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 . . .

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Sources:
Geithner, Summers Leading Search for Successor to Fed’s Kohn
Scott Lanman and Nicholas Johnston
Bloomberg, March 2 2010
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6kDhLnSfF8w&

Vice Chairman of Fed to Retire, Letting Obama Reshape Board
SEWELL CHAN
NYT, March 1, 2010
http://www.nytimes.com/2010/03/02/business/economy/02fed.html

Fed Vacancies Clear Path for Obama
DAVID WESSEL And JON HILSENRATH
WSJ, MARCH 2, 2010
http://online.wsj.com/article/SB10001424052748704754604575095353771917046.html

Category: Bailout Nation, Federal Reserve, Inflation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Geithner, Summers Lead FOMC Vacancy Search”

  1. budhak0n says:

    I guess maybe just maybe our thoughts that this is a truly transformative election aren’t all that crazy after all.

    Wow. That’s a lot of power if you can basically put a stranglehold on the Fed.

    I guess if they are 14 year terms a lot would depend on just how much liquidity there is in the current banks without seeking any additional funding from the Fed.

    You’ll have to excuse my lack of direct knowledge of the actual Bank to Fed process. Sure we all know that the Banks in a time when they needed liquid funds were able to borrow it from the Fed. Anybody who picks up a paper or flips onto a blog knows this , but what we don’t know is just how much of the daily business of our financial institutions is reliant on the Fed to fund their daily or monthly obligations.

    Not knowing this in practice, doesn’t allow someone trying to analyze the effect of a completely new group of economists at the helm would change things in the future.

    Someone who has been through several decades of this would obviously be able to draw upon their prior knowledge of how different boards did this or that….

    But what sort of “micro” effect could the Fed really have? Isn’t it up to the individual participants to decide which paper is allowed to pass over their desk so to speak?

    Like a gigantic old boy network or people with access and people without?

    I guess what i”m saying is there’s no requirement that banks that participate in the federal reserve system actually use their services for loans and funding and such , correct?

  2. Mr.E. says:

    Looks like the patients have the keys to the asylum.

  3. budhak0n says:

    Sorry I have to get in the habit of proofreading but I’m an open book. I make mistakes.

    Unlike the “powers” that be which are perfect. Perfectly Banal. A B of W . Yes sir!

  4. troubled times says:

    I’m surprised Freddie Mac and Obama’s Chief of Staff , Rahm Emanual isn’t leading the way but hey, maybe he is. You guys realizes Odama’s people turned down a “Freedom of Information” request to review Freddie Mac board minutes and correspondence during Rahm’s time as a director ? Yep. Obama is just another hack.

  5. budhak0n says:

    No You get what I’m asking E correct?

    People simply read these large Macro concepts and immediately think it somehow affects their corner banker.

    When in reality, it may have very little effect on what their local neighborhood bank does day to day.

  6. GrafSchweik says:

    On the whole, I’d rather be a zoological specimen on Tralfamadore than spend my dotage wading shoulder deep through the merde this ongoing farce is more than likely to generate.

    Uneffingbelievable…..

  7. Mike S says:

    Easy Als only devotion was to get republicans elected, and save capitalism from itself over and over again. Without him, we would have had a normal market in 98 and not the huge bubbles that followed.

  8. budhak0n says:

    Ok let it put it to you this way. Everybody likes to have these ideas that the see things on a Grand Scale.

    They have an idea of what this would be like or that would be like “if they were given the opportunity” to build it.

    But in reality what they do is they show up and the Borgata, and think to themselves who the heck built this freaking thing? It’s human nature.

  9. rktbrkr says:

    Fighting unemployment provides the cover to foster the hyperinflation that will allow US to effectively devalue the dollar and pay off their debt with cheap dollars, also to pay “entitlements” like social security with worthless dollars, just keep a freeze on COLA for that.

    A couple years from now we’ll be treated to BB mumbling that the 15% inflation rate was truly “unimaginable” but at least the unemployment rate is back down to almost 9%

  10. b.j. says:

    The Times article excerpt doesn’t say that there has been inflation. It seems to indicate that this was the stated objective, whether or not it was sensible. I think this is backed up by The WSJ excerpt which states it’s probably impossible to become more concerned about the threat of inflation, based on how zealous they are about it now.

  11. cognos says:

    rktbrkt — “hyperinflation” like 2-3%?

    At 15% inflation… we’ll have $3T in annual nominal GDP growth ($30k/yr per household in income growth). Just 3 years of that… and we’ll have compounded to $30T in GDP. All debts will be paid off or deminimus.

    IF one actually believes that… one should buy the largest house possible with the most debt (prob a bad idea).

  12. b_thunder says:

    Remember the magazine cover with Rubin, Greenspan and Summers “The committee to save the world?”

