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Sarah Bloom Raskin. Photo: Tom Williams/CQ Roll Call

Sarah Bloom Raskin has emerged as the leading candidate to be President Biden’s choice for vice chair of supervision at the Federal Reserve, with an announcement as early as this week, people familiar with the matter tell Axios.

Why it matters: By settling on Raskin, a former deputy Treasury secretary, for the powerful bank regulator position, Biden is giving progressive senators like Elizabeth Warren (D-Mass.) a policy and personnel win on a position about which they care deeply.

  • He's also avoiding a potentially perilous confirmation fight in a 50-50 Senate.
  • Raskin, currently a law professor at Duke University married to Rep. Jamie Raskin (D-Md.), served as a Fed governor before she joined President Obama’s Treasury department. She's been confirmed by the Senate twice, the last time by a voice vote.
  • A White House official said no final decisions have been made.

The big picture: After Biden announced in November his intent to renominate Fed Chair Jay Powell, a Republican, progressives made it clear they wanted a candidate more in line with them ideologically for the powerful bank regulator slot.

  • “It’s no secret I oppose Chair Jerome Powell’s renomination, and I will vote against him," Warren said in November. "Powell’s failures on regulation, climate and ethics make the still-vacant position of vice chair of supervision critically important."
  • Warren is supportive of Raskin's candidacy, according to a person familiar with the matter.

Between the lines: Biden also had been considering Richard Cordray, who helped Warren stand up the Consumer Financial Protection Bureau, for the vice chair position.

  • But Republicans warned against naming him, promising a bruising confirmation fight.

Driving the news: Biden has three open seats on the Federal Reserve, which will take center stage in 2022 in the fight against inflation.

  • He’s considering Lisa Cook, a former Council of Economic Advisers official under President Obama and current professor at Michigan State University, for one of those slots, Axios has reported.
  • Philip Jefferson, a former Fed economist and now a professor and dean at Davidson College, also is under consideration for the other open seat, according to the Wall Street Journal.

When Biden announced Powell as his pick for the top job, as well as Lael Brainard to serve as the other vice chair, he promised his next nominees would “bring new diversity to the Fed, which is much needed and long overdue, in my view.”

  • Both Cook and Jefferson are Black.
  • The president is expected to announce a slate of nominees for the three positions, according to people familiar with the matter.

Go deeper: Biden has had a challenge filling some key bank regulator positions, including the Office of the Comptroller of the Currency.

  • Centrist Democratic senators rejected Biden's pick for the OCC, Saule Omarova, leading her to bow out.
  • The current FDIC chair, Jelena McWilliams, a key bank regulator appointed by former President Trump, will step down after fighting with Biden appointees.
  • This will give Biden an opportunity to nominate a Democrat for the position.

Go deeper

What Biden's Fed nominations mean for policy

Sarah Bloom Raskin at a 2013 hearing. Photo: Andrew Harrer/Getty Images

Now that President Biden's long-awaited nominations for vacant seats on the Federal Reserve Board of Governors have dropped, the big question is how Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson, if confirmed, might shift policy.

  • The answer: Don't expect any big changes to the central bank's policy direction overnight — but do expect it to prioritize a healthy labor market more in the years ahead.

Why it matters: The Fed's actions shape the economy in ways that outlast the presidents who appoint them — and the Biden-appointed Fed looks to be a more explicitly pro-worker central bank than we've seen in modern times.

The big picture: With inflation running hot, the Fed is in the midst of a pivot to more hawkish monetary policy — possibly including raising interest rates in March.

  • Raskin, Cook, and Jefferson are unlikely to stand in the way of that pivot, and not just because the slow-moving Senate confirmation process means it will likely be well underway before they are confirmed for their new jobs.
  • The Fed is a consensus-driven institution, and the consensus has swung decisively in a hawkish direction in the last three months. Even normally-dovish officials like San Francisco Fed President Mary Daly and Chicago Fed president Charles Evans on board with the policy shift.

But over time, the new additions to the Board of Governors — who have a permanent vote on monetary policy, unlike regional Fed presidents who rotate — have emphasized the importance of running a hot labor market in order to achieve gains for workers and greater racial equality.

  • That implies the three new governors would resist continuing to push interest rates higher once inflation moderates.

What they're saying: "Inflation is so high and political pressures on the Fed are so strong (including from Democrats), that we doubt they will push hard against the will of the committee," wrote Roberto Perli and Benson Durham of Cornerstone Macro, in a client note.

  • But, they add, "Because all of them have expressed views in favor of broader expansion of the labor market, … we can expect them to resist substantial tightening in the future."

Regulatory policy is a different matter. If confirmed as vice chair for supervision — and Republican Senators will try to stop that from happening — Raskin would have more explicit power over a wide range of regulatory policy, and look to rein in the deregulatory impulses of her predecessor, Trump appointee Randal Quarles.

The bottom line: As the Biden Fed takes shape, it will include more voices focused on workers than in modern memory. But the course of policy depends on whether inflation trends allow them to act on those instincts.

Biden's epic failures

Illustration: Shoshana Gordon/Axios

In the two months since signing the $1 trillion infrastructure bill into law, President Biden has by almost every measure bombed big time on the things that matter most.

The big picture: Biden, who marks one year in office next Thursday, has never been less popular nationally, after personally lobbying his party and the public on Build Back Better and voting rights — and failing.

1 hour ago - World

Pentagon: 8,500 troops on high alert for possible deployment to eastern Europe

Photo: Anna Moneymaker/Getty Images

Defense Secretary Lloyd Austin has placed 8,500 U.S. troops on "heightened preparedness to deploy" to eastern Europe in case NATO activates its rapid-response force over tensions with Russia, the Pentagon announced Monday.

Why it matters: No decisions have been made to actually deploy U.S. forces, but the heightened alert level will allow the military to rapidly shore up NATO's eastern flank in the event that Russia invades Ukraine. The Pentagon warned that Russia has shown "no signs of de-escalating," and continues to amass troops on Ukraine's borders.