On Friday, August 6th, Congress failed to approve 3 appointments by President Obama to the Federal Reserve. This is important, and noteworthy, as the Federal Reserve is to have 7 members. They currently only have 5 members and another member’s term is to expire on September 1.
This blog is not intended to be political in nature. Its purpose is to help to clarify and inform its readers of important financial and newsworthy events, which we feel this is. Thus, the purpose of this post is to explain why we feel the action, particularly by Senator Shelby of Alabama, was incorrect.
Due to Alabama Senator Richard Shelby, Peter Diamond’s nomination was rejected and President Obama will need to be re-submit his nomination, if President Obama chooses to do so. Shelby stated that while Diamond is a “skilled economist,” he is not yet ready to be appointed or not qualified to make monetary policy decisions. This is the same Senator Shelby that was against any financial assistance for the automobile industry.
Senator’s Shelby’s comments are very disturbing. A quick review of Diamond’s background indicates that he is an exemplary economist and has headed many major economic organizations/associations. But more importantly, the 70 year old MIT economist’s areas of expertise are the study of the Social Security system and the long term effects of structural unemployment. Both of these topics are critically important to our country today. Additionally, as a Federal Reserve member, he would have the ability to guide the national discussion and awareness of issues, through speeches and writings. Diamond’s expertise and knowledge should be even more important than ever.
The leaders of the Federal Reserve should be a broad and diverse group of financial and economic experts, who would work together and share thoughts, for the betterment of our country and society. The country faces major challenges in dealing with both the Social Security system, as well as structural unemployment. Just as I posted a while ago that we are fortunate that Fed Chairman Bernanke’s expertise was in dealing with the causes of the Great Depression, Mr. Diamond’s skills would be a valuable addition to the Federal Reserve.
As importantly, it is vital that Congress act so that the Federal Reserve positions are filled as fast as possible with very competent individuals. Now is not the time for the Federal Reserve to be “understaffed.” We need the wisest minds working together to help guide our economy.