The Federal Reserve Board makes key decisions about our economy and our financial system. It sets short-term interest rates and regulates the big banks.
For the past four years, it has been led by its first woman chair, Janet Yellen. Under Yellen’s leadership, the Fed has been focused on putting people to work—on full employment—in a way we haven’t seen in decades. This is why we have seen steady job growth over this period.
But President Donald Trump chose not to reappoint Yellen. The man he did nominate, Jerome Powell, comes from Wall Street, but he has worked with Yellen on the Fed. More appointments are on the way because of several vacancies on the Federal Reserve’s Board of Governors.
If not done right, this changing of the guard at the Fed poses a real threat to working people. If these vacancies are filled with the wrong people, monetary policy could turn hostile to jobs and the deregulation of the big banks could lead to investment capital moving away from Main Street and back to Wall Street speculation, starving operating businesses and threatening to bring about another financial crisis.
Some background. The Federal Reserve is an enormously powerful economic policy institution whose decisions have deep ramifications in the daily lives of working families. The Fed sets interest rates and its decisions impact a gamut of rates—including credit card rates, mortgage rates, auto loan rates and the rate of interest paid by federal, state and local governments. All of this, in turn, affects the level of economic activity, the availability of jobs and wages.
These are critical "bread and butter" concerns for all working people, which is why unions must monitor and influence appointments to the Federal Reserve.
The current situation. Trump’s nominee, Powell, is moving toward a confirmation vote in the Senate. In the coming months, Trump will be nominating more individuals to fill four other vacant slots.
Consequently, in the space of a few months, the president will have appointed five out of seven members of the Federal Reserve Board of Governors.
Given its powers and given its policy discretion, it is essential that the Fed be governed by individuals of the highest caliber who have a true commitment to public service in the public interest. To make sure this is the case, we believe nominees should be selected in accordance with six fundamental criteria listed below and described in more detail here:
- Character and independence.
- Experience and record.
- Commitment to full employment.
- Managing inflation as part of the larger economic picture.
- Commitment to financial regulation.
- Policy driven by what is happening to real people, not mathematical rules.
These criteria are nonpartisan, and they should guide the president’s choice of nominees as well as consideration of nominees by the Senate. They also should guide future administrations, regardless of political stripe.
Applying these criteria can help ensure that the Fed helps the economy create jobs, that real wages rise in line with productivity growth and that working people share in the wealth we help create.