Friday, April 23, 2010

"Where do they find these people?"

There is a wonderful scene in the movie "The Queen" in which Tony Blair gets off the carphone with the Palace and turns to his assistant and says "Where do they find these people?". I am reminded of this when I read in the WSJ that the deflationist "hicks from the sticks" (a/k/a the regional Fed presidents) are pressuring Bernanke to unwind the TALF: 

Some Fed officials are pushing for a more aggressive approach. In April, Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank, called for monthly sales of $15 billion to $25 billion to eliminate the Fed's mortgage holdings within five years. "It is likely the Fed will have to sell a nontrivial amount of its MBS holdings," he concluded. Some Fed policy makers, among them Charles Plosser of Philadelphia , Jeffrey Lacker of Richmond and Kevin Warsh at the Fed board, are sympathetic .

Whose idea was it to allow local bankers to elect the regional presidents, and more critically, whose idea was it that these country club bankers should sit on the FOMC? Compare this with the UK MPC where the members are all serious economists including an American!
Can you imagine a British economist on the FOMC? 

Where are the serious guys: Barry Eichengreen, Peter Temin, Ronald McKinnon, or, for that matter, Paul Krugman? Why do we keep our smartest guys on the bench while we field rural bankers who should be playing golf with clients?

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