WASHINGTON: US President Joe Biden announced his intention to nominate Michael Barr for the key position of vice chair for supervision of the Federal Reserve, one month after his first pick dropped out. Barr’s nomination will have to be confirmed by the Senate. “Michael brings the expertise and experience necessary for this important position at a critical time for our economy and families across the country,” Biden said in a statement. Currently serving as dean of the University of Michigan’s public policy school, Barr also worked at the Treasury Department during the Bill Clinton and Barack Obama administrations.
He was one of the main architects of the Dodd-Frank Act, passed after the 2008 global financial crisis, which was aimed at better regulating the activities of large US financial institutions. He also helped create the Consumer Financial Protection Bureau and the position for which Biden nominated him. If confirmed, Barr will oversee supervision and regulation of banking giants such as JPMorgan Chase, Bank of America and Citigroup.
“He understands that this job is not a partisan one, but one that plays a critical role in regulating our nation’s financial institutions to ensure Americans are treated fairly and to protect the stability of our economy,” the president said. Biden’s original nominee for the position, Sarah Bloom Raskin, withdrew from the race in mid-March when her nomination appeared to be in jeopardy due to a lack of support in the Senate.
Republican senators, as well as Democratic Senator Joe Manchin, said that they would not give her their votes. In addition to Barr, the Senate must confirm four other nominations to the Fed’s board of directors, including those of its current chairman Jerome Powell and of Lael Brainard as vice chair. The US central bank can bring inflation down by raising interest rates without jeopardizing growth in the world’s largest economy, although it will be a challenge, a top Federal Reserve official had said.
“I think we can achieve a soft landing,” New York Fed President John Williams said in an interview with Bloomberg. A wave of price increases caused by high demand and supply chain challenges was made worse by the Russian invasion of Ukraine, which hit food and fuel prices, sending US inflation to its highest level in four decades.
But Williams said Fed interest rate hikes are “really well suited” for addressing the imbalances between supply and demand in the US economy without causing a downturn. The Fed can “just take the froth… out of the economy” to put it on sustainable footing. But he acknowledged that “it’s not going to be easy,” given the “unique set of circumstances” facing the economy due to the ongoing challenges of the pandemic and the Russian invasion of Ukraine. Williams serves as vice chair of the Fed’s policy-setting committee, which last month raised the benchmark lending rate for the first time since cutting it to zero at the start of the pandemic in early 2020.
Since then, a steady stream of central bankers have signaled plans for aggressive rate hikes to try to douse the inflation fires, with multiple half-point rate hikes likely starting at the May 3-4 meeting. The Fed also intends to reduce its massive bond holdings, which also should have the effect of tightening policy. The actions already have had an impact on financial conditions, Williams said, which is “positioning policy well to get the supply and demand back into balance and set us up for bringing inflation down over the next couple of years.” – AFP