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President Biden listens as Lael Brainard speaks after he nominated her to be Fed vice chair in November. Photo: Alex Wong/Getty Images

Some Senate Republicans are open to voting for Lael Brainard, President Biden’s nominee to serve as vice chair of the Federal Reserve, but sound more concerned about Sarah Bloom Raskin.

Why it matters: GOP support for Brainard, a Fed governor whose confirmation hearing will be Thursday, would all but assure her confirmation. But questions about Raskin, Biden’s likely choice to serve as the Fed's top bank regulator, raise doubts for her.

What they are saying: “A president should be able to bring their team in. [Brainard] is part of his team,” Sen. Mike Rounds (R-S.D.), a member of the Senate Banking Committee, told Axios.

  • “I lean to supporting a nominee that the president has requested unless there's a reason not to,” he said, citing some concerns about her environmental positions.
  • “I am inclined to support her but would not make a final decision until I've had a chance to review the hearing transcript,” said Sen. Susan Collins (R-Maine).
  • While not on the committee, Collins is one of four Republicans still in the Senate who voted to confirm Brainard in 2012 by a vote of 61-31.

The big picture: Questions about inflation, which rose to 7% in Wednesday’s CPI report, dominated Fed Chair Jay Powell’s own confirmation hearing Tuesday. They'll also feature in Brainard's.

  • Tamping down inflation is the “most important task,” Brainard will tell the committee Thursday, according to prepared remarks.
  • “Inflation is too high, and working people around the country are concerned about how far their paychecks will go,” she will say.
  • Republicans also plan to press Brainard on how she’ll use the Fed to encourage carbon-neutral policies.

Go deeper: When Biden reappointed Powell to a second term in November, he picked him over Brainard — choosing to elevate her to the No. 2 slot. Both nominations require Senate confirmation.

  • Leading up to the Powell decision, Republicans publicly warned Biden against choosing Brainard for the top job, citing her more aggressive stance on using the Fed to fight climate change.
  • But GOP concern about using the Fed to pursue more carbon-neutral policies seems to have shifted toward Raskin, if she's to be seated as the vice chair for bank supervision.
  • “I've got concerns about whether [Brainard] would be sympathetic to the idea of using the Fed to try to implement climate policy, which is not the role of the Fed,” Sen. Pat Toomey (R-Pa.), the ranking member of the Banking Committee, told Axios.
  • “We know for sure that Sarah Bloom Raskin advocates using the Fed to allocate credit away from, say, the fossil fuel industry,” he said. “That's extremely disturbing.”

Flashback: Raskin, a former Fed governor and deputy Treasury secretary for President Obama, was confirmed twice by the Senate via voice vote, indicating there wasn’t any serious opposition.

  • Republicans are seizing on her more recent writings, according to Bloomberg.
  • She objected to allowing oil, gas and coal companies access to some of the emergency lending programs established in 2020 in response to the pandemic.
  • Raskin allies say Republicans are distorting her position.

The bottom line: Centrist Democrats, like Sen. Jon Tester (D-Mont.), helped scuttle Saule Omarova, Biden’s nominee to lead to Office of the Comptroller of the Currency.

  • Tester told Axios he doesn’t anticipate any problems with Brainard.
  • “I feel positive at this moment,” the senator said.

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.

Rising mortgage rates could slow house price surge

Chart: Axios Visuals

Mortgage rates have jumped to their highest level since early 2020.

Why it matters: The rising cost of home loans could slow the booming American market for residential real estate.

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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