Federal Reserve governor Elizabeth Duke announced Thursday that she would step down from her position at the central bank at the end of August, opening up a spot on the seven-member board for President Obama to fill.
Duke, a Virginia community banker before joining the Fed, was appointed by President George W. Bush in 2008, and served through the financial crisis and the Fed’s unconventional monetary policy operations that began with what is now known as QE1 when Wall Street began to collapse. Duke is the only board member who wasn’t appointed by Obama (Chairman Ben Bernanke was originally appointed by Bush but was reappointed by Obama in 2010). Her term officially expired in January 2012, but she continued serving because there were only five members on the board at the time.
Any replacement for Duke must be approved by the Senate, raising the possibility that Obama will face another tough confirmation fight.
From 2006 to 2012, the Fed’s Board of Governors was undermanned by two members. The Obama administration struggled to fill out the board as the banking collapse took its toll on the economy. After initially neglecting to nominate candidates for the board, Obama saw one candidate, the Nobel Prize-winning MIT economist Peter Diamond, withdraw his candidacy after being held up by Republican senators for 14 months. Only when Obama paired a Democratic nominee, Harvard professor Jeremy Stein, with a Republican, Jerome Powell, to smooth the confirmation process was he able to fully staff the board in May 2012.
Each member of the Board of Governors is a permanent voting member of the Fed’s monetary policy committee, meaning that they have considerable influence over the management of the nation’s money supply. Four presidents from the 12 regional Federal Reserve banks alternate as voting members on a yearly basis, with the president of the New York Fed always voting. Governors also oversee the Fed’s regulation of banks, meaning that Obama’s choice of replacement for Duke will be consequential for the country’s economic policies beyond Obama’s administration.
With Obama getting the opportunity to fill out the board with his nominees, it remains to be seen whether he will find a candidate that can avoid being held up by Republicans in the Senate. Senate Banking Committee Republicans Richard Shelby of Alabama and David Vitter of Louisana, in particular, have demonstrated strong opposition to “dovish” economists who might tolerate high inflation as Fed members.
A spokeswoman for the White House, Amy Brundage, said via Twitter that “President Obama is grateful to Elizabeth Duke for her years of valued service at the Federal Reserve.” The White House has not indicated any possible replacements.