MNI:5 Things: Fed Nominees Clarida, Bowman Back FOMC Positions

By Jean Yung

     WASHINGTON (MNI) - Richard Clarida and Michelle Bowman, President Donald

Trump's latest nominees for the Federal Reserve Board, testified in front of the

Senate Banking Committee on Tuesday, answering questions on the economy,

monetary policy and financial regulation. In a short hearing that ran just over

an hour, neither made waves with their comments, which largely backed existing

FOMC positions. 

     Clarida is an economist and former adviser at Pimco and if confirmed would

serve as Chair Jay Powell's No. 2. Bowman is the Kansas state banking

commissioner and former executive at her family-owned Farmers and Drovers Bank. 

     Clarida and Bowman are not expected to face opposition from the Banking

Committee, but no date has been set for a full Senate vote. They would join

other Trump picks Powell and Randal Quarles as well as Lael Brainard, an Obama

nominee. Two other slots are empty, with Trump nominee Marvin Goodfriend's vote

currently held up in the Senate. 

     The following are key highlights from their comments Tuesday: 

     - Clarida said he "absolutely" supports the Fed's ongoing normalization of

interest rates. He said neither Trump nor he discussed their individual views on

the level of appropriate interest rates during his nomination interview. 

     - Clarida backed Powell's stance that the Fed's normalized balance sheet

would be "a lot smaller" and an estimate in the range of $2.4 trillion to $2.9

trillion, compared to its crisis-level size of $4.5 trillion, "makes sense."

Growing demand for currency necessitates a bigger balance sheet than before the

financial crisis, but the Fed should divest all of its holdings in

mortgage-backed securities, Clarida said. 

     - Asked whether sluggish wage growth signaled further slack in the labor

market, Clarida said that the Fed should focus on achieving a jobless rate that

fits a healthy economy. Wage growth is a function of a number of features of the

economy, including productivity growth and technological changes, he said.  

     - Stock market volatility in and of itself shouldn't determine how the Fed

makes its rate-setting decisions, Clarida said. 

     - Clarida said he supports efforts to tailor financial regulation but that

policies should "preserve the far greater resiliency and stability of the

financial system" as a result of post-crisis reforms. Bowman said some rules put

smaller banks at a disadvantage. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]