Local banker's Fed nomination remains stalled

Almost nine months after the White House nominated a prominent Hampton Roads banker to serve on the Federal Reserve Board of Governors, the appointment remains stalled in the Senate Banking Committee.

The White House chose Betsy Duke, chief operating officer of Portsmouth-based TowneBank, and Larry Klane, an executive of McLean-based Capital One Financial Corp., in May to fill two unexpired terms on the powerful board. The White House also nominated existing board member Randall Kroszner for a new 14-year term.

The Senate committee held hearings on all three nominations in August but has yet to vote on them.

Duke, a Portsmouth native who has spent most of her career with community banks in Hampton Roads, has served on the board of the Federal Reserve Bank of Richmond and was chairwoman of the American Bankers Association for a year. She was nominated to fill a Fed vacancy that expires in 2012.

Duke was out of town and could not be reached for comment Monday.

Asked whether the Senate Banking Committee had scheduled a vote on the nominees, spokeswoman Kate Szostak said the committee "is

fulfilling its responsibility to carefully and thoroughly evaluate whether these nominees are qualified to help protect consumers from predatory lending and set monetary policy during a time of significant economic turmoil."

In addition to having regulatory responsibilities, the seven members of the Fed's Board of Governors sit on the Federal Open Market Committee, which shapes the nation's monetary policy by influencing interest rates and using other tools.

In an Oct. 3 article, The Wall Street Journal quoted the banking committee's chairman, Sen. Chris Dodd, D-Conn., as saying he had no plans to move the three nominations through the committee and to the Senate floor for confirmation. "The Fed nominations are not a high priority at this point," Dodd said. "We've got some legislative stuff to get out."

Dodd campaigned during 2007 for the Democratic Party nomination for president but withdrew from the race last month after a poor showing in the Iowa caucuses.

When the Senate's current session began two weeks ago, Dodd announced his 2008 priorities for the banking committee, including efforts to enhance economic prosperity and national security. His statement, however, made no mention of whether the committee would vote on the nominations to the Federal Reserve Board.

Two congressional staffers said last week that the vote hasn't taken place partly because paperwork related to the nominations wasn't completed until early November.

T he delays in confirmation have prompted speculation in Washington that Dodd has chosen to sit on the nominations in the hope that a Democratic candidate will be elected president in November and will be able to choose his or her own nominees.

In some of his remarks on efforts to stem home foreclosures and curb predatory lending, Dodd has called attention to the reluctance by Fed board member Kroszner to impose tougher lending regulations. Kroszner's term on the board expired Thursday. The economist, known for his free-market stance on banking regulation, can continue to serve on the board until he is reappointed or until another nominee is confirmed by the Senate.

Because of their control over agendas, the chairs of Senate committees have the power to block presidential nominations by not bringing them up for a vote, said Tom Schlesinger, executive director of the Federal Markets Center, a research and educational institute near Charlottesville that monitors the Fed and financial regulators.

If Dodd has chosen to do that with the current nominees, it wouldn't be a the first time that a banking committee chairman let the clock run out on nominees for the Fed.

Late in the second administration of President Clinton, then-chairman Phil Gramm, R-Texas, sat on two Clinton appointments. The next president, Gramm said at the time, should have the opportunity to make his own appointments.

It's possible that Bush could withdraw his existing nominees and submit new ones to the committee, but that appeared unlikely, Schlesinger said.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com