The U.S. Senate Banking Committee on Wednesday approved the nomination of three new members to the Federal Reserve's powerful board, including Janet Yellen for vice chairman, clearing the way for a final vote by the whole Senate.

If the nominees, including Maryland regulator Sarah Raskin and MIT professor Peter Diamond, win confirmation, it would bring the central bank's board up to full strength -- with all seven members in place -- for the first time since early 2006.

The three nominees could give the Fed's board a somewhat dovish tilt when it comes to monetary policy. Yellen, who is currently president of the San Francisco Federal Reserve Bank, has consistently argued for an easy policy to help revive the economy and create jobs.

Raskin's nomination sailed through the panel on a 21-2 vote, but the panel voted 18-5 on Yellen's board nomination and 17-6 on her nomination to be No. 2. Diamond cleared on a 16-7 vote with the panel's top Republican voicing disapproval.

I do not believe he is ready to be a member of the Federal Reserve, Senator Richard Shelby of Alabama said. I do not believe the current environment of uncertainty would benefit from monetary policy decisions made by board members who are learning on the job.

The last few years have been some of the most tumultuous in the Fed's history.

The central bank battled the worst financial crisis since the Great Depression with an aggressive regimen of interest-rate cuts and asset purchases, which have taken official borrowing costs close to zero.

Until recently, the Fed had been focused on developing a plan for how it would eventually unwind such extraordinary stimulus. But recent weakness in the U.S. economy, and fears of another recession, have revived the debate about the possible need for further monetary easing.

Yellen, Diamond and Raskin would have to help steer the Fed through this and other difficult policy decisions, including how to manage the central bank's enhanced authority to regulate the financial industry under the freshly minted reform legislation signed by President Barack Obama last week.

Members of the board will clearly have their hands full in the coming years, committee Chairman Christopher Dodd said. Fortunately, I believe that our nominees will meet the challenges they will face.

The Connecticut Democrat said the full Senate would not vote on the nominees until after it returns from a summer break on September 13.


Yellen would replace Donald Kohn, a 40-year Fed veteran who announced in March that he was stepping down.

She would serve out a four-year term as vice chair, concurrent with a board term that would end on January 31, 2024. Raskin's board term would expire on January 31, 2016, while Diamond would be able to serve until January 31, 2013.

While Yellen is widely viewed as one of the more dovish policymakers at the central bank, Raskin and Diamond, whose professional experience has not been directly tied to monetary policy, are harder to gauge.

Still, their written answers to questions from Shelby, made public on Monday, indicate they are not likely to diverge too far from Yellen's views.

Diamond argued the risk of deflation, while not major, was greater than that of inflation, and he said the Fed would have to be prepared to move monetary policy in either direction.

Raskin voiced opposition to selling the mortgage-backed securities the Fed acquired during the crisis before it begins raising official interest rates, in contrast to the proposals of some hawkish regional Fed bank presidents.

The two also bring important, and distinct, sensibilities to the board.

Raskin is Maryland's commissioner of financial regulation, while Diamond's academic work has focused on taxation and pension reform.

(Reporting by Pedro Nicolaci da Costa; Editing by Jan Paschal)