White House weighs two key Fed nominations: reports

President Biden is considering nominating Federal Reserve board member Philip Jefferson for the role of Fed vice chairman and World Bank U.S. Executive Director Adriana Kugler for a spot on the U.S. central bank’s board of governors, according to the Wall Street Journal and New York Times.

Jefferson would take the spot last held by former Fed Vice Chairwoman Lael Brainard, who moved to the White House in February to head up the National Economic Council, which spearheads the president’s economic agenda.

Brainard’s departure left a vacancy on the Fed’s board of governors, comprising seven members who are nominated by the president and confirmed by the Senate. Kugler would take Brainard’s governor spot as Jefferson moves into the vice chair position, and she would become the first Hispanic member of the Fed board.

The White House did not immediately respond to a request for confirmation on the potential nominations of Jefferson and Kugler.

Jefferson’s committee assignments include board affairs, economic and monetary affairs, and supervision and regulation, as well as the subcommittee on smaller regional and community banking.

Supervision and community banking are two areas in the financial spotlight following the collapse of some of the largest banks in U.S. history over the past few months, which largely catered to wealthy clientele and received publicly administered rescues using a variety of financial mechanisms.

Those rescues, which are symptomatic of a larger “bailout culture,” according to one Federal Deposit Insurance Corporation regulator, prompted a deposit flight out of smaller and regional banks toward some of the too-big-to-fail banks, which are subject to greater regulation and saw huge first-quarter profits. 

Jefferson may face political and industry pressure to make some course corrections in Fed regulatory policy regarding smaller banks.

“To ensure the nation responds appropriately to recent developments, policymakers must distinguish large, risky banks from the community banks that serve local consumers and small businesses. Given these vastly different banking models, Washington should ensure any response to recent closures at larger institutions does not affect the community banks that continue to do right by their customers and hometowns,” Independent Community Bankers of America (ICBA) President Rebeca Romero Rainey said in a statement on Monday.

Kugler is a labor economist with the World Bank and is on leave as a professor of public policy and economics at Georgetown. She has also held top positions in the Business and Economics Statistics Section of the American Statistical Association.

A paper featured on her World Bank page about labor market reforms in Columbia concludes that making it cheaper for companies to fire people and decreasing employees’ job security increases the level of employment.

Columbian labor market reform in 1990 “contributed to reducing unemployment … because it generated greater flows out of unemployment than into unemployment,” Kugler wrote.

“Welfare considerations of labour market reform should not only recognise the efficiency gains from greater mobility and the benefits from lower unemployment that may be brought about by a reform, but also the welfare gains of compositional changes towards better jobs,” she wrote.