Federal Reserve Bank in Washington, DC (cc photo: Dan Smith/Wikimedia)
In its usual bipartisan way, the Washington Post (12/18/15) took even-handed swipes at Republican Rep. Jeb Hensarling and at Bernie Sanders, a senator and candidate for the Democratic presidential nomination, over their criticisms of the Federal Reserve Board.
Never mind that Hensarling’s criticisms were over the Fed’s failure to raise interest rates to prevent hyper-inflation over the last five years, while Sanders’ criticism was over the fact that the Fed’s recent rate hike will slow growth and the rate of job creation. In Washington Post bipartisan land, both are equally damnable offenses.
But what is even more striking is the Post‘s ability to treat the Fed as a neutral party when the evidence is so overwhelming in the opposite direction. The majority of the Fed’s 12 district bank presidents have long been pushing for a rate hike. While there are some doves among this group—most notably Charles Evans, the Chicago bank president, and Narayana Kocherlakota, the departing president of the Minneapolis bank—most of this group have been publicly pushing for higher rate hikes for some time. By contrast, the governors who are appointed through the democratic process have been far more cautious about raising rates.
It should raise serious concerns that the bank presidents, who are appointed through a process dominated by the banking industry, have such a different perspective on the best path forward for monetary policy. With only five of the seven governor slots currently filled, there are as many bank presidents with voting seats on the Fed’s Open Market Committee as governors. In total, the governors are outnumbered at meetings by a ratio of twelve to five.
Any serious discussion of Fed policy would note that the banking industry appears to have a grossly disproportionate say in the country’s monetary policy. Furthermore, it seems determined to use that influence to push the Fed on a path that slows growth and reduces the rate of job creation. The Post somehow missed this story, or at least would prefer that the rest of us not take notice.
Economist Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. A version of this post originally appeared on CEPR’s blog Beat the Press (12/19/15).
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Source: Fair.org No Spin Section
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