The > Fed was created by Congress in 1913 and, therefore, is a creature of a democracy and must answer to the public interest. But, it also gives special power to regional Fed banks, which are directed by private boards of directors composed in part of private banks who have special access to monetary policy decisions. So the Fed chief is independent AND beholden to the public interest.
We have had some lousy and good Fed chiefs. Greenspan knew Wall Street was “irrationally exuberant” and creating dangerous bubbles and he knew the Bush tax cuts would raise the deficit; but, sadly, he was no fixer.
Ben Bernanke, appointed by George W. Bush and whose term expires this year, is a pretty good Fed chief. A Princeton professor of the Depression, he moved fast and boldly when the recession hit. If Obama should re-up Bernanke depends on the alternatives.
Let’s look at some names:
Another professor Janet Yellen, who has ably headed the San Francisco Fed, is a favorite for good reasons, though no Wall Street connections she is experienced, trusted, and independent. We need more candidates with her integrity and I invite readers to submit candidates here.
Watch Gary Gensler, new head of the Commodity Futures Trading Commission, and in the cross hairs of the finance industry for wanting to take on oil speculators and derivative markets. He is super smart – the youngest executive at Goldman at one time — and is showing bold moves toward the public interest in crucial places.
But why I am eying this guy? His book, “The Great Mutual Fund Trap,” exposed the mutual fund industry — “With returns corrected for survivorship bias, the average actively managed funds trail the market by about 3 percentage points a year” back in the exuberant times when “do-it-yourself” investing seemed to be a frictionless money machine.
That book took guts and a feel for what people needed. Both characteristics don’t appear in the “Federal Reserve Chief” job description but they are bona fide qualifiers.
