Friday, March 21, 2008
And Poole, an inflation hawk if there ever was one, is stepping down at the end of the month. Both Thoma and Felix Salmon say there is little doubt that this isn't about politicizing the Fed:
Of all the members of the Federal Open Market Committee, five members of the Board of Governors (usually seven, but two sets are currently empty) and twelve district bank presidents for a total of seventeen, how many were appointed under Democratic presidents?Answer: There is just one, William Poole of the St. Louis Fed...
Clearly there's a lot of politics surrounding the area of fiscal policy concerned with tax cuts. And there might be a very weak correlation between the hawk-dove spectrum and the Republican-Democrat spectrum. But it's very easy to think of Republican doves and Democratic hawks. And the Fed, in particular, seems to have done a very good job of remaining genuinely independent, which is one reason why Greenspan's testimony in favor of the Bush tax cuts was so very shocking.Justin Fox expands on the point, noting the salaries of presidents over governors probably leads to less presidential turnover. But he doesn't think the turnover and the current composition reflects any partisanship.
But that doesn't mean the choices of governors and presidents aren't influenced by political considerations. A speech back in 2000 by then-Governor Lawrence Meyer contains an interesting footnote:
When Susan Phillips' term expired on January 31, 1998, it took the Administration a year and a half to nominate Carol Parry for that position. Alice Rivlin announced on June 4, 1999, that she would be resigning from the Board, but the President has not nominated anyone to replace her. In the meantime, the President renominated Vice Chairman Roger Ferguson to a full term as governor after the expiration of his short partial term on January 31, 2000. The Republican leadership of the Senate Banking Committee has refused to hold hearings for either the new nominee, Parry, or Ferguson, reserving the opportunity for the new President to make these appointments and therefore possibly to convert the positions from Democratic to Republican appointments. In the meantime, the Board remains below its statutory number of members and could remain so for the many months after the new President takes office, if past experience is any guide to the time it takes to make appointments and get them through the confirmation process.I posted last November that several Fed appointments are now being held up by Senator Christopher Dodd; these appointments are still awaiting action. Supreme Court justices they are not, but Fed governors and presidents are important, particularly at this time of great uncertainty. We should acknowledge that both parties have participated in using the hold on monetary policy (and even fiscal, in the case of Parry). But we shouldn't accept it.
UPDATE (Saturday): Thanks to Justin Fox for a link. He notes the case of Randall Kroszner's renomination to a full term as governor, which is one of the nominations Dodd is holding up. Kroszner has in fact already testified before Dodd's committee. There's some discussion that Dodd is holding up Kroszner due to the latter's activism on mortgage regulation, which displeases Dodd.
As to Kroszner still voting, I think this isn't unusual. Ferguson continued to be a voting member of FOMC after the expiration of his partial term in January 2000 (example). I can't find a published rule on it, however.