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**JANUARY 14, 2022**

Kuttner on TAP

Three Great Fed Appointees, Led by Sarah Bloom Raskin

Biden's superb stream of progressive financial regulatory nominees
continues.

Sarah Bloom Raskin will replace the anti-regulation Randy Quarles on the
Fed's Board of Governors as vice chair for supervision, as part of a
new 4-to-3 progressive majority. The other two excellent nominees are
economists Lisa Cook and Philip Jefferson, both African American,
creating the most progressive and diverse Federal Reserve ever.

Under Fed Chair Jay Powell and Quarles, the Fed weakened bank capital
requirements, gutted the Volcker Rule restricting derivatives trading,
and was far too indulgent of bank mergers. All of this can and should be
reversed.

In addition, several new areas demand strong regulatory action,
including regulation of crypto, non-bank fintech, as well as climate
issues, a special favorite of Raskin. The new progressive Fed majority
is also in a strong position to challenge the conventional wisdom on
inflation and interest rates. As the

**Prospect**'s extensive reporting on the supply chain debacle has
demonstrated, most of today's inflation is the result of supply
bottlenecks and opportunistic price increases, not overheated demand.

As a former Fed governor (2010-2014) and deputy Treasury secretary
(2014-2016), Raskin knows the regulatory machinery as well as she
knows the industry abuses. One possible flashpoint is conflict between
this newly progressive majority and the Fed permanent staff, a source of
conservative undertow long accustomed to wielding immense power.

Another potential conflict is with Treasury Secretary Janet Yellen, a
former Fed chair who has brought with her to Treasury the more
pro-banking Fed culture as well as several conservative Fed career
officials, such as Nellie Liang, now Treasury undersecretary for
domestic finance. In a weird inversion, the traditionally conservative
Fed could now be more progressive than a Cabinet department that reports
directly to a progressive president.

Raskin will work closely with the one holdover Democrat at the Fed, Lael
Brainard, who has often been the lone dissenter on issues of bank
mergers and other regulatory issues. With the resignation in disgrace
for insider trading of the current general vice chair, Richard Clarida,
Biden has elevated

Brainard to general vice chair.

All of this raises the intriguing question of what will become of Jay
Powell. With his reassurance that inflation could be contained and
testimony that there was no reason to rush into a rate hike, Powell
managed to sweet-talk Biden into reappointing him. No sooner did he get
the job than Powell reverted to inflation hawk.

Normally, the Fed chair wields enormous power, but the Fed operates by
consensus. A chair who finds himself on the losing side of votes can't
function. Fed watchers believe that the genial Powell will find ways to
compromise and avoid split votes. The last thing he wants is a repeat of
the recent episode at the FDIC, where the Democratic majority outvoted
the chair, leading to her resignation
.

Much of Biden's legislative program is blocked for now, but his use of
the power to appoint and regulate remains formidable.

****

~ ROBERT KUTTNER

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Follow Robert Kuttner on Twitter

**Robert Kuttner's latest book is**

The Stakes: 2020 and the Survival of American Democracy
.

[link removed]

There Is a Bully Pulpit
And
thanks to the Supreme Court, Biden will need to use it. BY DAVID DAYEN

Rollups: All Monopolies Are Local
How one
supermarket chain, Stop & Shop, abuses property transfers to frustrate
competition BY ROBERT KUTTNER

Altercation: Why Journalism Isn't Conveying the Threat to Democracy

It's not just both-sidesism. It's also how journalists' jobs have
been compelled to dumb down. BY ERIC ALTERMAN

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