Obama Nominates Three to Fed Board: all three nominees are Jewish continuing the Jewish minority's control over America's Fed Reserve system

By SUDEEP REDDY
Wall Street Journal

President Barack Obama announced the nomination of two economists and a lawyer to the Federal Reserve Board, reshaping the central bank's top ranks at a critical period for financial regulation and monetary policy.

Obama nominated two economists and a lawyer to the Fed Board, in what would fill three of the Board's seven seats, reshaping the central bank's top ranks at a critical period for financial regulation and monetary policy. The WSJ's Sudeep Reddy discusses.

The White House tapped Janet Yellen, president of the San Francisco Federal Reserve Bank, to be the board's vice chairman, and Massachusetts Institute of Technology economist Peter Diamond and Maryland state banking regulator Sarah Bloom Raskin to sit on the seven-member board. The Senate is likely to confirm them.

"The depth of experience these individuals bring in economic and monetary policy, financial regulation, and consumer protection will make them tremendous assets at the Fed," President Obama said in a statement. "I am grateful they have chosen to dedicate their talents to serving the American people."

The nominations aren't likely to prompt a major shift in interest-rate policy. But they would reinforce the Fed's activist bent as policy makers overhaul the central bank to monitor and regulate risk-taking across the financial system, review compensation policies at banks and tighten consumer regulation.

All these responsibilities would be altered if Congress passes legislation overhauling financial regulations.

"The Federal Reserve system is going to be reshaped," said Vincent Reinhart, a former top Fed staffer now at the American Enterprise Institute. "It's more likely to show that it can be activist in its ability to set regulations and enforce those regulations. The governors will influence the direction those actions take."

If the new nominees are confirmed by the Senate, Mr. Obama will have installed four of the seven governors since taking office 15 months ago. His first appointment, Daniel Tarullo, is shaking up Fed bank supervision by scrutinizing bank practices more closely. Mr. Obama also gave Ben Bernanke a second four-year term as chairman.
Obama's Fed Picks
[0428fed01] Associated Press

Peter Diamond, turns 70 on Thursday
Professor, Massachusetts Institute of Technology
Prior positions: Professor, University of California, Berkeley
Education: MIT, Ph.D. (Economics); Yale , B.A. (Mathematics)
Academic Interests: Social Security, pensions, taxation
[0428fed02] Bloomberg News

Sarah Bloom Raskin, 49
Maryland Commissioner of Financial Regulation (Aug 2007 to present)
Prior positions: Managing Director, Promontory Financial Group; General Counsel, Worldwide Retail Exchange; General Counsel, Columbia Energy Services Corp; Counsel, Senate Banking Committee; Staff, Federal Reserve Bank of New York; Staff, Congress's Joint Economic Committee
Education: Harvard Law School, J.D.; Amherst , B.A. (Economics)
[0428fed03] Bloomberg News

Janet Yellen, 63
President, Federal Reserve Bank of San Francisco
Prior Positions: Professor, University of California, Berkeley; Chair , White House Council of Economic Advisers; Governor, Federal Reserve Board
Education: Yale , Ph.D. (Economics); Brown , B.A. (Economics)
Academic Interests: Unemployment and labor markets; monetary and fiscal policies; international trade and investment policy. Read Yellen's Statement on Nomination

For a quarter-century, Fed chairmen have maintained the backing of the board's governors on every monetary policy vote. Some Fed watchers, Mr. Reinhart among them, expect the new governors to nudge the Fed slightly in the direction of easier monetary policy. They also are expected to offset the pressure from regional Fed bank presidents more eager than Mr. Bernanke to tighten monetary policy soon.

Allan Meltzer, a Fed historian at Carnegie Mellon University, said, "I'm not saying they're going to be politically motivated. But they're going to [be] people who are going to be more concerned about unemployment and wait to do something about inflation later."

Others doubt the appointments will make much difference given the chairman's dominance. The president "isn't trying to put his stamp on the monetary policy side," said Lou Crandall, a money-market economist at Wrightson ICAP. "He is looking to add people to the board who take regulation seriously…consistent with his push for entrenching the institution at the heart of the regulatory system."

Picking Mr. Diamond and Ms. Raskin—neither of whom have much experience in monetary policy—"is a symptom of broadening the Fed's responsibilities," said Alice Rivlin, a former Fed vice chair. "The Fed's got a lot on its plate at the moment."

Mr. Diamond, who turned 70 years old Thursday, specializes in Social Security, pensions and taxation issues, and co-wrote a 2005 book on Social Security with Peter Orszag, the White House budget director. He is known as an agile economist comfortable with a range of issues from unemployment to social insurance.

Before taking the Maryland post, Ms. Raskin, who wrote her undergraduate thesis at Amherst College on monetary policy, spent four years at Promontory Financial Group, a firm that advises banks, particularly those with regulatory issues.

"She has been in the examining room, the emergency room and the operating room," said the firm's chief executive, Eugene Ludwig, a former comptroller of the currency.

In a speech last September, she blamed the financial crisis on "a deregulatory fervor that marginalized the interests of many" and said the recession "brought upon us through a combination of greed, weak regulation and weak enforcement." Ms. Raskin, 49, is married to a Democratic state senator in Maryland.

Ms. Yellen, 63, a Yale-trained economist who served on the Greenspan Fed board and chaired President Clinton's Council of Economic Advisers, would succeed Donald Kohn, who retires in June.

Given her personality and background, she is likely to fill his role as occasional mediator between the Washington-based Fed governors and the presidents of regional banks.

Ms. Yellen has a reputation as harboring stronger concern about high unemployment than inflation risks, an image she has recently tried to correct. "I have personally supported an increase in our target for the federal funds rate on 20 different occasions," she said recently.

After the White House announced her nomination, Ms. Yellen said in a statement: "I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability and, if confirmed, I will work to ensure that policy promotes job creation and keeps inflation in check." Ms. Yellen is married to George Akerlof, a Nobel Prize winning economist.