Today my boss is at an off-site meeting and let us go home early. So I am excited that I get some extra time for blogging which has certainly been in deficit range lately. Even though I don’t have as much time for blogging as I used to, I still keep up on news of the three-wheeled clown car known as the FOMC. Janet Yellen held her first meeting as Fed chief Tuesday and Wednesday, and while the results were not nearly regrettable as the outcomes of those meetings in 2008, they left a bit to be desired as the Committee stumbles around to grasp the art of forward guidance.
It isn’t helpful that Yellen is officially three governors short of a full deck when it comes to dealing with the more hawkish members form the regional Fed banks, members such as Charles Plosser who seem to think that wage growth is a tell-tail sign that rates need to rise even though the LFPR and employment to population ratio are still quite far from any reasonable definition of full employment. All three seats on the Board of Governors have had nominees for a couple of months, but Senator Harry Reid of Nevada, the majority leader, has yet to bring them up for a vote on the floor, and there is no date set for such a vote.
Given that the conduct of monetary policy has been such a disaster in the last several years, I wonder what could possibly be holding up the vote. It doesn’t make sense to me for there to have been as much ruckus over the nomination of the Chairman and vote in order to fill that position before it was left vacant only to not provide the new Chairman the support she needs on the BoG to conduct monetary policy in a way she deems necessary; that is unless Reid doesn’t want the mess to be cleaned up. His less than charming hesitation leaves more doubt about whose side he is on the longer it goes on.
I’ve been working on a post about why the Federal Reserve should be reformed. And without giving the whole thing away, like serving wine before its time, I would just like to point out that Bernanke was a few seats short of the full slate in 2008 also, and we know how well that went. And it isn’t so much about how it went, but the composition of majority of the voting members of the FOMC was skewed toward regional bank presidents, guys who are voted for by the banks themselves. They ran economy into the ground with tight money as Bernanke who has a serious lack of leadership skills did nothing to prevent it. I will allude to a possible motivation, as now all of the investment banks that enabled the regulated banks to provide certain kinds of credit are now gone; with an illustration that what is left is regulated banks that are doing very little in the way of serving the public good.
With this in mind, I think it is certainly worth questioning why Harry Reid is no particular hurry to confirm Janet Yellen’s team for the Board of Governors while there is still quite a bit of financial suffering going on from the lack of ample employment opportunities. It certainly isn’t helping matters for average Joe. And if he isn’t in a hurry to help average Joe, whose side is he on – really?