GOP senators scrutinize Federal Reserve nominee Lisa Cook, an MSU economist
Washington — Michigan State University economist Lisa D. Cook faced scrutiny Thursday from Republican lawmakers who questioned her expertise in monetary policy and whether she's too partisan a pick for the role.
Cook appeared before the Senate Committee on Banking, Housing and Urban Affairs, which is considering her nomination by President Joe Biden to the Federal Reserve.
If confirmed, Cook would be the first Black woman to serve on the Fed's seven-member board of governors, who serve terms of up to 14 years. The central bank's mandate is to promote stable prices and maximum employment.
A Georgia native, Cook has taught at MSU since 2005, where she is a professor of economics and international relations. She was named a director of the Federal Reserve Bank of Chicago last month and previously served as a senior Treasury Department adviser and on President Barack Obama's White House Council of Economic Advisers from 2011-12.
"The depth and breadth of my experience in both the public and private sectors qualify me to serve as a Federal Reserve governor," Cook told the panel Thursday. "And should I be confirmed, I would be honored to work with my colleagues to help navigate this critical moment for our nation’s economy and the global economy."
Her nomination last month was lauded by bankers, former Federal Reserve governors and top-tier economists. But some conservatives said they're concerned she would politicize the nonpartisan board, pointing to "left-wing" social media posts, support for reparations for slavery and tweets advocating for Democratic politicians.
Pennsylvania U.S. Sen. Pat Toomey, the panel's top Republican, said that after GOP committee staff highlighted some of Cook's tweets on Wednesday, she moved to block the Banking Committee Republicans' Twitter account.
"Apparently, Professor Cook realizes how inflammatory her partisan tweets have been," Toomey said at Thursday's hearing.
"See, the Fed is already suffering from a credibility problem because of its involvement in politics and its departure from its statutorily limited and proscribed role. I’m concerned that Professor Cook will further politicize an institution that has to remain apolitical."
Cook in her testimony said she'd follow the example of economist and former Fed Chairman Paul Volcker, "whom I greatly admire for his unwavering dedication to a nonpolitical and independent Federal Reserve."
"My approach to complex problems is to be guided by facts, data and analysis and to work collaboratively," she said. "I have served in the administrations of presidents from both parties and when I make decisions, I do so based on the facts and not politics."
GOP: 'Just no clear answers'
Toomey said Cook had published little related to monetary policy, and he was unhappy that she had refused to explicitly endorse the Fed’s pulling back its "easy money" policy when they spoke earlier.
Cook responded that she agreed with the direction of the Fed's path "right now," as it prepares to start raising interest rates in March to fight inflation. "But when we get to a decision point, I would look to the data, the evidence that would be made available at that time," she said.
Toomey in his closing remarks said he was "very disappointed" in Cook.
"Yet again today, I've been unable to elicit any kind of clear response as to how she views the challenges that we face specifically with regard to the inflation that we have, what kind of tools she would be willing to use, her thoughts on the changes in our economy," he said. "There's just no clear answers, and that is disturbing."
Cook was among three Federal Reserve nominees who appeared Thursday before the panel, along with Sarah Bloom Raskin and Philip Jefferson. Committee Chairman Sherrod Brown, D-Ohio, has predicted that they would all be confirmed with bipartisan support and said the panel will vote on the nominees on Feb. 15.
Brown remarked that Republicans' "hyperventilating" about the nominees Thursday was based on hyperbole and misrepresentation and not their records or experience.
"The attacks on Dr. Cook are abhorrent. They were ginned up on the far-right blogosphere to discredit a highly respected economist with substantial monetary policy experience," Brown said.
"She has a Ph.D. in economics. Plenty of other board governors never had that, including prominent ones today. I'm disappointed my Republican colleagues repeat these ugly and baseless lies and (are) spreading fake news."
It would be helpful to Cook's confirmation if she can garner at least some GOP support in the evenly divided Senate. Sen. John Kennedy, a Republican from Louisiana, sounded Thursday like he could back Cook, saying while he might disagree with the nominees on politics, "in America, you can believe what you want. That's why it's such a great country."
