Jan 27, 2022 - Economy & Business

One weird rule affecting Biden's Fed picks

 Former Fed chair and quasi-Georgia native Ben Bernanke. Photo: Saul Loeb/AFP via Getty Images

Former Fed chair and quasi-Georgia native Ben Bernanke. Photo: Saul Loeb/AFP via Getty Images

A little-known, often-circumvented provision of the Federal Reserve Act is causing new problems for President Biden's nominees to the world's most powerful central bank.

Driving the news According to the law that established the Fed, each member of the seven-member Board of Governors must come from a different one of the 12 regional districts that divide up the U.S. Three of the president's nominees appear to live in the same Fed district.

Why it matters: Republicans could use this as a reason to oppose Biden Fed nominees — but it exposes a longstanding practice of creative license in applying a century-old law.

The big picture: The Richmond, Virginia, Fed district stretches from the Carolinas to Maryland, so it encompasses both the Washington, D.C., area, where Biden nominees Jerome Powell and Lael Brainard reside, and the vicinity of Davidson College in North Carolina where Philip Jefferson is a dean.

  • Sen. Patrick Toomey, (R-Pa.), the top Republican on the Senate Banking Committee, noted the issue in a letter to President Biden, suggesting it may become ground for opposing the nominations.

Yes, but: Presidents of both parties have used great creative license in assigning Fed governor nominees to a particular Fed district in order to make sure their preferred picks can pass legal muster.

  • Former chair Ben Bernanke spent his youth in South Carolina (part of the Richmond Fed district); his young adulthood in Cambridge, Mass. (Boston district) and lived in Princeton, New Jersey, (Philadelphia district) before being named a Fed governor. Yet in nominating him, George W. Bush identified him as coming from the Atlanta Fed district because he was born in Georgia.
  • Current Fed chair Powell, appointed by Presidents Obama, Trump, and now Biden, grew up in the D.C., area, and has spent his adult life in New York and D.C., but is classified as coming from the Philadelphia Fed district. He went to college at Princeton.

The bottom line: Toomey is calling the Biden administration out on a longstanding inconsistency in American financial governance.

Go deeper