Brainard as vice chairman, whom President Biden will elect to fill three more vacant, voting member seats on the Federal Reserve Board of Governors, might mean.
George Selgin, a senior fellow at the Cato Institute, believes that more progressive Fed appointments could “scrutinize regulation-wise banks that could stifle innovation and competition in the industry.
“That would of course rule out bad financial innovations, but it would also rule out really desirable competition for conventional banks,” he added. “I hope that won’t happen, but it’s a prospect I would worry about, maybe more than any other.”
Brainard, the only Democrat on the Board of Governors, was appointed to her seat in 2014. She previously served in the Treasury Department under the Obama administration and was also Deputy National Economic Advisor to President Bill Clinton from 1990-1996.
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Proponents of Brainard say their ideas align closely with this government’s policy goals, especially those focused on climate change. In a statement following the announcement of her nomination, the White House named Brainard “one of our country’s leading macroeconomists” who “played a key role in the US Federal Reserve.”
The GOP breathed a sigh of relief when Brainard was not selected for first place. Progressive Senator Elizabeth Warren, D-Mass., However, says she will stand against Powell but support Brainard.
The confirmation hearings will be held before the Senate Banking Committee, but no date has been set as each side prepares their arguments. Both Brainard and Powell are expected to be out in mid-January.