Peter Diamond’s nomination for a Federal Reserve Board seat was approved a third time by the Senate Banking Committee with little prospect that he’ll win confirmation from the Senate as a central bank governor.
Republicans, a minority on the panel, were unified today for the first time on the issue in a vote in Washington, opposing the advance of the nomination for the Nobel Prize-winning economist to the full Senate. Twelve Democrats backed Diamond in the vote while 10 Republicans opposed him.
Senator Tim Johnson, a Democrat from South Dakota and chairman of the committee, said to reporters he’s “doubtful” that any Republicans will break party ranks to let Democrats hold a Senate vote on Diamond. Alabama Senator Richard Shelby, the committee’s senior Republican and an opponent to Diamond, said the chances of a Senate vote on Diamond are “not good.”
To win confirmation, the Obama administration and Senate Democrats must rally support from some Republican lawmakers because Democrats are short of the 60 votes needed to override procedural moves to block the nomination.
“It might be time for the president to start looking for somebody else if he hadn’t already,” Shelby said in an interview today after the vote.
Johnson told reporters today it would be up to Senate Majority Leader Harry Reid to decide whether to devote time on the Senate floor to Diamond’s candidacy. Republicans twice blocked confirmation last year for Diamond.
“I’m doubtful, but anything’s possible,” Johnson told reporters when asked if any Republicans would help Democrats override a filibuster on Diamond.
The panel’s vote today was by a narrower margin than last year’s 16-7 tallies. Democrats lost seats to Republicans in November’s midterm elections.
“I don’t believe that Dr. Diamond is the right person for this job,” Shelby told the committee before the vote. “I don’t believe that he has the appropriate background or experience.”
Republicans’ unanimous vote today “sends a very strong signal to the Senate that we’re planning to oppose that nomination,” Shelby said in the interview. It’s also a “strong message” to other Republican senators, “who I hope would back us.” He said he doesn’t know of any Republicans who would support Diamond.
The White House renominated Diamond in January, marking a third try at confirmation after the Senate adjourned in December without approving him. Diamond’s initial candidacy was returned to the White House in August under a procedural objection.
Confirmed Last Year
He was first nominated to the Fed by President Barack Obama in April 2010. Republicans allowed two other nominees, Fed Vice Chairman Janet Yellen and Governor Sarah Bloom Raskin, to be confirmed last year.
Diamond, a professor at the Massachusetts Institute of Technology since 1966, shared the 2010 Nobel Prize in Economic Sciences in October with Dale Mortensen and Christopher Pissarides for research into the difficulties of matching supply and demand, particularly in the labor market.
Shelby says Diamond lacks monetary-policy expertise and would violate a law saying no two Fed governors may come from the same geographic region. Shelby also disagrees with Diamond’s support of stimulus spending to combat recessions.
The Nobel-winning work is a “starting place for applied research in a wide variety of areas,” including “monetary theory and analysis of the capital market,” Diamond said in March testimony before the Banking Committee.
Diamond said at the confirmation hearing that the Fed’s asset purchases aimed at lowering long-term rates with the short-term rate near zero are an “appropriate way to go.”
Yesterday, Diamond lost the support of the one remaining Republican senator on the banking panel to support his nomination last year.
Nebraska Senator Mike Johanns, who voted twice in the Banking Committee to back Diamond, said in a statement on his website that “with our country spending its way into a crisis, I can no longer support a nominee so vocally in favor of more spending, more stimulus, and more quantitative easing.”
Johanns was one of three Republicans, among 10 on the banking panel last year, to vote for Diamond in 2010. The other two, Utah’s Robert Bennett and New Hampshire’s Judd Gregg, are no longer in the Senate.
Fed Governor Kevin Warsh resigned effective April 2, opening a second vacancy on the central bank’s board. The White House has yet to pick a replacement. Diamond’s proposed term would end January 2014.
Shelby has said Diamond is “legally not eligible to serve” because Fed law bars having two governors come from the same region of the U.S. The nominations for both Diamond and current Fed Governor Daniel Tarullo said the men were from Massachusetts.
The White House designated Diamond as being from the Chicago Fed district to comply with the law. In a Nov. 30 interview, Diamond, a professor at MIT since 1966, said his professional connections to the region were sufficient to meet the requirements of the provision.
He cited teaching for one quarter at Northwestern University in Evanston, Illinois, seminars at Northwestern and the University of Chicago and other visits for a few days apiece to schools in the region.
The Club for Growth, an anti-tax group, said this week it would oppose Diamond’s nomination and include his confirmation vote as a “key vote” on its “Congressional Scorecard” of lawmakers.