Starting off with a side note, it would be really nice to have a NGDP futures market in situations like this so we can see what influence the news of Summers’ withdrawal from consideration for Fed top dog is having on future NGDP expectations. Without one, making best-guess deductions about the impact of any major news using an assortment of market indicators is like putting on lipstick without a mirror.
Back to my subject line, the story about Summers’ withdrawal on Bloomberg.com has a political flair to it.
Here’s a quote:
The decision by Tester, Brown and Senator Jeff Merkley of Oregon, to publicly oppose the nomination of Summers created a hurdle for the administration on the banking panel, where Democrats hold a 12-10 edge. Support from Republicans, none of whom declared support for Summers, would have been needed for the nomination to clear the committee.
If Summers had been sent forward by the committee, a Senate floor fight would likely have followed. Lawmakers who have been critical of the Fed under Bernanke, such as Senator Rand Paul, a Kentucky Republican, and Sanders, indicated they might have been willing to try holding up the nomination.
Sanders today praised Summers for withdrawing and clearing the way for a better candidate.
“The truth is that it was unlikely he would have been confirmed by the Senate,” Sanders said in a statement e-mailed to reporters. “What the American people want now is a Fed chairman prepared to stand up to the greed, recklessness and illegal behavior on Wall Street, not a Wall Street insider.”
Behind the scenes, staff and lawmakers, even those who said they would support Summers, voiced concern in interviews about the intraparty fight a Summers nomination would cause. Democrats, who hold a majority in the Senate, face negotiations on the budget and an increase in the debt ceiling in the coming weeks.
It’s difficult to weave an alternate tapestry of the sentiment behind the opposition to Summers on the part of some Democrats; and I think this time what they’re saying is probably their ultimate concern – the banks.
One thing I noticed from this story that sticks out like a sore thumb is that it is the Senate Banking Committee that sends the recommendation for the confirmation of the Fed Chairman to the floor of the Senate – which seems like it might be at the heart of why the Fed is skewed heavily toward banking concerns rather than appropriate monetary policy. I could even take that a few steps further and speculate that this might be why no one has been barking or even softly growling about a need to fix monetary policy while we’re hearing about the need for macro-prudential policies. It’s an awful governance setup that should be revised. At the very least, the Economic Committee should also be involved in the early stages of the confirmation of the Fed Chairman; and it must start work immediately on a nominal stability monetary constitution.
I hate to break it to these headstrong Democrats in the Senate, especially those on the Banking Committee that the banks didn’t cause the Great Recession or cause millions of people to default on credit obligations and become evicted from their homes due to loss of income – inflation obsessed, bad monetary policy based on a faulty theory of inflation and interest rates did.
Perhaps they already know; someone in their party knows. Maxine Waters knows as I’ve documented here (in the comments section – Bernanke testimony before the House Financial Services Committee Feb 2013). I find it hard to believe that her remarks on the record weren’t noted or that she hasn’t spoken with anyone in her party on the Banking Committee given that her husband is a banker.
I find this kind of behavior rather striking coming from Democrats considering that it is the party that put Humphrey-Hawkins into place. Yet it seems to be entirely unaware that lack of adherence to that law is what caused the snowballing effect of a recession caused by an oil price spike. Is this the party of the people or is it really just run by power mad Banking Committee members who couldn’t care less about average Joe? I suppose we only get a chicken in every pot if it has some Democrat politician’s name on it.
Despicable is the only word I can find to describe this predicament.
PS: Below are the names of the members of the Senate Banking Committee, people who likely have the lion’s share of responsibility for persistently tight money:
|Tim Johnson Chairman (D-SD)||Mike Crapo Ranking Member (R-ID)|
|Jack Reed (D-RI)||Richard Shelby (R-AL)|
|Charles E. Schumer (D-NY)||Bob Corker (R-TN)|
|Robert Menendez (D-NJ)||David Vitter (R-LA)|
|Sherrod Brown (D-OH)||Mike Johanns (R-NE)|
|Jon Tester (D-MT)||Patrick J. Toomey (R-PA)|
|Mark R. Warner (D-VA)||Mark Kirk (R-IL)|
|Jeff Merkley (D-OR)||Jerry Moran (R-KS)|
|Kay Hagan (D-NC)||Tom Coburn (R-OK)|
|Joe Manchin III (D-WV)||Dean Heller (R-NV)|
|Elizabeth Warren (D-MA)|
|Heidi Heitkamp (D-ND)|