Oh, goody, the status quo duo are leading the search for not one but three FOMC governors.
These two are notable not only for their devotion to The Street, but for their acute lack of judgment in most matters financial. They are the reason Obama is quite possibly going to be a one term President.
If I had to sum up the likelihood of how their as of yet unknown selections will perform, we can guesstimate it as soft on inflation, aggressive on unemployment. The Street will love the “Good for stocks, bad for America” vacancy choices.
The reportage on this has varied from smart to ridiculous. The Times has an utterly absurd quote in their Kohn article:
“The vacancies are likely to spur debate over the Fed’s priorities. With unemployment near 10 percent and projected to remain high for years to come, there is sure to be pressure on the administration, especially from liberals, to nominate Fed governors willing to adhere not just to the central bank’s mission of price stability but also its mandate of full employment, a goal that has effectively taken a back seat to inflation fighting over much of the last three decades.”
What clueless drivel. There has been almost zero inflation fighting since Volcker retired in 1987. As has been conclusively demonstrated in books such as Greenspan’s Bubbles and Bailout Nation, our former Fed Chief, aka, Easy Al, the creator of the Greenspan Put, could not have possibly cared any less about Inflation. To quote Kurt Vonnegut, Greenspan didn’t give a flying f*$& at a rolling donut about price stability. That The Times imagines he did reflects a total lack of understanding of 3 decades of Federal Reserve policy. Bizarre.
As per usual, Bloomberg has the most astute coverage:
“The search to fill vacancies at the Federal Reserve is being led by President Barack Obama’s Treasury secretary and chief economic adviser, indicating Chairman Ben S. Bernanke will get support for his policies as he tries to sustain growth while withdrawing monetary stimulus.
Donald Kohn, 67, said yesterday he will leave when his four-year term as vice chairman ends in June. Timothy Geithner, a former New York Fed president, and Lawrence Summers, director of the National Economic Council, are conducting the search to replace him and fill two other vacancies on the Fed board, said an official familiar with the discussions who requested anonymity to talk about internal deliberations.”
Last, here is the WSJ:
“Donald Kohn, who helped steer the Federal Reserve through the financial crisis, said he would retire as Fed vice chairman in June, giving President Barack Obama a chance to reshape the Fed by filling the resulting vacancy and two others on its seven-member board.
The opportunity comes at a delicate moment. The Fed is under political attack for its failure to prevent the financial crisis and for the way it helped bail out the banks, and it is confronting the task of deciding when and how to raise short-term interest rates and drain the extraordinary amount of credit it pumped into the economy.
If Mr. Obama and the Senate move swiftly—and the White House press secretary, Robert Gibbs, said Monday the president hopes to have a successor to Mr. Kohn confirmed by June—new Fed governors could influence the timing of the Fed’s eventual move to raise interest rates. “It’s almost inconceivable the [policy-making Federal Open Market] Committee will become more hawkish,” said Laurence Meyer, a former Fed governor. In Fed jargon, hawks are those more worried about inflation and more eager to raise rates.”
This will be worth watching over the next few months . . .
Geithner, Summers Leading Search for Successor to Fed’s Kohn
Scott Lanman and Nicholas Johnston
Bloomberg, March 2 2010
Vice Chairman of Fed to Retire, Letting Obama Reshape Board
NYT, March 1, 2010
Fed Vacancies Clear Path for Obama
DAVID WESSEL And JON HILSENRATH
WSJ, MARCH 2, 2010