Obama nominee to Federal Reserve Board withdraws

Senate Republicans have succeeded in a 14-month campaign to block one of President Barack Obama’s nominees to the Federal Reserve’s board of governors after Peter Diamond withdrew as a candidate.

Announcing his decision in a New York Times column, Mr Diamond, a Nobel Prize winner, said that every Republican on the Senate Banking committee had opposed him in a recent vote, making it unlikely that he will ever pass the full Senate. “It is time for me to withdraw, as I plan to inform the White House,” he wrote.

His withdrawal that means there are still two vacancies on the Fed’s seven member board – all of whom vote on monetary policy – and highlights the growing difficulty of finding nominees who are acceptable to both sides of Washington’s partisan divide.

Mr Diamond was first nominated in April 2010 but Republicans twice blocked a vote of the full Senate. He was nominated again after last November’s mid-term elections, but of the three Republicans who had previously supported him on the banking committee, two had left the Senate and another changed his mind.

“It is my hope that President Obama will now nominate someone capable of garnering bipartisan support in the Senate,” said Richard Shelby, the ranking Republican on the banking committee who led opposition to Mr Diamond’s nomination.

Mr Shelby has argued the Massachusetts Institute of Technology professor is not qualified because he had no experience “working as a bank regulator or even working in a bank”, no experience “in effectively managing a crisis”, and that “his academic work has been on pensions and labour market theory” and not monetary policy.

But Mr Diamond said that analysing the causes of unemployment is crucial to setting monetary policy. “Understanding the labour market – and the process by which workers and jobs come together and separate – is critical to devising an effective monetary policy.”

“We should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight,” he wrote.

Mr Shelby also opposed Mr Diamond because of his support for fiscal stimulus and the Fed’s programme of quantitative easing but Mr Diamond argued that it was necessary to balance concern about possible future inflation with the “large costs of continuing high unemployment”.

If Republicans refuse to pass any candidate who supported fiscal stimulus or quantitative easing during the financial crisis then it may be hard to find a nominee acceptable to both sides.

Some staffers on Capitol Hill expect the White House to put forward a slate of candidates for financial jobs in order to balance Republican concerns.