Binyamin Applebaum at the New York Times has a good piece today about who Mitt Romney might appoint as Federal Reserve chairman and what that might mean. His analysis is similar to that of Macro Advisers, and I don’t have much to add, save that I think Glenn Hubbard or Greg Mankiw are more likely choices than John Taylor.
It is worth considering, though, how a more hawkish Fed chairman would interact with the rest of the FOMC. The seven Fed governors at present are:
|Ben Bernanke||2020||58||Chairman until Jan 2014|
|Janet Yellen||2024||66||Vice chair until Oct 2014|
By 2014, the next president will be able to renominate or replace Elizabeth Duke, a Bush appointee, and Jerome Powell, who was regarded as the Republican half of a package of nominations this year, with Jeremy Stein viewed as the Democratic pick. Whoever is chosen to replace Governor Duke could well be someone marked out as a future vice chair (it would be very aggressive to appoint your future chair to the Federal Reserve Board while Mr Bernanke is still serving).
Later in 2014, the president will be able to choose whether to renominate Janet Yellen as the vice chair. If she were not renominated as vice chair, then it is hard to imagine her staying as a governor. By the end of 2014, therefore — and depending greatly on the will of the Senate — a president Romney might have a chair, vice-chair and two governors of his own choice.
The remaining three governors would be Sarah Bloom Raskin, Jeremy Stein and Daniel Tarullo, who are all Obama appointees. It is hard to know how long they plan to serve. But at least initially, a Fed chairman appointed by Mr Romney would have to work with several governors who backed current policy.
The rest of the FOMC, assuming no resignations, would be:
|William Dudley||William Dudley||William Dudley|
|Charles Evans||Sandra Pianalto||Charles Evans|
|Eric Rosengren||Charles Plosser||Jeffrey Lacker|
|James Bullard||Richard Fisher||Dennis Lockhart|
|Esther George||Narayana Kocherlakota||John Williams|
The rotation in 2014 is relatively hawkish, with Charles Plosser and Richard Fisher both voting members, but 2015 is dovish with Charles Evans and John Williams — both closely identified with current policy — serving as voters.
Presidents of the twelve regional Federal Reserve banks serve renewable five-year terms, which are due to expire in 2016. In theory, the Board can deny reappointment as a regional bank president, although I’m not aware of cases where that has happened. The current body of regional presidents is not especially long-serving and some of the more outspoken doves are likely to be around for some time.
|President||Age||Years in office|
|New York||William Dudley||60||3|
|St Louis||James Bullard||51||4|
|Kansas City||Esther George||54||1|
|San Francisco||John Williams||50||1|
All of this is a long-winded way of saying that, even if a president Romney appointed a hawkish Fed chairman in 2014, around half the voting membership of the FOMC would probably be doves who had backed current policy. Any change towards more hawkish policy initiated by a new chairman would have to be slow and gradual, which is just how the designers of the Federal Reserve System wanted it.