With Raskin Out, Biden May Be Forced To Go With A Moderate For Fed Regulatory Position

Former Member of the Federal Reserve Board of Governors and Deputy Secretary of the Treasury Sarah Bloom Raskin withdrew her nomination for Federal Reserve Vice Chairwoman for banking supervision on March 15. Now, the White House may be forced to either choose a new moderate candidate or leave the post open for the foreseeable future.

Raskin announced her decision the day after centrist Democratic Senator Joe Manchin said he would not support her due to worries she would discourage Wall Street banks from lending to oil and gas companies. As each party holds 50 Senate seats, this pronouncement by Manchin effectively ended Raskin’s chances for the job.

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If President Biden hopes to win Manchin’s support for one of his nominees, he’ll likely have to abandon any hope of nominating a progressive to the post. “If the White House decides to find another nominee for the supervision post, we presume it will be someone who's viewed as more moderate," said Ian Katz, Managing Director of Capital Alpha Partners.

Treasury Undersecretary Nellie Liang, Atlanta Fed President Raphael Bosti, Acting Comptroller of the Currency Michael Hsu, and Richard Cordray (former head of the Consumer Financial Protection Bureau under President Obama who now oversees student loans for the Department of Education) were all previously in contention for the job. Now, Mary Miller, a former Treasury Undersecretary who until recently was an administrative official at Johns Hopkins University, also seems to be in the mix, according to Isaac Boltansky, Policy Director for brokerage firm BTIG.

Raskin's exit is a win for the oil and gas lobby as well as for big banks. Raskin had received support from progressives who want tougher Wall Street oversight, and she was firmly opposed by the energy industry after suggesting that financial institutions be more aggressively policed by regulators on climate change-related financial risk.

Some, however, do not see Raskin’s withdrawal as a significant stumbling block for Biden’s goal of reining in big banks. "This should not change the risk that the big banks face from Team Biden taking control of the Federal Reserve . . . The plan going forward is the same," said Jaret Seiberg, Analyst at Cowen Washington Research Group.

The White House also has the option to leave the seat open and have other Fed governors act as the de facto regulation lead. This approach was previously adopted by President Obama's administration when Republicans similarly stymied the approval of his nominees.