Who should lead the Federal Reserve?

That is the topic of my latest Bloomberg column, here is one excerpt:

We do not live under political normalcy, so traditional standards are not enough to guide this choice. In an age of consensus, it might be wise to nominate the candidate who knows the most about monetary policy, or who commands the most respect on Wall Street. Those remain significant factors, but the most important job of the next candidate is to prevent a polarization of opinion within the Fed itself.

I do consider some specific names at the link.


Of course, Trump is of two minds about almost any policy, and one cannot predict which mind will prevail. For the Fed, the Bannon influence (does he or doesn't he?) may well result in the appointment of ideologues from the Austrian school, whereas Trump the peddler of real estate with the promise of rising prices influence may well result in the appointment of the easiest of easy money men.

Andreas Antonopoulos should be the leading candidate


If I'm a betting man, I'm betting on the latter. That means Taylor is never gonna happen, and Warsh is only still in the running as a bone to Ronald Lauder. I thought I read somewhere today that Kashkari was not on the shortlist. So, from what we know, that leaves Powell with an outside shot of Yellen, I'm not putting money on Yellen however, as Trump strikes me as unlikely to appoint a holdover.

How about a career central banker committed to keeping the advance of the major price indices at a slow and steady level - i.e. someone who thinks inside the box unless a disaster is looming?

That implies a macro formula which keeps prices rising at x% a year, in which event we could just program a computer and appoint it as head of the FRB. When you get that formula worked out let us know.

There are powerful sociological currents which constrain central bankers from acting when a disaster is "looming." If I own appreciating assets, then I think the economy is good, and the more they appreciate the better I think the economy is. But again, this implies we know what prices "should" be in any given sector at any point in time. Is Sun Belt real estate overpriced? Are Facebook stocks or US Treasuries overpriced? And if I could figure that out why would I be schlepping to work at the central bank? We'll know it when it happens. The Fed is doomed to reactivity and will always be a political institution.

I'm sympathetic to the view that the Fed should drop the pretense and return to being a banker's bank but I don't see how that's possible at this point.

You're overthinking things. Maintaining the general price level does not dictate prices in sectors.

It has to, because there's no macro without micro. Got that formula worked out yet?

The Federal Reserve quite successfully maintained price stability over the period running from 1951 to 1966 and has done so since 1982 without consulting me. If you fancy the last 35 years have been an illusion, that's your problem.

The FED has a dual mandate.

The dual mandate is like taking two cocks up the ass at the same time; seems like a great idea until you lose control of your bowels.

There are powerful sociological currents which constrain central bankers from acting when a disaster is “looming.”

You'd have done a better job in 2008-09?

You said "looming," so that's how I responded. Please argue in good faith.

2008-09 was after the fact. What should have been done and when, and how can you tell?

Please argue in good faith.

Shove it, poseur.

The Federal Reserve has a banking supervisory staff, but it's book is limited to member banks. If the Comptroller of the Currency, the Office of Thrift Supervision, and the state banking superintendents are falling down on the job, that really is not the Fed's doing. Similarly, if federal legislation permits universal banking and that inhibits the FDIC from being able to handle failing banks with conventional tools, that's not the Fed's doing either.

.....yes, of course -- a "Career Central Banker" is the ideal choice if one endorses the Federal Reserve System and concept.

However, many persons do not endorse that institution and concept ...thus making the Fed "leader" a trivial consideration.

The U.S. Federal Reserve System is a cartel of major banks, enforced by the Federal Government.

Primary objective of the Fed is the financial well being of major banks. Secondary objective is as a fiscal spigot for excess U.S. Congressional spending. A Fed leader should be proficient and supportive in meeting those objectives.

I plead guilty to thinking the von Mises Institute is a crank cotillion. So sue me.

I'm calling this subthread for Art, by several lengths.

The Fedovac 3000.

Powered by Kernkraft 400?

I would like John Taylor but not sure why he would want it.

"Those remain significant factors": really? What do they signify? And what, precisely, do you mean by 'factor'?

If that excerpt is the best bit I'll skip the rest.

Does Tyler delete comments?

