Trump’s Newest Fed Nominee Faces GOP Opposition

WASHINGTON — President Donald Trump’s decision to nominate Nellie Liang, a seasoned financial regulator, to the Federal Reserve’s board of governors is eliciting a rare show of public opposition from some Senate Republicans, who want the Fed to loosen its grip on large banks.

Those Republicans, including members of the Senate Banking Committee, have continued to express concerns about Liang’s record on financial regulation despite continuing efforts by the White House and by the Fed’s chairman, Jerome H. Powell, to make the case for Trump’s pick.

Liang, 60, is a longtime Fed official who played a key role in the construction of stronger regulations after the 2008 financial crisis. In the years afterward, she led a new department focused on monitoring financial stability. She left the Fed last year to join the Brookings Institution, where she is a senior fellow in economic studies.

A spokesman for Sen. Thom Tillis, R-N.C., said on Tuesday that he had “serious concerns about Nellie Liang due to several policy positions she laid out during her time” at the Brookings Institution.

Corey Lewandowski, Trump’s former campaign manager, publicly urged Trump last week to pull Liang’s nomination. In an opinion piece published in The Hill, Lewandowski criticized the Fed for raising interest rates despite Trump’s repeated objections. The president recently called the central bank’s rate hikes “my biggest threat” and has said he was disappointed in Powell.

Describing the Fed as a “rogue agency” engaged in “trying to sabotage the Trump economic recovery,” Lewandowski urged Trump to “fire a torpedo across the bow of the Fed” by reversing his own decision and withdrawing Liang’s nomination. Lewandowski added that if the Fed persisted in raising rates, Trump should consider asking for Powell’s resignation.

Trump nominated Liang on the recommendation of some of his top economic advisers, including Larry Kudlow, the director of the National Economic Council, and the White House has told Republicans it is committed to the decision. The choice of Liang, announced in September, is also supported by Fed officials, including Powell, and it was widely applauded by others in the relatively small world of central banking, who saw Liang’s expertise in regulation as a valuable addition to the Fed’s board.

Powell has praised Liang in conversations with Senate Republicans.

But representatives of the banking industry almost immediately began to quietly make the case to Senate Republicans that it would be a mistake to confirm Liang. They argued she might seek to impede congressional efforts to reduce the burden of postcrisis regulations.

Tillis, whose state is home to Bank of America, the nation’s second-largest bank, has been the most outspoken member of the Senate Banking Committee in expressing concerns.

One example: Republicans want the Fed to provide banks with advance information about the details of its annual stress test, which requires banks to demonstrate they have the financial strength to weather a financial crisis. Liang, who played a leading role in the creation of the stress tests, has expressed support for some measures that might ease the burden of the annual tests. But she, along with other former Fed officials, have cautioned that providing too much information could undermine the tests by allowing banks to essentially game the system.

Adam Webb, the spokesman for Tillis, said Liang was not sufficiently supportive of the calls for increased transparency.

“It is not clear that Ms. Liang will be an advocate for reducing some of the undue burden regulations place on banks all across the U.S.,” Webb said.

As a member of the Fed’s board of governors, Liang would hold one of seven votes on regulatory issues. She would also serve as a voting member of the Fed’s monetary policy committee.

The Fed’s vice chairman for supervision, Randal K. Quarles, would remain the lead official on regulatory issues. But Ian Katz, a financial policy analyst at Capital Alpha Partners, a research firm for investors, said Liang, by virtue of her experience, would almost certainly play an influential role.

“She’s made her career on financial stability issues, and I would fully expect her to be an influential voice,” he said. “And if you’d like to see less regulation and looser oversight, then this isn’t who you’d pick. You may think she would be too quick to put the brakes on or to rein in certain activities.”

A spokesman for Sen. Mike Crapo, R-Idaho, chairman of the Senate Banking Committee, said Tuesday he was aware of the concerns some Republicans had expressed about Liang, and that he was keeping an open mind. Crapo has not yet met with Liang.

A spokesman for Sen. Pat Toomey, R-Pa., said the lawmaker also had concerns about Liang’s views on regulation, but added that Toomey was keeping an open mind and looking forward to meeting with Liang.

The Banking Committee has not scheduled a hearing for Liang and there is a chance that her nomination could expire if lawmakers do not act before the next Congress takes office in January. In that event, Trump could either re-up her nomination or choose another candidate. Trump previously nominated candidates for two other vacancies on the Fed’s board. One of those nominees, Michelle Bowman, the head of banking regulation in Kansas, is expected to be confirmed by the Senate after the November elections. But the Republican leadership has not scheduled a vote on the other nominee, Marvin Goodfriend, an economist at Carnegie Mellon University.

Sen. Rand Paul, R-Ky., has publicly opposed Goodfriend’s nomination.