Trump Fed nominee could face trouble

One of President Trump's nominees for the Federal Reserve could be in trouble.Marvin Goodfriend, an economics ...

Posted: Feb 9, 2018 7:32 AM
Updated: Feb 9, 2018 7:32 AM

One of President Trump's nominees for the Federal Reserve could be in trouble.

Marvin Goodfriend, an economics professor at Carnegie Mellon, barely cleared the Senate Banking Committee on Thursday, 13 to 12.

At his confirmation hearing last month, Democrats questioned Goodfriend's economic predictions.

In particular, he was criticized for urging the Fed to raise interest rates quickly after the financial crisis, and for suggesting in 2012 that inflation could become dangerously high if the unemployment rate fell below 7%. That never happened.

"The stakes are too high for workers and for the economy," Sherrod Brown, the top Democrat on the panel, said Thursday before he voted against Goodfriend. "We can't take a chance on someone with a decades-long record of prioritizing hypothetical inflation over real people losing their jobs."

Related: As Yellen leaves, Fed will face new challenges

Senator Elizabeth Warren, a Democrat from Massachusetts, told Goodfriend at last month's hearing: "These wrong predictions are not outliers for you."

"They have been part of your overall approach to monetary policy, which effectively ignores the Fed's full employment mandate and instead focuses solely on speculative concerns about inflation," she said. The central bank's job is to ensure price stability and maximum employment.

Republicans have 51 of the Senate's 100 seats. That thin majority is even more challenging with Arizona Senator John McCain's medical absence. Senator Paul Rand, a Kentucky Republican and Fed critic, also said he plans to vote against the nomination.

If Goodfriend isn't able to attract any votes from Democrats or independents, he'll fall short of the 60 votes needed to secure confirmation.

"The math for Goodfriend is bad, and he might not even make it to a full Senate confirmation vote," Ian Katz, an analyst with Capital Alpha Partners, wrote in a note to clients.

Related: Jerome Powell's big test: Raise rates and avoid a recession

It's rare for the Senate to reject a president's nominee to the Fed. A nominee will usually withdraw if it looks like he or she won't clear the hurdle. Massachusetts Institute of Technology economist Peter Diamond was the last Fed nominee to do so in 2011 after a number of Republicans opposed his nomination.

White House spokeswoman Lindsay Walters said the president "stands behind his nomination" of Goodfriend and hopes the Senate will "swiftly" confirm him.

A vote has yet to be scheduled.

Trump nominated Goodfriend in November. If he's approved, he will fill one of four vacant seats on the Fed's seven-member board.

Two of the president's other Fed picks, Chairman Jerome Powell and Governor Randal Quarles, each won Senate confirmation with bipartisan support.

On Thursday, the panel also voted unanimously to advance the nominations of Jelena McWilliams to lead the Federal Deposit Insurance Corp. and Thomas Workman to be an insurance expert member of the Financial Stability Oversight Council.

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