By Denny Gulino

WASHINGTON (MNI) – The Federal Reserve Board’s two newest members,
Jeremy Stein and Jerome Powell, were formally sworn in Monday with
Chairman Ben Bernanke presiding and their families looking on, about a
month after they actually assumed their posts and almost a week
following their first FOMC meeting.

Stein assumed his position on May 30 and Powell his five days
earlier, following their confirmation by the Senate May 17.

Their confirmations marked the first time the Board’s seven slots
were all occupied since April 2006. Their long road to confirmation was
a case study of how divided government and the partisan debate over
economic policy can stymie key decisions on Capitol Hill.

Sen. David Vitter, a Republican, had held up the two confirmations
for almost three months to register his opposition to what he considers
the Fed’s overly accommodative policies.

Earlier the Senate Banking Committee’s Republicans had shot down
the nomination of Peter Diamond, a winner of the Nobel Prize in
economics and MIT professor since 1966. He was deemed to be too grounded
in labor market theory by the committee’s ranking Republican Richard
Shelby. He was also opposed by the conservative Club for Growth group as
an advocate of “interventionist” monetary policy.

After Diamond, the White House intended to choose a Republican as a
nominee to balance Democrat and Harvard professor Stein and that way
increase the chances of committee approval. But the first attempt didn’t
work either. The chosen, Columbia University Professor Richard Clarida,
who had been a Treasury official in the Bush administration and an
adviser to PIMCO, withdrew from consideration without saying why.

The name of another Republican, Powell, was floated after Clarida
withdrew. Powell also had served at the Treasury during a Bush
administration, that of George senior and he was a partner at the
private equity firm Carlyle Group until 2005. This time committee
Republicans, seemingly reluctantly, allowed the confirmations to
proceed.

Sen. Vitter still opposed them, as did his Republican colleague Jim
DeMint, but for Stein and Powell neither chose to exercise a senator’s
prerogative of freezing nominations any longer. And the nominees were
able to get Sen. Bob Corker’s acquiescence, if not support. Republican
Corker said both candidates were not as “hawkish” as he would like but
he did acknowledge that at least, both appeared to be qualified.

Another Republican, Lamar Alexandeer, suggested a reason his party
was allowing anyone President Obama nominated to get through, saying
Republicans hoped Democrats on the committee would be as cooperative in
approving any Mitt Romney nominations in case he’s sworn in as president
next year.

The next president may have at least one opportunity, perhaps more,
to send someone to the Fed board. Powell is filling the term of office
left unfinished by Federic Mishkin that expires in 2014.

However unless someone is confirmed as his replacement he could
keep going, as Elizabeth Duke has done. She announced in January she
would stay “for a while” on the board beyond the expiration of her term
at the end of January.

At the time she said she felt her background as a commercial banker
was useful for the board. Without her presence at the time, the board
would not have had the five votes necessary for many official actions.
In fact, Bernanke had to certify that she did not have to recuse herself
in the consideration of anything having to do with Wachovia Corp., later
absorbed by Wells Fargo, from which she begins to get $1,000 a month in
pension payments in 2017.

“I think it is important to have a full Board,” she said, “in part
because of the volume of work, but also because it is helpful to have a
diversity of backgrounds and expertise to address the breadth and
complexity of the issues that require Board action.”

Sara Bloom Raskin’s terms ends Jan. 31, 2016. That anyone who fills
an unexpired term can be reappointed, is specified under section 10(2)
of the Federal Reserve Act. Stein fills the post vacated by Kevin Warsh,
which runs through 2018. Anyone who fills a full term, has to leave the
board.

Janet Yellen’s term as vice chair ends Oct. 4, 2014 and her 14-year
term as board member runs until Jan. 31, 2014.

In addition, Chairman Bernanke’s term of chairman ends Feb. 1, 2014
and if not reappointed, would not surprise anyone if he did not serve
the rest of his term of governor which goes until Jan. 31, 2020.

** MNI Washington Bureau: 202-371-2121 **

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