Sardonic DC insiders like to say there’s nothing of import coming down the pike in terms of economic policy. To which I say two words: Fed governors. The President needs to appoint two of them to fill empty slots on the big bank’s board.
For good reasons, progressive members of the Senate Finance Committee (e.g., Sens Warren. Brown), where the confirmation process starts (and probably ends, given the invoked “nuclear option”–i.e., candidates that make it to the floor will probably get to 51, as opposed to 60) invoke the importance of financial oversight in the new candidates.
I couldn’t agree more and think of this in terms of supporting Chair Yellen, who consistently sounds strong on these issues. Recall that during her own confirmation hearing she broke with her two predecessors in underscoring the role of the Fed in identifying and deflating bubbles, something both G-span and Bernanke eschewed, arguing the Fed could neither spot nor stop them. Given the shampoo economic cycle of recent decades (“bubble, bust, repeat”), Chair Yellen seems to recognize that the Fed doesn’t have the luxury to stand on the sidelines in this regard and she could use another ally or two in that pursuit.
Other progressives argue, “no, what’s really needed is someone who values the full employment side of the Fed’s dual mandate.” And given the rarity of full employment labor markets in recent decades that’s an obvious and valid position as well.
Me, I think the two are intimately related. Back in the days when I was working on high-speed rail (HSR) issues–remember, I’m an old Biden guy–a rail expert shared the deep and secret Zen of HSR: “the thing that keeps trains from going fast is when they have to go slow.”
He was referring to the necessity of straight tracks, but in this context, one of the best ways to achieve and maintain full employment is to not inflate financial or housing bubbles. The thing that whacks strong labor demand is long periods of weak labor demand. Moreover, such periods do lasting damage.
So let’s not get too compartmentalized here. Both of these Fed functions matter a lot and they’re complements, not substitutes.