By Peter Schroeder - 05/08/14 12:08 PM EDT
Federal Reserve Chairwoman Janet Yellen would welcome someone with community banking experience to the Fed board, and she has told the White House as much.
Testifying before the Senate Budget Committee on Thursday, Yellen said she agreed with a bipartisan group of lawmakers who believe the bank regulator should employ someone with extensive knowledge of smaller banks.
When asked by Sen. Angus King (I-Maine) if she would tell the White House she would prefer someone with a similar background, Yellen said she already had.
The Federal Reserve Board is currently grappling with a number of vacancies, and has two spots that still need to be filled with presidential nominees.
Community banks and their advocates have not been shy about pushing for a nominee with experience in their sector, and Yellen heard from several lawmakers from both parties Thursday about the importance of smaller banks.
Senators have also informed the White House they would like to see President Obama nominate someone to fill Fed vacancies with community banking experience, and the administration is reportedly looking for candidates that fit that criteria.
As the Fed and other regulators seek to implement tough new rules aimed at the nation’s largest and most complicated financial institutions, Yellen herself has sought to assuage community banks that the goal is not to bury them in regulations.
Earlier this month, Yellen told a group of community bankers gathered in Washington that they play a critical role, and that regulators should not adopt a “one-size-fits-all” approach to overseeing banks.
“We are taking a fresh look at how we supervise community banks and possible ways that supervision can be smarter, more nimble, and more effective,” she said.
Three nominees to join the seven-member Fed board are pending before the full Senate: Stanley Fischer, Lael Brainard and Jerome Powell. Powell is currently serving on the Fed but seeking a full 14-year term via confirmation.
Meanwhile, Fed Governor Jeremy Stein has announced his intention to step down from the central bank this month to resume teaching at Harvard. That means even if all three nominees are confirmed, the Fed will have two more slots to fill.
Yellen’s comments came at a broader hearing focused on the economy. As she did in testimony a day earlier, she was broadly optimistic about the economy in the coming months, but emphasized that Fed support is still necessary.
She also emphasized that even once the economy is back on its feet, the Fed may hold off on boosting interest rates until it really takes off.
“Interest rates are unlikely to begin rising until we’re in a strong economic recovery,” she said.
Yellen also had to fend off criticism from GOP lawmakers long skeptical of the Fed’s easy money policies. Some Republicans also bristled at how Yellen and her predecessor, Ben Bernanke, criticized short-term spending cuts they sought as harmful to the economy.
“We simply have to get our fiscal house in order,” said Sen. Jeff Sessions (R-Ala.), the ranking member of the panel. “You’re not going to be able to call over from the Fed and tell us, ‘Now’s the time we want you to cut spending this month, but not next month.' "
Meanwhile, Democrats pressed Yellen on growing levels of income inequality, which she called “very disturbing.”