BLOG VIEW: Kevin Warsh is leaving the Board of Governors of the Federal Reserve System this week, after a little more than five years of service. His departure will create a second vacancy on the board, and this opening will compound an astonishing federal problem: Too many crucial offices in Washington are currently or will soon be empty.
Besides the two Fed vacancies, the top offices at the Federal Housing Finance Agency (FHFA) and the Office of the Comptroller of the Currency (OCC) have been empty for too long. The Consumer Financial Protection Bureau (CFPB) is still waiting for an official director, while a pair of major entities – the Federal Deposit Insurance Corp. (FDIC) and the Federal Housing Administration (FHA) – will soon be absent of leadership when Sheila Bair and David Stevens leave their respective jobs later this spring.
Part of the problem in filling top-level jobs has been the partisan rancor in Washington. President Obama twice tried to get Peter Diamond, a professor at the Massachusetts Institute of Technology and a Nobel laureate in economics, appointed to the Fed's Board of Governors, but his nomination has been blocked by a hostile Sen. Richard Selby, R-Ala., the ranking member of the Senate Banking Committee, who dismissed him as ‘an old-fashioned big government Keynesian.’ The same degree of partisan politics helped to stall the president's effort to fill the FHFA vacancy with North Carolina Commissioner of the Banks Joseph A. Smith Jr.
Smith had no stomach for Capitol Hill's machinations and withdrew his nomination, though Diamond is still in the fight – obviously, he believes that three times will be the charm. The threat of a blocked nomination may explain why Elizabeth Warren's name has not been put forth for the CFPB director's spot, though the absence of a new OCC chief has never been properly explained.
Yet at the same time, Obama has chosen not to fill these gaps with recess appointments. President Obama has made a number of these appointments during his presidency to fill several ambassadorial openings and a number of relatively minor bureaucratic positions, but he has curiously refused to extend recess appointments to the aforementioned vacancies.
However, many senators loathe recess appointments, saying it undermine their role within the checks-and-balances process, and they often will not give a fair shake to any recess appointment that comes seeking official confirmation – especially if the recess appointment came after the Senate declined to give its blessing. This is playing out now with the attempts to confirm James Cole as deputy attorney general. The Senate did not confirm Cole to the Senate last year, so he received a recess appointment in December and is able to serve until late 2011. But he would need Senate confirmation to keep the job into next year. Sen. Chuck Grassley, R-Iowa, told the Senate Judiciary Committee that he will hold the recess appointment against Cole as the core reason for blocking his confirmation.
So how can this situation be alleviated? The administration is required by law to cough up a CFPB nominee soon, and it is inconceivable that anyone except Warren will be put forward. (Whether she receives Senate confirmation is another story.) The other entities do not have mandated requirements for filling vacancies, and I suspect that the administration will continue its lethargy and not rush to fill them. After all, the FHFA and the OCC are humming along with ‘acting’ leaders, and the FDIC and the FHA could probably do the same.
As for the Fed vacancies, the Senate is not thoroughly obstinate on this subject – Janet Yellen and Sarah Bloom Raskin received confirmation last fall to join the Fed Board of Governors, while Diamond was blocked. The Diamond nomination is the wrong fight for the administration to take on at this point of time, especially since there is no shortage of highly qualified and non-polarizing economists that can do the job.
However things get resolved, the surplus of leadership holes is embarrassing – even by Washington's shameless standards.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
