Obama to name Fed appointees -- will anyone care?
President Obama's finally making his Fed nominations official:
The White House on Thursday will tap Janet Yellen, president of the San Francisco Federal Reserve Bank, to be the board's vice chairman, and Massachusetts Institute of Technology economist Peter Diamond and Maryland state banking regulator Sarah Bloom Raskin to sit on the seven-member board, according to people familiar with the matter. The Senate is likely to confirm them.
This reminds me that I'd meant to link to Matt Yglesias's Outlook piece on the weird difference between our treatment of Supreme Court vacancies and our treatment of Federal Reserve vacancies.
If there were three simultaneous vacancies on the Supreme Court, Washington would be a war zone, and the volume of direct mail would solve the post office's financial problems. Not so with the Federal Reserve. When the Fed is discussed in a political context, the talk normally comes from the fringe (as in the Ron Paul fan club's chants of "End the Fed"). Yet its decisions powerfully affect everyday life in a way that's rare for a court decision. ...
For all that elected officials talk about how their policies will create jobs or their opponents' policies will destroy them, in normal times it's the Fed -- not the White House, not Congress -- that determines the pace of job creation. (Its dual mandate from Congress, after all, is to promote stable prices with maximum employment.) When the Fed's Open Market Committee wants the economy to grow faster, it reduces interest rates. When it wants to slow things down, it raises them. The committee's willingness to cut rates to historically low levels in the wake of the 2001 terrorist attacks and the dot-com bust helped avoid a severe recession -- but many also think that its willingness to hold them so low for so long fueled the credit boom that led to our current bust.
Since the beginning of the financial crisis in 2008, the Fed has grown more powerful. It has effectively nationalized key parts of the banking system, taken loads of sketchy assets from wobbly banks onto its balance sheet and printed huge sums of money to stimulate the economy. The effects of these actions on average Americans cannot be overstated: Thanks to the Fed, we aren't hoarding money under our mattresses or making runs on banks. And we do not have to worry about the kind of deflationary downward spiral that has mired the Japanese economy for a decade.
As I understand it, Supreme Court nominations weren't heavily politicized until fairly late in the court's history. Decisions like Brown v. Board of Education and Roe v. Wade clarified the stakes for people. So it's worth wondering whether the financial crisis will do a bit of that for the Fed: It's made the institution more visible, given it new powers and made clear how important it is even in times of apparent quiet. Partisans on both sides increasingly realize they need to care about the institution's direction, and that means caring about who gets appointed. On the other hand, I haven't heard much about Diamond or Raskin since their names were first floated, so maybe there's been no change at all.