Bernanke Stands to Gain Financial-Market Experts With Nominees

Federal Reserve Chairman Ben S. Bernanke stands to gain two lieutenants with expertise on financial markets if the Senate confirms President Barack Obama’s nominees to the Board of Governors.

Jerome Powell, a former private equity manager and Treasury undersecretary under President George H.W. Bush, and Jeremy Stein, a Harvard University economist and former adviser to Treasury Secretary Timothy F. Geithner, will testify before the Senate Banking Committee today. They were nominated by Obama in January to fill vacant seats on the Fed’s board.
Enlarge image Jeremy Stein

Jeremy Stein served in the Obama administration from February to July 2009 as a senior adviser to the Treasury secretary and on the staff of the National Economic Council, according to Harvard’s website. Photo: Tim Boyle/Bloomberg

The two need to overcome partisan wrangling in the Senate, which has delayed action on nominations for financial regulatory posts and earlier rejected a Nobel laureate economist, Peter Diamond, for a seat on the Fed. If confirmed, they would fill a void left by Kevin Warsh, a former Morgan Stanley banker and close confidante of Bernanke during the financial crisis, who resigned from the board in April, said Antulio Bomfim, a former Fed economist.

“I don’t think there’s been anybody with either strong experience or academic credentials in financial markets” since Warsh left, said Bomfim, now a senior managing director with Macroeconomic Advisers LLC in Washington. “Together they bring both.”

Nominees for positions at the Fed, the Federal Deposit Insurance Corp. and the Comptroller of the Currency have been in limbo since Obama in January used a recess appointment to install Richard Cordray as the first director of the Consumer Financial Protection Bureau without formal Senate approval.
60 Votes Needed

The president made the appointment of Cordray after Republicans blocked his confirmation in December. While the Democrats control 53 votes in the 100-member chamber, Senate leaders needed at least 60 senators to advance the nomination.

“There’s still certainly some bitterness about Cordray” among Republicans, said Mark Calabria, an economist and the director of financial regulation studies at the Cato Institute and a former senior aide for Republicans on the Senate Banking Committee.

“It’s not clear whether Republicans will oppose them,” Calabria said of the Fed nominees. “At minimum there will be a party-line vote that gets them out of the committee,” he said.

Gaining committee approval wouldn’t ensure that Powell and Stein later win appointment in a vote by the full Senate. Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell of Kentucky, said the Republican leader hasn’t indicated yet whether he backs either of the Fed nominees.
Norton, Berner

The committee will also consider the nominations of Jeremiah Norton to the board of directors of the Federal Deposit Insurance Corp.; Richard Berner as director of the Treasury Department’s Office of Financial Research; and Christy Romero as special inspector general for the Troubled Asset Relief Program.

The Fed’s board currently consists of Bernanke and Vice Chairman Janet Yellen, both economists; Daniel Tarullo, a former professor at the Georgetown University Law Center; Sarah Bloom Raskin, a former top bank regulator for Maryland; and Elizabeth Duke, who had been a community banker.

“I’d like to see some folks on the board who have some more understanding of the private economy,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.

Stein, 51, served in the Obama administration from February to July 2009 as a senior adviser to the Treasury secretary and on the staff of the National Economic Council, according to Harvard’s website. He was also a senior staff economist on the Council of Economic Advisers from September 1989 to June 1990, leaving just before Powell was nominated to a Treasury post.
Debt Markets

Stein rejoined Harvard as an economics professor in 2000 and has served on the New York Fed’s Financial Advisory Roundtable since 2006. He has focused his research on topics including debt markets, corporate investment and stock market efficiency.

Powell, 59, is a visiting scholar at the Bipartisan Policy Center in Washington. He was a partner at the private equity firm the Carlyle Group LP from 1997 through 2005, where he led the industrial group within the U.S. buyout fund, according to a biography from the Bipartisan Policy Center.

Powell disclosed personal financial assets through Nov. 2011 of at least $20 million, according to forms filed with the Office of Government Ethics and obtained by Bloomberg News. That would make him the Fed board’s wealthiest member, if he wins Senate approval.
Yellen Assets

Last year, Yellen and her husband, George Akerlof, a Nobel laureate, reported assets ranging between $5.1 million and $13.7 million for 2010, making her the wealthiest current governor based on disclosed financial assets.

Stein previously revealed financial assets between $3 million and $6.3 million.

Duke disclosed assets between $3 million and $8 million in 2010, while Bernanke reported assets between $1 million and $2.3 million. Raskin and Tarullo each disclosed between $1 million and $4 million in financial assets. The disclosure forms report the value of assets in ranges, making a precise tally impossible.

Powell’s 196-page disclosure form showed family holdings in hundreds of individual stocks, municipal bonds, private equity holdings, hedge funds and other accounts. In a letter also provided by the Office of Government Ethics, Powell said that if confirmed to the Fed board he would divest his private equity and hedge fund holdings and those in financial companies.

Powell didn’t respond to an e-mail and a telephone message seeking comment through his office at the Bipartisan Policy Center.
‘Real Relief’

“It will be a real relief to Bernanke and the other governors to have full staffing” on the board, said Stephen Oliner, a resident scholar at the American Enterprise Institute in Washington and a senior staff economist at the Fed until March 2011.

“There’s a lot of administrative work that the governors have to do that is picked up through committee assignments such as overseeing the Reserve Banks, the board’s operations, its budget, construction projects, the sort of things that are not related to monetary policy but nonetheless are necessary,” he said.