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Obama looks to Republican to fill Fed opening

Jeremy Stein, professor of economics and finance at Harvard University Jeremy Stein

Tim Boyle/Bloomberg

U.S. President Barack Obama might finally have found a way around Republican opposition to his nominees for senior government positions: appoint a Republican.

Mr. Obama Tuesday nominated Jerome Powell, a senior official at the Treasury Department under President George H. W. Bush, to fill an opening at the Federal Reserve Board.

It's rare for presidents to stray from their own flock to fill such a prominent position.

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But in an intensely partisan Washington, backing by the White House isn't always enough to fill government posts in a system where a single senator can block senior appointments. Earlier this year, Peter Diamond, a previous Fed nominee and Nobel laureate in economics, pulled out in the face of partisan opposition.

By putting up a candidate with a Republican background, Mr. Obama stands a better chance of winning support for his choice to fill a second vacancy at the Fed: Harvard University economist Jeremy Stein, who served as an adviser to the current administration in 2009.

Mr. Powell, who is currently a visiting scholar at the Washington-based Bipartisan Policy Center, was a vocal critic of the Republican threat to allow the U.S. to default during this summer's debate over raising the legislative debt ceiling. He led an analysis by the think tank that predicted failure to raise the debt ceiling would result in an immediate cut in federal spending of 44 per cent, creating a "chaotic" environment.

However, Mr. Powell's background is in investment banking, spending many years as a partner at Washington-based Carlyle Group. Mr. Stein is an expert in finance and banking, suggesting Mr. Obama intends the nominees to bolster the Fed's expanding role in financial regulation. Neither nominee has a deep background in monetary policy, which suggests the two would follow the lead of Chairman Ben Bernanke.

"We do not view Stein or Powell as having any particular bent on the conduct of monetary policy and, if approved, would view them as voting in line with the chairman and vice chair regarding the implementation of policy," Michael Gapen, an economist at Barclays Capital in New York, said in a research note.


Jeremy Stein Age: 51

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Education: Bachelor's degree in economics from Princeton (1983) and PhD in economics from the Massachusetts Institute of Technology (1986).

Primary Occupation: Academic

Current employer: Harvard University (since 2000). Previous experience: senior adviser to the Treasury secretary and staff member of the National of Economic Council, 2009; finance professor of finance at MIT's Sloan School of Management, 1990-2000; assistant professor of finance at Harvard, 1987-1990. Quotation: "High leverage is for financial firms like what a performance-enhancing drug is for elite sprinters: even if the drug is harmful to health and only adds a few hundredths of a second to their times, with all else so closely matched, they may not feel they can afford not to take it."


Jerome "Jay" Powell Age: 58 Education: Princeton University (1975) and Georgetown University Law Center (1979). Primary Occupation: Investment banker Current employer: Bipartisan Policy Center. Previous Experience: partner at the Carlyle Group, 1997-2005; undersecretary for finance at the Treasury Department under George H. W. Bush; invest banker at Dillon Read and Co. in the 1980s. Quotation: "I am a deficit hawk, but I am worried," Mr. Powell told the Huffington Post in early August. "The real question is how we execute long-term deficit reduction without holding our head underwater for the next 10 years."

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More

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