Friday, November 16, 2007

Is Chris Dodd screwing up monetary policy? 

I don't think I've ever seen this line of logic before. Senator Christopher Dodd is holding up any confirmations of Federal Reserve governors until after the elections.
Senate Banking Committee Chairman Christopher Dodd (D., Conn.), suggested Friday that he might not bring a vote on the renomination of Federal Reserve Governor Randall Kroszner, a leading figure in the central bank�s effort to overhaul its mortgage regulation.

Kroszner�s term at the Fed expires Jan. 31, and the White House nominated the former academic to a 14-year term that would run through 2022.

�There�s one nomination here that would be for somebody [for] 14 years,� Dodd told reporters on a conference call. �We�re frankly getting down to less than a year away from the [November 2008] election. On nominations of that length, I�m fairly reluctant.�
There are already two empty seats on the Federal Reserve Board of Governors. Losing a third seat gives the Fed a much smaller board with which to make monetary policy than the original Federal Reserve Act intended. The nominations were made on May 16. My impression is that having Kroszner off the board and holding up the other two makes the FOMC more weighted towards academic economists, and possibly more hawkish on inflation. Why Dodd thinks this is a good idea is beyond me. And it seems a new extension of Congressional running-out-the-clock on divided government.

At any rate, fewer members on the Board of Governors robs monetary policy of a diversity of viewpoints.

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