Policy: Budgets & Deficits

Senate liberals lay out criteria for Federal Reserve nominee

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Two of the Senate’s most prominent liberal populists have laid out their criteria for the next Federal Reserve chairman, and their qualifications clearly rule out one of President Obama’s favorite candidates, namely Harvard professor Larry Summers.

Elizabeth Warren, a freshman Democrat from Massachusetts, and Bernie Sanders, an independent socialist who caucuses with Democrats, wrote in the Huffington Post on Sunday that whoever replaces current Chairman Ben Bernanke when his term expires in January must have the “right temperament and a willingness to take on Wall Street CEOs when necessary. It is critical that the next Fed chair make a genuine, long-term commitment to supporting those who don’t have armies of lobbyists and lawyers to advance their interests in Washington.”

The senators, considered two of the most aggressive critics of Wall Street’s influence in the federal government, lay out four questions for Fed chairman hopefuls. They ask whether the candidate would set the central bank’s mandate to promote full employment as the “top priority,” presumably over the Fed’s mandate to maintain stable prices. Sanders and Warren also ask whether the candidate would “work to break up ‘too-big-to-fail’ institutions” and blame “the deregulation of Wall Street” for the “worst financial crisis since the Great Depression.”

The column provides a window into the thinking of two Democrats who could pose difficulties for Obama if he does choose to nominate Summers. The two senators’ column is an implicit rebuke to Summers, who many liberals believe helped generate the financial crisis by pushing for deregulatory measures as Bill Clinton’s Treasury secretary in the late 1990s and early 2000s. The Fed is tasked with managing the money supply but also serves as the top financial regulator, and has taken on broad new powers following the enactment of the 2010 Dodd-Frank financial regulatory overhaul.

Warren has signed onto a letter endorsing Janet Yellen, the Fed vice chair whom Obama has named as a top competitor to Summers for the post. Sanders wrote a letter to the president in late July recommending the Nobel laureate economist Joseph Stiglitz or former Labor secretary Robert Reich for Fed chairman.

If the president loses the support of just a handful of Democrats, he could need help from a significant portion of Senate Republicans to confirm his nominee. In 2010, 18 Republicans voted against reconfirming Bernanke, who was originally a Republican nominee. That number will likely rise for anyone nominated by Obama. Eleven Democrats and an independent also voted against Bernanke.

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