VIEWPOINT: How Much Scrutiny for Fed Governors?
Walters, William, American Banker
Byline: William Walters
With the nomination of Judge Sonia Sotomayor to the Supreme Court, Washington now whips itself into the usual confirmation frenzy. By contrast, when a president offers nominees to the Federal Reserve Board, there is little, if any, recognition and debate.
I predict Fed nominees will soon face bruising confirmation battles similar to those of judicial nominees. The battles won't be as intense; a spirited debate about whether a Fed nominee is a Keynesian or a monetarist will never capture public interest in the same way that a debate about a judge's stance on affirmative action does. But there will be more scrutiny.
A Fed nominee's thinking about the economy surely influences the lives of more Americans than a judicial nominee's thinking about the narrow, hot-button legal issues in the headlines.
And remember that court nominations did not become protracted battles until the judiciary took center stage in a number of controversial issues in the early 20th century. As the Fed projects itself into uncharted waters, it too can expect to draw more public interest. After some of the regulatory shortcomings of the Greenspan regime, the era of complete deference to the Fed is over.
Why have the nominations of the seven Fed governors merited so little attention thus far in our history?
First, part of the frenzy around Supreme Court nominations is due to the fact that these federal judiciary posts involve rare, lifetime appointments. Conversely, Fed governors are appointed for 14-year terms and many choose not to serve their entire term.
Second, many decisions by the Federal Open Market Committee are made unanimously and quietly, whereas Supreme Court decisions are often bitter 5-4 affairs. The Fed is meant to be a less argumentative arena, where the near unanimity of decisions supposedly carries more weight with markets.
Also, Fed governors are generally overshadowed by the Fed chairman. The only checks on the chairman are a shorter term (four years, rather than 14) and the remote possibility that colleagues could deny him or her the chairmanship of the Federal Open Market Committee. …