5:08 PM, Nov 12, 2015 • By IKE BRANNON
What kind of skills might be essential for someone to be head of a Federal Reserve Regional Bank? If your response is a basic knowledge of monetary policy and a deep understanding of financial markets you are mistaken: The answer is, apparently, experience at Goldman Sachs. The appointment of former Goldman Sachs vice president and Treasury official Neel Kashkari to be president of the Minneapolis Federal Reserve Bank means that the last three central bank presidents have come from Goldman.
I've never worked for an investment bank so perhaps I'm being unfair, but the day-to-day activities of most people at Goldman have relatively little to do with central bank operations. A regional Central Bank president has two main tasks: to run a bureaucracy tasked with monitoring the region’s economy and its member banks, and to serve on the Federal Open Market Committee, which helps determine the Fed’s monetary policy.
Kashkari has no managerial experience to speak of and no training or experience relevant to monetary policy, so there must be something else that qualifies him. The New York Times noted with approval that he was the “runner up” in the California gubernatorial race in 2014, an exceedingly nice way to describe a hopeless campaign that did eight points worse than the last Republican who ran for the seat. Other commentators have complimented him on his performance running equities at PIMCO, but the size of his fund never reached one percent of PIMCO’s holdings, he didn’t beat the market in his tenure, (in 2012 it finished in the bottom decile of such funds) and the company has since closed down most of its equity holdings.
Kashkari became a household name thanks to the prominent role he played in the 2008 financial crisis, in which he helped his mentor, Treasury Secretary Hank Paulson, conceive of and then administer TARP—the Troubled Asset Relief Program. He participated in some intense and important negotiations, which no doubt educated him on the workings of Congress and Treasury, but none of that is relevant to being a Fed regional bank president. And if we do have another financial crisis, no one’s going to be looking to the Minneapolis Fed for guidance unless it closely resembles the last one—which it won’t.
Here’s how the appointment of regional Fed Bank presidents used to work, before we just started asking Goldman Sachs vice presidents to grace us with their service. In 2008 the St. Louis Fed found itself in need of a president at a time when financial markets were going down the tubes. In a pinch, they actually hired one of their senior economists, Jim Bullard, to run things. Bullard didn’t have much managerial experience either but he had spent the previous 20 years of his life thinking about monetary policy—especially what the Fed can do when it pushes interest rates to zero and the economy is still in need of stimulus—and he was considered one of the profession’s experts in this area. In short order he came to play an outsized role in devising the quantitative easing that the Fed embraced a few months later, and he continues to play an important role in formulating monetary policy.
Some have suggested he might be a good successor to Janet Yellen, but that’s not likely to happen: A few people have pointed out that his Ph.D. is from Indiana University, which is apparently insufficient for such a post. Maybe he can just do a stint on the trading desk at Goldman if he ever decides to go for the job.
1:02 PM, Nov 11, 2015 • By MARK HEMINGWAY
One of the big problems with media "fact checkers" is the presumption of expertise that the reporter doesn't actually have. Sitting around googling whenever a politician opens his or her mouth often means a rush to judgment, and the results can be embarassing. Last night, Politico Pro sent out the following story:
Fact check: The president can’t fire Yellen
By Jon Prior
12:01 AM, Oct 31, 2015 • By IRWIN M. STELZER
Coming soon to a central bank near you, in time for the Christmas shopping season, an increase in interest rates, courtesy of Janet Yellen and her colleagues on the Federal Reserve Board’s monetary policy committee. Or perhaps not. Folks living in euroland can expect the gift that keeps on giving, unless it doesn’t, more monetary stimulus. China works on a different calendar, so its people have already unwrapped their gifts, a cut in interest rates and assorted credit-easing measures.
1:10 PM, Oct 30, 2015 • By WILLIAM KRISTOL
Interesting political debates typically have what could be called primary effects. In Wednesday night's case, those would include the Bush-Rubio exchange, which did a lot of good for Rubio and a lot of damage to Bush, and the Cruz assault on the moderators, which was dazzling.
Yellen's Augustinian monetary policy.12:01 AM, Sep 19, 2015 • By IRWIN M. STELZER
The U.S. economy is chugging along. Not at high speed, but at a steady 2.25 percent annual rate, with retailers stocking up in anticipation of a very merry holiday season. The unemployment rate is down to 5.1 percent, according to the Federal Reserve Board headed lower to its “long-run normal” rate, and employers in many sectors are scrambling to find workers with the skills they need.
12:00 AM, Sep 5, 2015 • By IRWIN M. STELZER
“A fact can be a beautiful thing,” sings one of the characters in the award-winning musical, “Promises, Promises.” True. Unfortunately, a gaggle of facts can be somewhere between confusing and a curse, especially if you are a central banker who has specialized in promises, promises that a process of normalization will begin after seven years of zero interest rates. Now, faced with its next meeting less than two weeks hence, the Federal Reserve Board’s monetary policy committee has to decide whether to replace promises with action.
12:01 AM, Aug 1, 2015 • By IRWIN M. STELZER
Hurry up and wait. Hurry to the announcement by the Federal Reserve Board’s monetary policy committee, and then wait for the next one. After 2,417 days of keeping its key interest rate at zero, on Wednesday of last week the Fed policy team decided that a few more weeks or months at that level might be a good idea. The Fed knows that zero is not a sustainable level for interest rates, but also wants to be certain it doesn’t abort the none-too-robust recovery.
4:29 PM, Apr 13, 2015 • By MATTHEW SCHOENFELD
Federal Reserve Chair Janet Yellen has devoted time of late to discussing the significant problem of inequality. At a conference on April 2nd, Ms. Yellen urged that research be undertaken “to understand whether any policies may hold people back or discourage upward mobility.” Perhaps such research might start at the doorstep of the Federal Reserve because the Fed’s sustained policy of near-zero interest rates has increased inequality, as well as made it more difficult for the middle class to climb the economic ladder.
12:01 AM, Mar 14, 2015 • By IRWIN M. STELZER
So all’s well. No more financial meltdowns. No more taxpayer bailouts of bonus-hunting, risk-taking bankers. The Federal Reserve Board’s regulators have decided that all 31 of the largest U.S. banks, including seven that are foreign-owned, would survive a severe recession with sufficient capital to continue lending and remain in business without a taxpayer bailout.
12:01 AM, Feb 21, 2015 • By IRWIN M. STELZER
Markets work. That’s the message from Walmart’s decision to raise its starting wage for 500,000 of its 1.3 million US employees to $10 per hour starting next year. That’s 37% above the statutory minimum of $7.25.
Majority don't trust Fed to fix it.1:01 PM, Aug 25, 2014 • By MICHAEL WARREN
Things are getting more expensive, and the American people know it. A new poll from Rasmussen Reports found three-quarters of Americans say they are concerned about inflation, with 81 percent saying they are paying more for groceries and 71 percent saying they expect to pay even more for groceries a year from now. Here's more:
Go bold with gold.Jul 21, 2014, Vol. 19, No. 42 • By JUDY SHELTON
Republicans are searching for big, bold ideas that will inspire voters to embrace a conservative agenda. To unite its disparate segments, the GOP needs to uphold our nation’s founding principles—a key requirement for Tea Party adherents—while fostering the aspirations of those who believe the United States should play a strong leadership role in the world. A prime opportunity presents itself in the most compelling problem America faces: the need to restore confidence in its economic future.