The U.S. Senate Banking Committee backed the nomination of three candidates for the Federal Reserve Board, including San Francisco Fed President Janet Yellen for vice chairman.
The panel’s decisions advanced the three a step closer to a vote by the full Senate necessary for confirmation. Yellen’s candidacy for vice chairman was recommended in a 17-6 vote. The panel voted 16-7 in favor of Peter Diamond, a Massachusetts Institute of Technology economics professor, and 21-2 for Sarah Bloom Raskin, Maryland’s commissioner of financial regulation. All of the opposition came from Republican committee members.
Senate approval of the nominees would give the Fed’s board a full seven-member complement for the first time in more than four years and help Fed Chairman Ben S. Bernanke devise policies to bring down unemployment and carry out expanded bank-supervision duties. Christopher Dodd, the Connecticut Democrat who chairs the committee, said he hopes for a final vote in September.
“They have the potential to make important contributions to the Federal Reserve in the years ahead,” Dodd said today before the vote.
Alabama Senator Richard Shelby, the panel’s senior Republican, backed Raskin while voting against Yellen and Diamond.
“President Yellen presided over a regional housing bubble and failed to restrain the excesses,” and Diamond, while a “skilled economist,” may not be qualified to make decisions on monetary policy, Shelby said.
Yellen defended her record in a written response to Shelby this month, saying that in 2004 the San Francisco Fed became “concerned with relaxed underwriting standards and growing commercial real estate concentrations at commercial banks.”
The yield on the current five-year note dropped 9 basis points, or 0.09 percentage point, to 1.70 percent at 3:40 p.m. in New York, according to BGCantor Market Data. The Standard & Poor’s 500 Index fell 0.7 percent to 1,105.62.
Diamond, 70, a specialist in taxation and behavioral economics, has written widely on overhauling entitlement programs. He said in a separate response to Shelby that he has done “considerable research” on government’s role in “helping markets to improve the bearing of risks in the economy.”
The Fed last month reiterated its pledge to keep its benchmark rate close to zero for an “extended period,” and Bernanke signaled in congressional testimony last week that signs of deeper economic weakness would be needed to justify additional monetary stimulus.
In a July 15 confirmation hearing before the banking panel, Yellen said the central bank must focus on creating jobs and reducing “painfully high” unemployment, which was 9.5 percent in June. Raskin said the Fed’s achievement of stable prices is “only a partial victory when many American households continue to face the perils of unemployment.”
Diamond favors “maintenance of the current level of ease” in monetary policy, “with vigilance to circumstances that might call for a change in either direction,” according to his responses to written follow-up questions from Shelby.
In January, the Senate voted 70-30 to approve Bernanke for a second four-year term, the most opposition to a Fed chairman since the office first became subject to Senate confirmation in 1978. The Banking Committee voted 16-7 in December to recommend approval to the full chamber. Shelby opposed Bernanke in both votes.
President Barack Obama announced the three Fed nominations in April. He previously appointed Daniel Tarullo as governor in January 2009 and re-appointed Bernanke to a second term that began in February.
Yellen, 63, would join the Fed board as the member with the most years of experience as a central banker. She served as a Fed governor from 1994 to 1997 under former Chairman Alan Greenspan and has led the San Francisco Fed since 2004, making her the only policy maker since Paul Volcker to hold regional and Washington-based roles.
Under a four-year term as vice chairman, Yellen would preside over board meetings in Bernanke’s absence and hold a permanent vote on monetary policy. Yellen would replace Donald Kohn, a 40-year veteran of the central bank whose June 23 retirement date was pushed back while Yellen’s confirmation was pending. She would get a separate term as governor through 2024; Diamond’s term would end in 2014 and Raskin’s in 2016.
Raskin, a 49-year-old attorney, was appointed in 2007 as Maryland’s top banking regulator. She was previously managing director of Promontory Financial Group, a consulting firm, and worked at the New York Fed and as a counsel for the Senate Banking Committee.