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U.S. Senate Majority Leader Harry Reid moved to force a vote on two nominees to the Federal Reserve Board, setting the stage for a vote as early as this week.
Reid, who filed a procedural motion today, said the U.S. needs a “fully functioning Fed” and can’t afford further delays. He made clear that a $2 billion trading loss at JPMorgan Chase & Co. (JPM) motivated his decision to act now to bolster the regulatory board.
“They were betting like you would do at a craps table in Las Vegas,” the Nevada Democrat said. That would be fine, he said, “if they did it with their own money. But the problem is, the way Wall Street’s been working, is that heads they win, tails we lose.”
The Senate Banking Committee on March 29 approved by voice vote the nominations of Harvard University professor Jeremy Stein and Jerome Powell, an attorney and private equity investor who was a Treasury undersecretary for President George H.W. Bush.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said both nominees probably will be confirmed.
“I haven’t looked carefully at it, but my impression is there is bipartisan support,” he said after a closed-door meeting of Senate Republicans.
The loss announced last week at JPMorgan may bolster the case for supporters of Stein and Powell, who are experts in the financial markets, that their expertise is needed at the Fed, said Sarah Binder, a senior fellow at the Brookings Institution in Washington who researches the relationship between the Fed and Congress.
“The story provides nice ammunition for Democrats for their argument that the Fed Board needs to be fully staffed and that these two nominees in particular are the right picks,” said Binder, also a professor at George Washington University. “In theory the news raises the heat on Republicans for blocking confirmation. But I don’t see much evidence that Republicans are chastened by the news.”
JPMorgan Chief Executive Officer Jamie Dimon said May 10 that his firm suffered the trading loss after an “egregious” failure in a unit managing risks.
The loss has prompted scrutiny from the Fed, which is in the process of enacting rules aimed at boosting capital and improving risk-management processes at the biggest banks. The central bank has deepened its oversight of the largest financial institutions following the Dodd-Frank Act, the most significant overhaul of financial regulation since the 1930s.
Republican Senators James DeMint of South Carolina and David Vitter of Louisiana opposed both nominations. Vitter has said he will object to holding a vote in the full Senate.
“These two Fed nominations and Fed monetary policy are tremendously important matters,” Vitter said in a statement before Reid’s move was made public. “Because they are, and because I have serious concerns with the Fed’s activist, easy money policies, I’m demanding a Senate debate and vote rather than just rubber-stamping all this with no debate.”
The nominations would need bipartisan support for Senate confirmation. While Democrats control 53 votes in the 100-member chamber, Senate leaders would need the votes of at least 60 senators to advance the nominations to a final vote.
When Powell and Stein appeared before the banking committee for their nomination hearings earlier this year, they underscored their experience with capital markets. Powell emphasized his work as an investor and investment banker, and Stein discussed his research on the 1987 stock-market crash and the effect of monetary policy on the banking system.
Powell was a partner at the private-equity firm the Carlyle Group LP (CG) 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, where he is a visiting scholar.
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.
The Fed’s board includes Chairman Ben S. 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.
If confirmed, Powell would fill the term vacated by Frederic Mishkin, which expires in 2014. Stein would fill the seat of former governor Kevin Warsh, with a term that lasts through 2018.
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