Late last year I noticed that the conservative infrastructure was being put in motion to go after the Federal Reserve and potential nominees to fill the vacant seats. With seats vacant, voting power disproportionately goes to regional Presidents. These are people that are elected by banks and are in general very conservative economic thinkers. Instead of shouting about a jobs crisis they have instead gone hoarse from shouting “Fire! Fire!” on Noah’s Ark this past year.
(My favorite regional Fed moment is still Hoenig saying he’s worried about unemployment at 9.6% – worried it might come down too fast! But there’s a ton of them.)
The conservative machine continues to spin up. Here’s CNBC noting that the conservative group Club For Growth is opposing Peter Diamond’s nomination to the Federal Reserve, aggressively targeting members who might vote for him:
The Club for Growth opposes the nomination of Peter Diamond to the Federal Reserve’s Board of Governors and urges all Senators to vote “NO” on his confirmation. If his nomination comes to the floor for a vote, it will be included in the Club for Growth’s 2011 Congressional Scorecard.
One of the pillars of economic growth is stable money – the most important responsibility of the Federal Reserve Board….While the Fed should be an independent institution to ensure sound money, Diamond is an activist-Keynesian who believes in a much larger role for government involvement in the economy. Most notably, he supported a larger stimulus than the failed one that passed into law in 2009. And he supports government-run healthcare administered through agencies similar to Fannie Mae and Freddie Mac….
Cabinet officials and other key executive branch appointments are assumed to be people who agree with the President. However, the Federal Reserve Board is not an executive branch agency – in fact its authority is controlled by the congressional power to “regulate the Value [of Money]” derived from Article I Section 8 of the Constitution. We believe that Congress should therefore apply a different standard of care for such nominations.
This is different than the random politician throwing off a barely-understood sound-bite about “fiat money” to a camera or a think-tank playing to the news cycle with press releases.
The fact that it is on their scorecard for how they rate congressional members, which is their metric for how they attack “RINOs” in primary challenges, means it is that much harder for a reasonable Senator to vote for a qualified, mainstream economist like Diamond. And there’s simply no alternative on the liberal side to that kind of organization on Fed policy or members.
And there’s nothing that is going to get us out of the crisis or prevent the next financial sector meltdown more than the Federal Reserve. It might help to get some liberal and progressive thinkers on there.
It’s important to watch their arguments. They are arguing that the President doesn’t have the presumption that his nominees to the Federal Reserve should go through if they are qualified, and that Peter Diamond isn’t qualified because he supported a stimulus bill larger than the ARRA that passed. This is simply an outrageous argument but it’s the reality liberals need to deal with.
I notice that having opinions about the social safety net was disqualifiable to conservative Senators when Shelby wrote his letter opposing Diamond. Notice how he opens with the similar deference argument and also a key observation that a Fed appointment is like an economic Supreme Court nominee (my bold):
Although I do not share many of the policy preferences of these nominees, I am inclined to give greater deference to the President in his choices for his own personal economic advisers. I do not believe, however, that the same deference should be given to nominations for our financial regulators.
It is proper, therefore, that the Senate should take its Constitutional advice and consent duties for Fed nominees very seriously. In my opinion, the nomination of a Fed Governor is the economic equivalent of a Supreme Court nomination and should be treated accordingly.
Applying this standard to the nomination of Dr. Peter Diamond to the Board of Governors, I believe that Dr. Diamond should not be confirmed….
In addition to a nominee’s expertise and experience, their policy preferences also matter….What are Dr. Diamond’s policy preferences?
[1.] He supports QE2.
[2.] He supported President Obama’s $800 billion stimulus package and has argued for additional fiscal stimulus.
[3.] He wrote a paper with President Obama’s former budget director, Peter Orszag, arguing for higher taxes to fund Social Security.
[4.] He supported bailing out big banks during the financial crisis.
[5.] He supports the use of behavioral economics to help bureaucrats more effectively control the choices Americans make.
[6.] He has even advocated the creation of a GSE modeled after Fannie and Freddie to subsidize health care.
I would note that “nudges” and Peter Orzag’s plan for Save Security is not exactly the most strong-left form of progressivism I can imagine. But without any kind of counter-pressure the conservative noise machine can push what constitutes a qualified nominee pretty far to the right.