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January 30, 2006
Apparently they missed the memo
Some senators do not keep up with the Fed confirmation hearings. (NY Times)
Wall Street may be intensely interested in just about every word ever uttered by Mr. Bernanke, the former Princeton economist and chairman of the White House Council of Economic Advisers who is President Bush's choice to succeed Alan Greenspan.
But in Washington, he is barely on some people's radar screens. Indeed, here is what Senator George Allen of Virginia, who is considering a bid for the Republican presidential nomination in 2008, said when asked his opinion of the Bernanke nomination.
"For what?"
Told that Mr. Bernanke was up for the Fed chairman's job, Mr. Allen hedged a little, said he had not been focused on it, and wondered aloud when the hearings would be. Told that the Senate Banking Committee hearings had concluded in November, the senator responded: "You mean I missed them all? I paid no attention to them."
Later in the article...
Economists are a bit mystified, though not entirely surprised. The Alito hearings were brimming with controversy, from the judge's membership in a Princeton University alumni group that fought against affirmative action to a 20-year-old memorandum in which he said that the Constitution did not provide a right to an abortion.
The Bernanke hearings, by contrast, centered on the world of monetary policy, a field where most of the big ideological fights were settled long ago.
Perhaps some of my esteemed readers would disagree with that! Actually, I think the writer is just oversimplifying the following remark by Alan Blinder.
"Monetary policy has become much less political than it used to be years back and centuries back," said Alan S. Blinder, a former Fed vice chairman who is a professor of economics at Princeton, where he was a colleague of Mr. Bernanke's. "There's a consensus on what monetary policy should be doing, which is to say keeping inflation low and, subject to that constraint, keeping employment high. So politicians take this attitude that it's for technocrats, and it doesn't matter too much whether the guy is a Republican or a Democrat."
That's a pretty broad statement, but essentially correct as far as it goes. There are a lot of things I look for in a Fed chair, but party affiliation isn't one of them. But taking it at face value, if it really is the case that party affiliation doesn't matter much, and that is why the some senators are uninterested, I think that says more about those senators than it does about monetary policy.
Posted by William Polley at January 30, 2006 9:44 PM
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Comments
The Fed is independent within the government, not independent of the governemnt. For the most part we get the monetary policy we demand and the tradeoff between unemployment and inflation that the Fed targets has strong public support.
interestingly, when Volcker shifted to targeting money supply rather then interest rates a large part of the rational is that they could then deny being responsible for the high rates -- they were only an unintended byproduct of hitting the money supply target.
Posted by: spencer at January 31, 2006 7:42 AM
You might find this study of 1979 of interest
http://www.federalreserve.gov/pubs/feds/2005/200502/200502pap.pdf
Posted by: spencer at January 31, 2006 9:08 AM
Spencer, Thanks for the link. You might like to see this issue of the St. Louis Review that was devoted to 1979.
http://research.stlouisfed.org/publications/review/05/03/part2/MarchApril2005Part2.pdf
Posted by: William Polley at January 31, 2006 4:40 PM