    Here we have the “Committee to save the Committee to save the world”, i.e. to ensure the policies of Rubin/Greenspan en perpetuity. Extend and Pretend, Print and Throw From the Helicopters is alive and well!

  13. scharfy says:

    As long as the price and supply of credit is under central management, expect more distortions, redistribution, and short term thinking.

    Central banking’s history is one of continual wreckage. I dare anyone to dispute that. It has always failed me on moral grounds. Now it has failed us on pragmatic grounds.

  14. Mannwich says:

    @BR: When the elites and their sycophant enablers refer to “inflation”, they really only mean the ability for the serfs to demand higher wages. If they can deny inflation at every turn (even though we’ve seen it everywhere in our daily lives over the past 20 years), then it doesn’t exist, so then the serfs can’t demand higher wages. Problem solved. Deny, obfuscate, extend and pretend, and hope the Sheeple believe it.

  15. primordial_ooze says:

    WILLIAM K. BLACK is the only good choice.

  16. hgordon says:

    “They are the reason Obama is quite possibly going to be a one term President.”

    Maybe. The elephant in the room is employment, and except for the employment rate of bankers, that’s not a statistic upon which the Federal Reserve exerts much direct influence. The O-team has continued a strategy from the previous administration that attempted to prop up various failing institutions, specifically banks, brokers, and pair of car companies. I would hazard to guess that restructurings of GM and Chrysler may have represented the least negative impact on employment numbers of all of the money spent/allocated by the Treasury over the past 12-18 months. Except for buoying the New York City real estate market, it would be difficult to attribute any positive employment benefits to the bulk of the funding that went to the financial sector.

    It would be interesting to see if any economists have been able to create a mapping between bailout money and employment statistics. As Warren Buffet noted in his recent interview, when asked the likely impact of the jobs bill, said that he didn’t see much benefit, because it basically didn’t get money into the hands of people who were going to actually spend it.

  17. flipspiceland says:

    I’m certain there are at least a dozen current or former Goldman Sucks candidates already vetted for these positions.

    It’s good to be king.

  18. rktbrkr says:

    Cognos, $30K income growth a year @15% is 200K household income, nice neighborhood (even with a forest of “for sale” signs!

    Just pointing out how high inflation could be used to solve a lot of problems under cover as the unemployment fix.

    It’s a LOT less “unimaginable” than our current set of circumstances.

    For each action there an equal and opposite reaction

  19. globaleyes says:

    IS there an FOMC opening ?

    What are the QUALIFICATIONS ?

    Do I have what it takes ?

    Judge for yourself…

    I’m just a cool dude.

    http://www.iamacooldude.com

  20. jjay says:

    I nominate Madoff, Milken,and Brunning

  21. ” They are the reason Obama is quite possibly going to be a one term President..”–BR, above

    something tells me that, if We had any sense Citizenship, there’d be a Recall Petition, on the Ballot, this November ’010.

    maybe, 2010 would be a good year to remember the 10th Amendment (?)

    “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. ”
    http://caselaw.lp.findlaw.com/data/constitution/amendment10/

    U.S. Const. amend. X. As a textual matter, therefore, the Tenth Amendment “states but a truism that all is retained which has not been surrendered.” United States v. Darby, 312 U.S. 100, 124 (1941). By its terms, the Amendment does not purport to limit the commerce power or any other enumerated power of Congress.

    In recent years, however, the Tenth Amendment has been interpreted “to encompass any implied constitutional limitation on Congress’ authority to regulate state activities, whether grounded in the Tenth Amendment itself or in principles of federalism derived generally from the Constitution.” South Carolina v. Baker, 485 U.S. 505, 511 n.5 (1988). Thus, “the Tenth Amendment confirms that the power of the Federal Government is subject to limits that may, in a given instance, reserve power to the States.” New York v. United States, 505 U.S. 144, 157 (1992).
    http://www.lectlaw.com/def2/t065.htm

    “…The first ever American resolution against slavery was issued from Pennsylvania in 1688. The University of Houston quotes the Germantown Petition against slavery as saying, “…In Europe there are many oppressed for conscience-sake; and here there are those oppressed which are of a black colour….Pray, what thing in the world can be done worse…”. The Germantown Petition, although largely ineffective, was passed among the Quaker communities in Pennsylvania.

    Anti-slavery sentiment in Pennsylvania grew during the following years. Numerous writings against slavery, by various Quaker authors, were published in Ben Franklin’s Philadelphia newspaper. Pennsylvania abolished slavery, using a gradual phase-out starting in 1780, and George Washington commented in 1786 that “once slaves got to the Pennsylvania/West Jersey area, they became nearly impossible to find and retrieve”.

