Lindsay and Ann Saphir (NYSE:) Dunsmuir

(Reuters) – Former Federal Reserve Governor Sarah Bloom Raskin and Lisa Cook from Michigan State University, as well as Philip Jefferson of Davidson College, will appear in front of the Senate Banking Committee Thursday to hear confirmation of their nominations for the powerful Board of Governors at the U.S. Central Bank.

The three nominees would be approved to join the Fed’s seven-member Board headed by Jerome Powell. Raskin will serve as Fed vice-chair for supervision. He is the nation’s leading banking regulator and central bank’s leader on Wall Street rules-making.

What does the Fed Governor do to make $203,700 per year? And what are the expectations of nominees when they sit behind their desks.

CONFIRMING INTEREST RATE

Fed governors have the first responsibility of setting monetary policy. Their goal is to maintain inflation at a minimum and increase employment in the biggest economy on the planet.

Each year the Fed’s Governors and Presidents of 12 Regional Fed Banks hold a policy meeting lasting two days. They usually meet in the 2-story boardroom with a chandelier in Washington, which is located in the U.S. Central bank building. Each meeting ends with a mural depicting the United States displaying the decision making process.

Along with the President of the New York Fed and the Fed chair, the vice-chair and the Fed chair lead this process. They meet multiple times before each meeting, gathering to discuss the economic outlook, and making policy decisions. Fed governors spend 20-30% of their time on Monetary Policy, which is concentrated over a one-to two-week period prior to every policy meeting.

This schedule didn’t work during times such as the 2007/2009 financial crisis or the 2020 COVID-19 pandemic. The Fed had to take emergency actions, and meetings lasted between the morning and the evening.

MAKING A MARK ELSEWHERE

The governors’ committees take up a large portion of the time. They oversee the financial industry, as well as the payments and community outreach.

“Those committees https://www.federalreserve.gov/aboutthefed/bios/board/default.htm are real work,” said Betsy Duke, who was a Fed governor from 2008 to 2013. You can’t imagine doing this job as someone who is only interested in one issue.

Governors usually chair one committee, and then serve on several others depending on their interests and expertise. Raskin is an example. He would head the oversight and regulation committee. This includes driving bank supervision including capital requirements and annual stress tests.

GIVING SPEECHES, DELIVERING PROJECTS

Other duties include giving speeches and running special projects, or being the Fed’s point person in a particular region or for an international group. It all depends on each governor’s interests.

Randall Kroszner was a Fed Governor from 2006 to 2009. He said, “There’s no playbook.”

Richard Clarida, former Fed Vice Chair, led a review over a period of one year and a half that examined the Fed’s policy framework. This helped to shape the bank’s response to the pandemic. Recently nominated as Clarida’s successor, Governor Lael Mindard delivered 15 speeches to last year. This was more than any other Fed vice chair. She presented her views on everything from monetary and digital currency to climate change.

Governor Michelle Bowman is a member of a subcommittee focusing on small banks. However, she has been largely focused upon community banking and other related issues.

NAVISTATING FOEDS’ CULTURE

It is likely that Cook and Jefferson will need some time to adjust to the complex apparatus and cultural differences of their new roles.

More than 2,500 Fed board members are employed, with more than 400 economists holding PhDs. The Fed bank system employs almost 23,000 people.

Andrew Levin is a Dartmouth College professor of economics and a former Fed employee. He said that the first year or so can be difficult because the Fed’s complex system is overwhelming. There’s no learning curve.

Raskin will be the exception. He was governor in 2010-2014 and is likely to quickly return.

Although the governors’ offices share the same corridor in the Fed headquarters in Washington as the Fed’s impressive Washington headquarters, transparency laws restrict the number of governors who can meet informally for work discussions.

This means that new recruits will not be able to borrow the help of more experienced colleagues. Staffers brief governors in groups or individually before formal meetings to ensure compliance. This allows governors the opportunity to ask questions and address concerns.

Kroszner stated that “that was a bit frustrating”. He contrasts this with the semi-open policy used in many areas of academia and business. Sometimes you want to just talk with other governors.

PROVIDING A DIVERSITY OF VIEWS

Although the Fed tries to be representative of America’s diversity in its decision-making, it has not been able to achieve this goal. Fed governors are overwhelmingly men, mostly from legal, banking and business fields. However, there have been at most three farmers and one newspaper owner.

Cook would become the first Black woman Fed Governor and Jefferson would make the board record-breaking four female members and increase its racially diverse nature. However, it will be lower by profession – four economists would now join the board.