I was probably last to know, but thought I’d post it here in case there is someone out there who knows, that John Williams of the SF Fed is being considered for the seat on the Fed’s Board of Governors vacated by the former Vice Chairman Stanley Fischer.
Williams must not have been part of the Fedster crowd talking up the need to steepen the rate of rate hikes because he’s been at the top of the SF Fed since Janet Yellen left it in 2011 and I’ve barely noticed him. And having never been directly centered in my cross-hairs for criticism is possibly a good thing; or it may not be. So I thought I’d take a look at what Bing has to say about his record.
It’s nice to see that Williams at least implicitly volunteered to take responsibility for something in the 2012 speech on the role of monetary policy in bolstering economic growth:
One of our most important functions is setting monetary policy. That involves influencing interest rates and broader financial conditions. Our decisions about monetary policy influence how fast the economy grows and the rate of price inflation.
But that’s the only impressive statement here. Williams continues with this:
We are now in the fourth year of the economic recovery. That in itself is a significant accomplishment, given how close our financial system came to collapsing in late 2008. The recession then already under way worsened, turning into the longest and deepest downturn since the Great Depression. The economy shrank more than 4½ percent and the unemployment rate eventually peaked at 10 percent.
Perhaps the most encouraging signs of a turnaround have been the improvements in two key sectors of the economy: autos and housing. Car sales have bounced back almost 60 percent from their recession lows, thanks to pent-up demand and fabulous rates on auto loans. And housing has finally started to come back. Fewer homes are going into foreclosure. Credit is still tight for many potential homebuyers, but the market has firmed and home sales are off their lows. With a limited stock of homes to choose from, house prices are rising in many parts of the country. This is setting the stage for more homebuilding. Housing starts are up sharply from where they were a year ago.
As welcome as this progress is, the recovery has lacked the spark of past rebounds. That’s not surprising when you consider what we went through in 2007 and 2008. Families are buried in debt accumulated during the housing boom, and many now find their homes are worth less than what they paid for them. Millions of homeowners are behind on their mortgages or have already lost their homes. And lenders, burned from their past mistakes, are tightfisted with credit. All these factors help explain the gradual pace of economic recovery.
When I look at the economic landscape ahead, I see several additional factors continuing to hold us back: a global economic slowdown stemming in large part from the European financial crisis, budget challenges here at home, and widespread uncertainty about where the economy is going.
It’s really interesting that Williams begins with an implicit claim of responsibility for growth and inflation, but when things are bad and not getting much better very quickly, the problem amazingly lies everywhere but at the Fed; I suppose that the saying about success having many fathers while failure is an orphan couldn’t be truer anywhere but at the Fed.
Of course this isn’t the worst thing ever uttered by a Fedster, and if this is the worst thing Williams ever said, he probably isn’t the worst person in the world to be considered for the Vice Chair post. But there better people, like Narayana Kocherlakota.
I understand that Kocherlakota made waves by firing people who, at least in my view, needed firing because the waste on bad advice is generally much greater than what one pays for it. And I think we’ve already paid the price times time and half of time in opportunity cost for milquetoast monetary policymakers who choose to get along rather than doing within their power what needs to be done to leave the world a better place than they found it, as thankless and unrewarding as this task often is.
I wouldn’t object to Williams as Vice Chair. But would wholeheartedly advocate for a Kocherlakota choice.