    Between the American Revolution and The Civil War, two fugitive slave laws were passed by the federal government in order to attempt to ensure that slavers were able to forcibly return any slaves who had escaped to other states. Pennsylvania met these federal laws with laws of our own, designed to insure liberty for the escaped slaves and to nullify the unjust federal legislation within Pennsylvania’s borders.

    Federal Fugitive Slave Act of 1793

    In 1793, the first Federal Fugitive Slave Act (FFSA) was issued. Wikipedia says that this act established a legal mechanism by which fugitive slaves could be seized, brought before a magistrate, then forcibly returned to their state of origin.

    Pennsylvania’s legislative resistance to this law apparently began in the 1820s. There are conflicting claims about Pennsylvania’s legislation in that decade, but the years 1820 and 1826 are commonly mentioned. The University of Pittsburgh says that in 1820, Pennsylvania passed a law to prevent state officials from enforcing the FFSA. In 1826, after receiving an appeal from Maryland to implement the FFSA, Pennsylvania responded by passing another law which is variously referred to as a Personal Liberty Act or a state Fugitive Slave Act and “After enactment of the 1826 law, there was virtually no way for a slaveholder to recapture a fugitive slave in Pennsylvania and be safe from prosecution as a kidnapper”…”
    http://www.tenthamendmentcenter.com/2010/02/22/early-pennsylvania-nullifying-the-way-to-freedom/

  22. xnycpdx says:

    ‘possibly’ one-termer? since even sweden is slipping backwards, i’d wager a double-dip is coming here, at the least.
    coupled with obama’s uncanny ability to offend every constiutent group while trying to offend NO constituent groups, i would hazard the only way for obama to win in 2012 is for his opponent sarah palin to gnaw through the entrails of her running mate rick perry, live, on stage.

    please note that i do not discount this scenario.

    but as bankster-pleasing moves like that above show, i forsee a LOT of dems simply throwing in the towel on him.

  23. flipspiceland says:

    As long as AIPAC stays on Obama’a side, he’ll win.

    Should Shoshana, however, quietly tell him to leave, he won’t run and another AIPAC candidate, a Democrat, will succeed him. Unless she switches to the republican camp, about as likely as Newt Gingrich winning a city council seat.

    There is no chance a republican will ever be elected president for the next 4 cycles. They will wander in the desert for the next 40 years.

  24. curbyourrisk says:

    Let’s see…..Jamie Dimon for Vice chairman. Lloyd Blankenfeld and Franklin Raines to round things out.

  25. Dow says:

    troubled times – Freddie Mac’s previous records as a private entity are not covered by FOIA. The FOIA only applies to federal government agencies.

  26. [...] Fed governors are singlehandedly reducing the unemployment rate.  (WashingtonPost, DealBook, Big Picture) [...]

  27. Pat G. says:

    Okay, let’s discuss this. Maybe we should start by listing those to whom we owe our greatest favors to. Then, wittle it down from there…

  28. troubled times says:

    Dow…Well Rahm’s hometown paper tried and failed

    http://www.chicagotribune.com/news/politics/obama/chi-rahm-emanuel-profit-26-mar26,0,5682373.story?page=2

    But ” the FOIA only applies to federal government agencies” is actly the same kind of self-serving stupid shit we got from Bush and his bunch of losers when we were trying to figure out what, if any, role Iraq had in 9/11…..Obama should have gotten those records simple by throwing Rahm against the wall and than say ” Whats give ? Give me those records. We are in serious trouble and i need the facts, as do the people ” . …

  29. willid3 says:

    i am guessing that the Fed has also dropped the ball on this part of their responsibilities
    Fed governors willing to adhere not just to the central bank’s mission of price stability but also its mandate of full employment,

    and that other one where they are suppose to a consumer protection agency seems to also be lost in the shuffle in doing other much more important work for

    wall street

    the TBTF banks!

  30. hgordon says:

    @willid3 –

    It does seem that a few things got lost in the shuffle. One has to wonder why fat & happy bankers are so important that Obama doesn’t want to “begrudge” them their rewards.

  31. michaelismoe says:

    “Possibly be a one-term president…”

    Now there’s some Hope and Change I can believe in.

  32. postman says:

    Greenspan was easy on inflation? He wasn’t concerned about asset inflation, aside from his “irrational exuberance” comment re stocks. He didn’t seem to be concerned about rising housing prices. And he was quite concerned about the possibility of deflation around 2003. But we had no serious overall inflation (as measured by a comprehensive price index) during his tenure, so what’s the evidence he was easy on inflation?

  33. [...] noted earlier this month (Geithner, Summers Lead FOMC Vacancy), there are 3 vacancies on the Federal Reserve — two Governors and a Vice-Chairman. Fed [...]