Cook described her economic specialty as managing financial crises, noting her post with the Financial Crisis Think Tank at the U.S. Department of the Treasury and that she was in charge of managing the eurozone crisis during her time on the White House Council of Economic Advisors.
She was addressing Sen. Bill Hagerty, a Tennessee Republican, who questioned if Cook's background was related to the mission of the Fed. Her list of publications and speeches seemed "more like social science," Hagerty said.
"I would have expected someone with deeper experience in the monetary policy realm," he said.
Cook noted she had publications related to banking reform and recognizing systemic risk and highlighted her doctorate from the University of California, Berkeley.
Hagerty also claimed that Cook had made "mischaracterizations" of her background in paperwork submitted to the panel, such as claiming articles were peer-reviewed that were not. But he did not let Cook respond in detail, saying she could do so in written responses to the committee.
Cook and the other nominees said they had never embellished their resumes or backgrounds.
"I certainly am proud of my academic background," Cook told Hagerty. "I note that I have been the target of anonymous and untrue attacks on my academic records."
Tackling inequality, spurring growth
Cook's published work has focused in part on policies that boost economic opportunity and innovation, including how tackling inequality can promote economic growth and the effects of gender and racial disparities on wealth inequality.
A 2014 research paper studied patents and found violence against Black Americans between 1870 to 1940 had depressed their innovation, suggesting political conflict can affect the direction and "quality of invention of economic growth over time."
She's also written about supporting small businesses during the COVID-19 pandemic and in the area of international finance "in places of uncertainty and emerging markets and developing countries," as she said Thursday.
"Senator, I've advised in a number of emerging markets and developing countries where the central bank was not independent," Cook said in response to a question by Sen. Jon Tester, D-Montana.
"Everyday citizens of those countries suffered tremendously as a result, typically with respect to hyperinflation or at least high-inflation environments. And I would say that I would be committed to Federal Reserve independence, and I would make sure that everyday Americans didn't suffer what I saw abroad."
Cook also spoke of the importance of shoring up funding for community development financial institutions, or CDFIs, that aim to meet the financial service needs of underserved areas and populations.
"They're critical in terms of getting funding to where capital doesn't go, whether we're talking about urban areas or rural areas, but certainly this is important for entrepreneurship ... and carrying out of the dual mandate, especially maximum employment," she said.
Cook grew up in Milledgeville, Georgia, which served as the state capital during the Civil War. When she was growing up, her parents and other family were active in the civil rights movement, "promoting nonviolent change alongside our family friend, the Rev. Dr. Martin Luther King Jr.," she told the committee.
She and her sisters integrated their schools and pools. Cook has spoken about how she carries physical scars from that period — on her leg and where hair won't grow in her eyebrow — from being beaten up during desegregation.
"We cannot ignore that your historic nomination to the Federal Reserve Board will serve as an inspiration for generations of young Black women who would like to study economics and dedicate themselves to work in the highest levels of public service," said Sen. Raphael Warnock, a Georgia Democrat.
"If we're to have an economy that works for all Americans, the Federal Reserve Board needs to look more like all Americans. And so I'm proud of your nomination, and Georgia is proud of your nomination."
Lessons from the Midwest
Cook said she sought a tenured position as a macroeconomist in the industrial Midwest "in this same spirit of being close to how our economic decisions affect working families."
"Living in a manufacturing hub during the financial crisis has underscored the effect that deep recessions have on everyday lives," she added. "And that is one reason I have dedicated much of my career to preventing the next financial crisis."
During the hearing, she recalled a scene from MSU's campus in the fall of 2008, when she was teaching macroeconomics. She looked out the window and saw students waiting in a long line for a food pantry, like something "straight out of the Great Depression."
"Their parents had lost their jobs. They had lost their jobs. They should be studying," Cook said. "At that time, I decided that all of the skills that I have — the ones that I've acquired through experience through research — would be devoted to addressing eliminating risk associated with financial and economic crises."
In addition to her doctorate from Berkeley, Cook holds two bachelor's degrees, one from Oxford University where she was a Marshall Scholar and another from Spelman College in Atlanta.