'We do not live under political normalcy'

Please, this is getting tedious. Trump has a long way to go to approach Nixonian political normalcy, for example - remember the Vietnam War, the oil embargo connected with the Yom Kippur War, and price controls? Along with the fact that Nixon finally took America off the gold standard, and was extremely interested in who headed the Fed, as is well documented - 'When Vice President Richard M. Nixon was running for President in 1959–1960, the Fed, under the Truman-appointed William McChesney Martin, Jr., was undertaking a monetary tightening policy that resulted in a recession in April 1960. In his book Six Crises, Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.

Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed' https://en.wikipedia.org/wiki/Arthur_Burns#Federal_Reserve_Chairman

Compared to Nixon, Trump is a political chump, though much more entertaining to watch.

Compared to a lot of people, Trump is a political chump.

BTW, if you click through to the article, Tyler actually elaborates on what he means by not living under "political normalcy". He doesn't mean executive dysfunction or corruption, as you seem to assume.

My examples were primarily war and economic crisis(es), not 'executive dysfunction or corruption' as you seem to assume.

"Compared to a lot of people, Trump is a political chump."

I keep hearing that, but the chump is the one who beat out every political pro and the entire pundit class.

Interesting point - what I meant is that Trump has not actually shaken up anything on a level comparable to Nixon's price controls or closing of the gold window, or supporting Israel then facing the immense fall out of the first oil embargo. In other words, compared to Nixon, Trump is a boring political chump, at least as president.

Not in direct reference, but it is fascinating to see how periods I actually lived through have been reduced to sound bites. Nixon imposed price controls on the American economy, in response to a combination of things causing major economic problems. Such as the oil embargo that resulted from America's aid to Israel during the Yom Kippur, or the devaluation of the dollar following the closing of the gold window, along with the ongoing costs of the Vietnam War, followed by the victory of the North Vietnamese.

That is the sort of thing that was 'political normalcy' when I was around 12 years old.

And yet, it seems as if the only thing people can think about when they read 'Nixonian political normalcy' is corruption of the Watergate variety (ITT seems to slipped from history), and whatever definition of executive dysfunction you prefer. Where I would say, broadly speaking, the Nixon Administration would not be a good example of executive dysfunction (leaving the question of Nixon's own personality aside).

This was the same sort of thing that happened when writing that a North Korean first strike would be hard to imagine as the North Koreans are fully aware of what happened to the last nation that made a first strike against the U.S. (or maybe not exactly the U.S., as Hawaii at the time was not actually an American state), most particularly what happened to Hiroshima.

But this represents the horns of a dilemma - write a detailed response, with links, and be called boring (which can be a fair charge, of course). Write something short, and see how what seemed plain can be misconstrued. Most of this really isn't so broadly relevant, and it might just be part of getting older, but there seems to an increasing lack of any ability to be aware that other people do not actually share the same set of preconceptions. And for someone living in the UK, you must see this on a daily basis - the British are not Americans, and do not share American frameworks.

Trump is just a reversion to the mean. I'm guessing Tyler's referring to the hissy fits from the left.

‘We do not live under political normalcy’

Everyone knows the emperor has no clothes, and the top drama is whether Tillerson actually said it. That is not normal, no.

Yes it is. All we are seeing is the reporting we usually see 3 years into a Republican administration.

It isn't reported usually.

Does the emperor have clothes?

"58 percent of respondents say they have either little or no confidence in Trump’s ability to steer the country through an international crisis."


Warsh is married into a family (and a wife) worth billions of dollars. His father-in-law is a lifelong friend of Trump.

I would put all candidates to an initial test by asking:
Banks are allowed to leverage more with assets considered safe, like loans to sovereigns, the AAArisktocracy and mortgages, than with assets considered risky, like loans to SMEs and entrepreneurs.
Does that mean “the safe” have even more and easier access to bank credit than usual and “the risky” have even less and on more expensive terms access to bank credit than usual?
If the answer is no, disqualify the candidate.
If the answer is yes, then ask: In terms of what can pose the greatest risk to the bank system, would you agree with Basel II’s risk weights of 20% for what is rated AAA to AA and 150% for what is rated below BB-?
If the answer is yes, disqualify the candidate.
If the answer is no, then ask: Do you agree with a 0% risk weighting of sovereigns?
If the answer is yes, the candidate should be classified as an incurable statist and accordingly dismissed.
If the answer is no you can proceed with the rest of the tests.

