Friday, August 06, 2010

Hey Dick: Benjamin Strong ain't walking through the door!

While killing Peter Diamond's nomination to the Fed's board of governors, one Richard Shelby (Moron, Alabama) said:

"I do not believe the current environment of uncertainty would benefit from monetary policy decisions made by board members who are learning on the job"

Wow. So Diamond, who has the seminal paper on bank runs and crises, is not qualified.

I would respectfully submit that Peter Diamond is a lot more qualified to be a Fed governor than Richard Shelby is to be a US senator!

From his quote, I assume Dick is holding out for Paul Volcker or Alan Greenspan?

It seems like the Fed has crossed a line and is now permanently going to be an overt political football in a way it rarely (never?) was before. I don't think this is a good thing.


As an astute commenter points out, I have the wrong Diamond. I humbly apologize for this error.

In my defense, if I was appointing an economist named Diamond to the Fed, I'd pick Douglas, the 57 year old finance expert and bank runs guy, not Peter, the 70 year old Social Security guy.

Maybe Shelby has a point? What does Peter Diamond bring to the table re monetary policy or bank regulation? He does have a paper on money illusion in the QJE from 1997, and a 1993 RESTUD on sticky prices and inflation, but he's not a monetary economist.


Anonymous said...

I think you have the wrong Diamond. Douglas Diamond wrote the bank run paper with Dybvig (if that is what you are thinking of.) Peter Diamond is from MIT and has mostly worked on social security and welfare.

Angus said...

Oooh, man. You are right! Sorry. That is embarrassing.