Filling Fed vacancies

Given the larger circumstances, this is not a good time for the Federal Reserve to have vacancies, especially when there’s a Democratic White House in a position to fill them. It’s hard to say what, if anything, Chairman Ben Bernanke intends to do next to prevent the economy from slipping backwards, but the more constructive voices on the board, the better.

True to form, some far-right Republicans have deliberately stalled the process of filling the vacancies, including refusing to allow the Senate to consider Peter Diamond’s nomination because he’s only the recipient a Nobel Prize in economics and an expert in unemployment.

GOP intransigence is obviously to blame for the mess, but assigning responsibility doesn’t resolve the larger problem. So, the White House is trying once again, this time with a bipartisan pair of nominees.

The Obama administration has identified two economists, one Democrat and one Republican, for two empty seats on the seven-member Federal Reserve Board, according to several people familiar with administration deliberations.

The two are Jeremy Stein, a Harvard University specialist in finance, and Richard Clarida, an executive vice president at money manager Pimco and professor of economics and international affairs at Columbia University.

Mr. Stein did a stint in the White House at the beginning of Barack Obama’s presidency. Mr. Clarida was a Treasury official in the early years of the George W. Bush administration.

I’m not terribly familiar with either of these economists, but Matt Yglesias, who’s pushed as aggressively as anyone to bring the Fed to full strength, seems mildly encouraged.

Barack Obama’s come up with some Federal Reserve Board nominees. One Democrat, Harvard Jeremy Stein, and one Republican, Columbia’s Richard Clarida. My hope is that this is some kind of package deal that’s been worked out with Senator Shelby and these two will be confirmed reasonably expeditiously. The last time I saw Clarida doing popular writing on the macroeconomic situation it seemed reasonably sensible (certainly no kind of Tea Party mania) though I disagree with the view of the recession that puts so much emphasis on the health of the credit channel. That’s very much Ben Bernanke’s view of things, though, and doesn’t seem to be an issue that’s been contested actively on the FOMC. Stein is a very interesting choice since he’s actively engaged in research on the interest on excess reserves (PDF) issue and other relevant topics. I think both of these guys should provide some ballast against hawkish regional fed presidents, but I’m still trying to learn more.

President Obama will, by the way, have another chance to nominate another Fed official early next year, when a Bush appointee’s term expires. One can only assume he or she will draw immediate GOP opposition, or more likely, Sen. Richard Shelby (R-Ala.) will simply hold him or her hostage, asking the White House, “What’s a Fed nominee worth to you?”