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And I Do Not Understand the Federal Reserve's Current Thinking at All...

OK. I Give Up. Who Is Ted Truman's Favored Candidate for Fed Chair?

He's not on #TeamLarry. He's not on #TeamJanet. He's not on #TeamDon or #TeamRoger. He's not on #TeamChristie of #TeamLaura or #TeamAlan. He's for an "outsider"--the last outsider was G. William Miller (1978-1979), who came to the Fed Chair after running a synthetic textiles manufacturing conglomerate. That did not work out well--although everybody agrees that G. William Miller was "a lovely person".

Before Miller, the last outsider was Scott Paper President McCabe from 1948-51--but the Board and the FOMC appear to have continued to act as though ex-Chair Mariner Eccles was still Chair. No other "outsiders" have been appointed Chair since the founding of the Fed.

But Ted Truman wants one:

The new Fed chair should not be one of the usual suspects: The Fed needs an outsider. The three… are all essentially highly competent insiders. But that is not enough to restore the Fed’s credibility…. The new chair must convince a sceptical public and its Washington representatives that it has learnt from the crisis. The Fed has not conducted a public self-examination. It should. Where did its practices go off-track before the crisis? This work would need to be broad: only a small portion of its staff of more than 20,000 is engaged in monetary policy. The Fed’s mandate is much broader, covering not just monetary policy but also the stability of the US and global financial and payment systems….

A vigorous appraisal of its past mistakes is essential not only because of the depth of the financial crisis but also because of the Fed’s recently augmented responsibilities for the supervision and regulation of the financial and payment systems…. This will require a leader who is an agent for change, not someone who was heavily involved in past decisions.

Only six men have served as Fed chair since… 1951…. Some were agents of change. William McChesney Martin… Arthur Burns… much-maligned G. William Miller was appointed by Jimmy Carter to succeed Burns… Paul Volcker….

[By contrast] Alan Greenspan… stressed continuity… Bernanke, because he was an insider, was more of the same. The Fed has emphasised intellectual and analytical rigour as well as open debate, and shown a willingness to innovate--but in the context of institutional inertia.

The next chair of the Fed must be knowledgeable about monetary policy but need not be a monetary expert and need not be an academic…. What the US and the world need is a Fed chair who will shake up the institution. They must be an effective manager as well as an intellectual leader who implements a transformation of the Fed as it enters its second century. That person is more likely to be a well-informed outsider than an entrenched insider.

I am sorry. I really do not see where Ted is trying to go here, or who he would choose…

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