Economist Lisa Cook is poised to make history at the Fed – but first she must face a grilling from senators

Wall Street and Washington will tune in Thursday to what’s expected to be a testy nomination hearing for President Joe Biden’s latest nominees to the Federal Reserve Board of Governors.

Among those preparing to testify is economist Lisa Cook, who would bring to the Fed a career steeped in equitability and inequality research and marked by proposals on how federal policy could help improve economic growth through better opportunities for women and racial minorities.

That resume, unusual for a Fed nominee, is likely what made Cook a favorite of many Democrats, including Senate Banking Committee Chair Sen. Sherrod Brown of Ohio. Her nomination could also lead to a historic development for the central bank since Cook would be the first Black woman to serve on the Fed’s board in its 108-year history.

But the historic nature of her nomination doesn’t guarantee a smooth confirmation process in a Senate that is split 50-50 by party.

Republicans on the Banking Committee have taken to Twitter to criticize Cook’s social media posts, which the GOP says is rife with liberal advocacy. On Wednesday, the day before the hearing, the Republicans said Cook had blocked them on Twitter.

Biden nominated Cook, an economics professor at Michigan State University, to serve on the Fed’s board of governors at a critical juncture. If confirmed by the Senate, Cook would bring with her decades of research on race-based disparities and global economics at a time when the Fed seeks to orchestrate a pullback of its easy-money policies to fight inflation rates around 7%.

Cook offered her thoughts on inflation late last year, when she told Detroit-based WDET that the current jump in prices isn’t like prior increases.

“I would certainly say that we’re seeing inflation. I’m seeing my grocery bill go up just like everyone else,” she told the radio station in November.

“I would prefer to call what is happening ‘supply disruptions,’ because this economy is still being run by the pandemic,” she added. “If there were no pandemic, we wouldn’t be talking about this. We would still be — the Fed would still be worrying about hitting a 2% inflation target.”

The Georgia native will testify before the Senate Banking Committee on Thursday with fellow nominees Sarah Bloom Raskin, a former board member tapped for vice chair for supervision, and Philip Jefferson, an economist with central banking experience.

For much of her career, Cook studied disparities in the market for intellectual property and innovation. Specifically, she’s spent years trying to determine why the U.S. government grants so few patents to women and Black Americans.

“Whatever their source, gender and racial disparities exist at each stage of the innovation process — education and training, the practice of invention, and commercialization of invention — and can be costly to both productivity and the economy,” she wrote in 2020.

Cook also spent considerable time studying global economics, including her firsthand experience with inflation when she served as an advisor in Nigeria and research on Soviet innovation while completing her dissertation.

She received a bachelor’s degree from Spelman College in Atlanta and earned her Ph.D. in economics from the University of California, Berkeley.

Less than a day before the hearing, there are signs that it could prove contentious.

The official Senate Banking GOP account on Wednesday morning said that Cook had blocked its access to her profile and tweets. The Republican account had just days earlier used some of Cook’s prior social media posts to argue that she’s too partisan to join the Fed.

“For years, Prof. Cook has used her Twitter account to engage in partisan political fights, taking extreme Left-wing positions on issues, especially noneconomic topics,” the Senate Banking GOP account wrote on Jan. 31. “This begs the question: Will @drlisadcook respect the @federalreserve’s independence?”

Meanwhile, Sen. Pat Toomey, a Republican from Pennsylvania and the committee’s ranking member, told CNBC Wednesday morning that he’s concerned about Cook’s fellow nominee Raskin. Toomey said he’s skeptical of her candidacy given her recent comments on climate change and what he views as her reluctance to curb capital to fossil fuel companies.

Toomey, who is not seeking reelection this year, has also been a harsh critic of nominees who would seek to gradually extend the Fed’s powers beyond a strict interpretation of maximum employment and inflation control, a process he refers to as “mission creep.”

While some have criticized Cook’s advocacy, her supporters say her addition to the Fed would be welcome at an institution long criticized for its lack of diversity. She worked as a senior economist at the White House Council of Economic Advisers in the Obama administration and spent a year as a Treasury Department official during the Clinton and George W. Bush years.

“Throughout their long, distinguished careers, [the three nominees have] proven they understand how our economy works – and who makes it work,” Brown, one of Cook’s biggest allies, said in a news release last month.

“They will also bring important perspectives to the Federal Reserve Board about the economic issues women, Black and brown workers, and rural and industrial communities across the country face,” he added at the time. “I urge my colleagues to support these nominees and look forward to their hearings before the Banking and Housing Committee.”

Based on a career studying inequalities, it’s likely Cook would prove a critical voice at the Fed in debates over how to hike interest rates in an economy where Black Americans continue to lag in the national employment recovery.

While the U.S. unemployment rate fell to 3.9% from 4.2% in December, the jobless rate for Black women rose 4.9% to 6.2%, compared with 3.1% for white women. The unemployment rate for Black men inched lower in the final month of the year to 7% from 7.2%, still well above the 3% for white men.

Congress tasks the Fed with maximizing employment and ensure price stability. With inflation at multidecade highs, many economists and politicians have implored the Fed to begin to hike interest rates, which are designed to restrict borrowing and curb spending throughout the economy.

While that seems to be the majority opinion on Wall Street and Capitol Hill, some stress that the Fed should take its time and consider a broader definition of what it considers maximum employment to account for race-based disparities.

Cook and others say reducing disparities in race-based economic indicators could lead to larger GDP growth overall.

“What’s at stake for this economy and the world economy if policymakers do not get this right and address these disparities?” Cook asked rhetorically at the conference.  “The productive capacity of the United States and the world economy, higher living standards that should follow from sustained long-run growth, and greater stability that is consistent with less unequal societies.”