President Obama has chosen his three nominees to fill vacant slots at the Federal Reserve, reports indicate. We've already heard that he will choose San Francisco Fed President Janet Yellen to take over for Vice Chairman Donald Kohn. But the two new names -- MIT Professor Peter Diamond and Maryland financial regulation commissioner Sarah Bloom Raskin -- are interesting choices to round out the group. Each of these nominees appears to satisfy a specific political objective.
As an expert on unemployment Yellen can help with the present problem the U.S. economy faces. Some have complained that the Federal Reserve is too worried about the financial industry and not concerned enough with Main Street's problems. As vice chair, Yellen would provide greater focus on the unemployment problem. Since so many economists believe the labor market recovery will be a slow one, that expertise will be needed for some time.
Diamond also makes perfect sense in the context of the deficit problem. He has studied and written extensively on pensions and Social Security. He even co-authored a book on saving Social Security with Obama's Office of Management and Budget Director Peter Orszag back in 2005. To the extent that the Fed can help with the deficit and entitlements problems, the President must want someone with strong expertise on the team.
Sarah Bloom Raskin
At this point, there's almost no doubt that the Federal Reserve will obtain additional regulatory oversight of the financial system through whatever financial reform bill is passed by Congress. It's just a question of how much. Raskin would presumably be Obama's choice to make sure that new regulation is effectively executed. She's a lawyer with extensive experience in financial regulation. By perusing her recent speeches, it's pretty clear that she's a strong advocate for consumer protection -- a specific aspect of financial reform that the Obama administration is particularly interested in.