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Richard Cordray is seen during his 2018 Ohio gubernatorial bid. Photo: Jeff Swensen/Getty Images

Key Republicans are warning President Biden not to nominate Richard Cordray, a progressive and former director of the Consumer Financial Protection Bureau, to be the top banking regulator on the Federal Reserve.

Driving the news: Sen. Pat Toomey (R-Pa.) is indicating the GOP will use a potential Cordray nomination to re-litigate his tenure at the CFBP, an agency devised by Sen. Elizabeth Warren (D-Mass.) and fiercely opposed by most Republicans.

  • “Richard Cordray’s disastrous and divisive tenure at the CFPB raises serious questions about how he might undermine the Fed’s independence and nonpartisan reputation,” Toomey, the ranking member on the Senate Banking Committee, told Axios.
  • “This is the individual who helped Elizabeth Warren stand up an agency so unaccountable the Supreme Court took away its independent status," said Toomey. "I’d hope the White House considers less divisive figures for this role.”
  • “I like Richard. I respect Richard. Richard is to the left of Lenin,” Sen. John Kennedy (R-La.) told the Wall Street Journal. It reported Tuesday that Biden was considering Cordray to be vice chair of supervision at the Fed.
  • The White House did not immediately respond to a request for comment. the president said last week he'd be making a decision about the three remaining open Fed spots in early December.

Why it matters: In a 50-50 Senate, Biden has to consider how Republicans, as well as Democrats, will respond to his nominees.

  • Last week, the president announced his decision to renominate Fed Chair Jerome Powell for a second term and elevate Lael Brainard, currently a Fed governor, to the other vice chair slot.
  • If all Republicans uniformly oppose Cordray, who was confirmed for his CFPB role in 2013 by a 66–34 margin, he could face a difficult confirmation process.
  • Five of the 12 Republicans who supported Cordray in 2013 remain in the Senate. Toomey, who's since tussled with Democratic administrations on bank regulation, voted against him. Sen. Joe Manchin (D-W.Va.), a key centrist, supported him eight years ago.
  • The White House already is on notice Biden’s pick to lead the Office of the Comptroller of the Currency, Saule Omarova, is unlikely to be confirmed after five Democrats indicated they would oppose her, Axios reported last week.

The big picture: With vast powers to regulate how financial institutions allocate capital, the supervisory role at the Fed crucially important to America’s banks.

  • Progressives lawmakers are pressing the Fed to take a more aggressive role in fighting climate change, and want the vice chair to take a leading role in ensuring America’s financial system doesn’t provide capital for carbon intensive investments.

Cordray, a former Ohio attorney general who ran unsuccessfully for governor, is currently an official at the Department of Education.

  • President Obama used a recess appointment to install him as director of the CFPB, an agency established after the 2008 financial crisis to protect consumers from predatory practices. He was later confirmed.

Go deeper: Biden also is considering Sarah Bloom Raskin, a former Fed governor and deputy Treasury secretary, for the position, people familiar with the matter tell Axios.

  • There are additional candidates, too, Bloomberg reported.

Go deeper

Biden names Sarah Bloom Raskin as Fed's top banking regulator

Sarah Bloom Raskin during a Fed meeting in 2013. Photo: Andrew Harrer/Bloomberg via Getty Images

President Biden will nominate Sarah Bloom Raskin as the Federal Reserve's top Wall Street cop, a Biden administration official said, one of three nominees being unveiled for the critical open seats on the central bank's board of governors.

Why it matters: It's Biden's biggest mark yet on the influential economic body that's center stage as the country grapples with inflation rising at the fastest pace in decades and a recovering labor market.

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.

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