I noticed that some people from around the MM blogosphere where pointing out news stories from around the Web about what Republicans might intend to do with monetary policy, none of it very flattering at least from my point of view.
I have to admit to being highly skeptical (cynical), likely contributing somewhat to the anxiety about what it means to monetary policy for Republicans to take over the US Senate. I took the confirmation bias bait from these stories prophesying that the BoG will become more hawkish at first, until I read this story on Bloomberg-Business Week that links to an interesting quote from Mark Calabria a former aid of Senator Shelby, the heir apparent for the Chairmanship of the Senate Banking Committee:
The Senate panel probably won’t approve White House nominees to the Fed’s board of governors. Two of seven seats are currently vacant.
It’s probably true that, as the Business Week story goes, the Senator doesn’t like Janet Yellen, at least on a partisan basis anyway. But in the story is a link to the congressional record of the exchange between the two during Yellen’s nomination hearing last year as a supposed demonstration that there is no love lost. I read it and didn’t see a big problem there. The Senator expressed some concern about the size of the Fed’s balance sheet, but there wasn’t any real hint of hawkishness, bad economics, inflation nutterism, or grandstanding. The truth is that I just don’t know much about what this man might do as Chairman.
If all Shelby does is hold up nominations, it wouldn’t be good governance, but it is far better than insisting on filling those empty BoG seats with hawks. There might be a possibility that he’ll just let the roster of the FOMC naturally become less hawkish in 2015 with Plosser and Fisher having exited their turns at voting to be replaced with more centrist-minded folks. But one cannot be sure what might happen with still two years to go before the Presidential election. I will be watching Senator Shelby like a… like a hawk for any hint of trying to play the politics of bad economics with the Fed in the meantime.
With any luck, Obama will nominate Christina Romer to the BoG during the lame duck session and get her sworn in before the new guard have a chance to do anything about it. Come on, Obama… There is no time to waste.