Great way to safeguard the independence of the Fed!

I don't think so actually.

Almost. But the correct Jared is, as always, Jared Fogel.


Trump will nominate someone who cow-tows and genuflects to him. Very few of any calibre want anything to do with Trump and his administration.

It's your contention that Rex Tillerson, Stephen Mnuchin, Gen. Mattis, Wilbur Ross, Ryan Zinke, and David Shulkin are not 'people of any calibre'? What do you have to do to be a true Scotsman?

(And while we're at it, why do John Kerry and Kathleen Sibelius qualify as 'people of any calibre')?

How important is the truth?


Not important.

>We do not live under political normalcy

Why? Because your tribe lost? And you're very upset about it?

Sorry, that's your problem, not anyone else's. Certainly not the Fed's problem. No policy is going to made, and no special person is going to be nominated, based on your dedication to a 4-8 year tantrum.

Try to keep up.


Corker is retiring. Yesterday's news.

There are plenty of NeverTrumpers in the GOP who preferred [and even voted for] Clinton.

Right Bob, it is the "Never Trumpers" who have been proven wrong by a brilliant and productive presidency. Trump is tired of winning.

"it is the “Never Trumpers” who have been proven wrong"

They preferred Clinton over Trump. Can't be more wrong than that.

Trump has failed to do a lot of things but mainly because of pathetic GOP senate caucus includes weaklings like Corker.

My father always said, look not to the man who succeeds, but the man who has excuses ready.

This comment seems very off brand for you, Art Deco.

I didn't even respond to the right comment dammit!

Off-topic: I have decided to support Representative Bolsonaro's presidential run - pending his change of parties. I would ask you all to ask all your Brazilian friends to vote for him and donate as much money they can as soon as he officially launches his candidacy - don't let malefactors of great wealth buy next year's election, please. Also, ask them to send him an email asking him to accept a Minimum Programme. Thank you very much.

The "minimum programme" is the nickname for my penis.

"This time around, it’s all about the politics."

Its always all about the politics.

Yellen got picked because Obama wanted a woman. That is politics.

I'm getting sick of all these women thinking they can do jobs men are supposed to do. Sure Yellen did a good job, but her comparative advantage is in sewing and cooking.

Yellen was qualified but she was still picked to be a "first". Bad sarcasm won't change that..

My point is why does there need to be a 'first'? If you don't pick a woman to do the job ever, then you don't have the SJWs doing their touchdown dances over increasing 'diversity'. Sure, Obama picked a qualified and in hindsight competent Fed chair, but did it have to be a woman? Plenty of men can do that job as well or better.

Obama wanted Larry Summers over Yellen and had to be talked out of it, rather grudgingly as I recall it.

Miles Kimball - a solid economist, thoughtful, and a decent person. Of course all three of those are likely disqualifying. If he won't take the job, bring back Paul Volcker.

I say put Tyler Cowen in charge. It would be rather amusing to see how markets cope with the art of reading between the Straussian lines.

I want Trump to nominate a Fed chair who will trigger the 21st century Great Depression.

Personally, I'm old and thus protected by the New Deal welfare state for the old, which thanks to Reagan protects me from inflation and has rewards for deflation, if it were to happen.

Trump has promised the government will fix everything, and that he will do so by cutting taxes and spending unlimited amounts of other people's money to solve every problem, just as he has lived his life. Thus, a crash triggered by the Fed and Congress will not lead to an uprising demanding no government response and every voter fixing every problem with their own money.

Not sure who the FDR will be. Maybe Bloomberg. The bigger question is who will be the Mariner Eccles. Without Eccles, we wouldn't have had the half century of growth that created the strong middle class by 1980. Only to be torn down by the free lunch economists Reagan listened to who sold America on debt as the path to wealth, not work.

Of those you name (but don't genuinely consider) as possible alternatives to a reappointment of Janet Yellen, only John Taylor has credentials as a macro/monetary economist that are even close to competitive with Yellen's. He has zero experience dealing with the Fed's bureaucracy, and his misinterpretation of the 2007-08 financial crisis is a serious error that should weigh heavily against his candidacy.

In a reasonable world, Yellen would be renominated and easily confirmed. But we don't live in a reasonable world.

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