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Of the 82 people to have served on the seven-seat board of governors at the Fed since 1935, only three have been black men and 10 were white women, according to a recent report. (Photo by Michigan State University / AFP)-/AFP/Getty Images

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When the U.S. government rolled out a rescue fund to help small businesses stay afloat during the early days of the pandemic, the Paycheck Protection Program (PPP) was faulted for being too small while doling out support to large companies.

Lisa Cook, a professor of economics at Michigan State University, levelled another criticism: Black-owned businesses received notably smaller PPP loans than white-owned ones, a gap stemming from flaws in the way the scheme was designed.

Now, Ms. Cook is poised to become the first Black woman to serve on the U.S. Federal Reserve’s board of governors after she was nominated by President Joe Biden alongside Philip Jefferson, dean of faculty at Davidson College and a former research economist for the Fed’s board, and Sarah Bloom Raskin, a former deputy secretary of the U.S. Treasury during the Obama administration, who President Biden picked for the top regulatory position at the Fed.

All three are expected to face a rocky ride during the confirmation process, which will culminate in a Senate vote.

Democratic moderates who hold sway in the upper chamber have indicated their support, including Joe Manchin from West Virginia, who says the nominees appear to be “extremely qualified.” That means they’re likely to be confirmed. Yet, they will have to defend their record against attacks from Republican senators, conservative commentators, and business leaders.

Pat Toomey, the top Republican on the Committee, admonished Ms. Raskin and Ms. Cook last week for “serious omissions” in submitted paperwork ahead of Tuesday’s appearance – “shoddy compliance” that he says showed “a lack of respect for Congress.”

Mr. Toomey criticized Ms. Cook for omitting a webinar presentation she gave last year in which she expressed support for Democratic legislation, which would create a commission to study whether Black people should be paid reparations for slavery.

Ms. Raskin, meanwhile, drew heat for not disclosing a letter she wrote attacking 2018 legislation that did “little or nothing to strengthen community banks” serving underprivileged borrowers.

John Cochrane, an economist and senior fellow at the conservative-leaning Hoover Institution at Stanford University, charges that Ms. Cook’s academic work contains “essentially nothing” related to monetary policy or “other traditional Fed topics.”

However, Tina Smith, a Democratic member on the Senate Committee, called the attacks “unfounded” and says they reflected “gross partisan behaviour.” Sherrod Brown, the Democratic chair of the committee, has highlighted the nominees’ stature in public and private spheres.

Ms. Cook has also been supported by fellow academics, such as Peter Henry, an economics professor who formerly served as dean of New York University’s Stern School of Business. He says Ms. Cook’s discovery of big racial disparities in the way that the PPP loans were disbursed encapsulated why she was the right choice for the Fed’s board.

“President Biden has nominated in [Ms.] Cook someone who, frankly, has been ahead of the profession in understanding the importance of market failures in various contexts,” Mr. Henry says. “The central theme of her research is understanding where traditional theories fail to explain the real world.”

For Ms. Raskin, who previously served on the Fed’s board, the criticism has centred on her push for the central bank to take climate-related financial risks more seriously. Energy lobbyists and the Chamber of Commerce have warned that her appointment could damage business.

In choosing Ms. Cook, Mr. Jefferson and Ms. Raskin, President Biden is seeking to fulfil a longstanding pledge to broaden the diversity of the Fed’s top brass.

Sarah Binder, a political scientist at George Washington University, says such an effort was “long overdue” and comes at a critical moment for the central bank, which is fighting the highest inflation in roughly 40 years.

Of the 82 people to have served on the seven-seat board of governors at the Fed since 1935, only three have been Black men and 10 were white women, according to a recent report. Mr. Jefferson, if confirmed, would become the fourth Black man.

Mr. Jefferson, who previously ran the economics department at Swarthmore College, has written extensively on poverty and economic growth. He has also investigated the relationship between education levels and unemployment, and the labour effects of running a “high-pressure” economy.

Some economists hope a more diverse roster will bring a fresh perspective to the 108-year-old institution and mean often-overlooked segments of the population are factored more prominently into economic decision-making.

“What you don’t know, you don’t ask, and the point of having diversity at the table is someone needs to know enough to say, ‘This could be a problem,’” says William Spriggs, an economist at Howard University and AFL-CIO, a union federation.

Ms. Cook, once a staff economist on the White House Council of Economic Advisers during the Obama administration, has researched the economic costs of discrimination in recent years. Her studies have ranged from how racially-motivated violence stymies innovation to output lost because of inequality.

Prior to that, Ms. Cook, who speaks six languages, focused on emerging markets, researching Africa’s economic development and Russia’s banking system.

“She is a very well-rounded person unlike most economists,” says Jeffrey Frankel, her former professor at the University of California at Berkeley, who is now at Harvard University.

The nominees are expected to lean dovish on monetary policy issues, favouring a gradual scaling back of pandemic-era support, but are unlikely to establish a heavy-enough counterweight to steer the board in a different direction at a time when it’s fighting soaring inflation.

“As a team, I see this group as not being dogmatic and being in line with Jay Powell in following the evidence,” says Mr. Spriggs, referring to the Fed chair.

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