Fed Vice Chair resigned yesterday. He was a Greenspan person. Obama gets a pick now. Leading the Fed are Bernanke, an academic economist specializing in the Great Depression, and a community banker and a JP Morgan Chase person. According to NYTimes, it’s likely they will name a woman academic economist to sit beside Bernanke to show that the Fed is not entrenched in the big bank econom. Surprisingly, as the Fed got slack from us and the public for being a feeding trough to the big banks, the Senate is going to give them more power, by housing the CFPA there. Senate, are you listening to anything the public wants?
We don’t think the Fed deserves any new powers unless it is democratized. Now’s probably a good time to sign the petition for no new powers for the fed, if you haven’t already. Any new regulator is simply going to get captured by the financial elite unless we make the regulators transparent, accountable, and operate in the context of public input or rather in democratic ways.
It’s notable that one of handful of Fed governors who has talked about addressing too-big-to-fail, using antitrust law, and breaking up the banks, Daniel Tarullo, is an Obama pick. My pick is Tarullo, just push him up. Doesn’t the guy look nice? Or give me a woman who has talked seriously about addressing the issue and is an expert at monetary policy AND employment.
Baseline Scenario has this to say about hand-picking Fed chiefs:
“Second, why is the Democratic establishment uniting behind Bernanke? Bernanke was a Bush appointee to the board, a chair of the Bush Council of Economic Advisers, and then Bush’s pick to replace Greenspan. He’s a Republican whose main selling point to Obama was that he was already in the job and accepted by “the markets,” and he was the clear choice of Wall Street this winter. Does this mean that Obama is going to appoint three centrists who follow the (recent) central banking orthodoxy of putting inflation control over economic growth, and who oppose tighter regulation of banks? For anyone who thinks that there is such a thing as a coherent Democratic economic policy, that seems like shooting yourself in the foot.
Finally, and I know I’m in the minority here, why are we trying to increase the power of the Fed chair — especially a Fed chair from the opposite party? Leaving aside policy questions, I think the deification of the Fed chair in the past two decades has been a decidedly bad thing. The sensitivity of the markets to one man’s pronouncements (and, just imagine, his health) is a bad thing; the fact that an unelected person is widely considered the second-most powerful person in the country is a bad thing; and if our economic fate actually depends on one person’s wisdom, that’s also a bad thing. The point of a committee is to have differing views, arguments, and a vote — not to have a bunch of suck-ups and yes men. If we put some real progressives on the board, then that’s what you would have — diversity of opinion and meaningful votes. (Including Bernanke, three of the four current members are Bush appointees, including a former investment banker and a former chair of the ABA.)
I know people will say I don’t understand, and if we had debate on the board the markets would be spooked. I think that effectively amounts to saying that dictatorship is good for the markets, so we should have a dictator.”