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No One Wants To Be Left Holding The Bag
TND Guest Contributor: Paul-Martin Foss |
This week brings news that Minneapolis Fed President Narayana Kocherlakota will be stepping down from his post, taking a position with the University of Rochester in 2016. Kocherlakota is the third Federal Reserve Bank President to step down or announce his retirement this year, following Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser. Is there a reason they’re all deciding to step down now?
Perhaps these leaders see the writing on the wall, realizing that the Fed’s response to the financial crisis has created an ever-larger asset bubble that is about to burst. Why not get out while the getting is good, while the Fed still has a decent reputation among business and academia, and cash in on that work history?
Those three aren’t the only recent retirements either. Cleveland Fed President Sandy Pianalto stepped down last year, as did Federal Reserve Board Chairman Ben Bernanke and Federal Reserve Board Governors Sarah Bloom Raskin and Jeremy Stein. And Fed Governor Elizabeth Duke retired in late 2013. That means that of the 19 top Fed decision-makers (7 Governors and 12 Reserve Bank Presidents), eight have resigned in the last year and a half. That’s a pretty sizable percentage, even more so when you consider that two of the spots on the Fed’s Board of Governors remain vacant.
The last time such a large spate of retirements occurred was in the 2006-07 time frame. Federal Reserve Chairman Alan Greenspan stepped down in early 2006, followed a few months later by Fed Vice Chairman Roger Ferguson and Fed Governor Mark Olson. Philadelphia Fed President Anthony Santomero stepped aside in March 2006, Atlanta Fed President Jack Guynn in October 2006, Fed Governor Susan Bies in March 2007, Boston Fed President Cathy Minehan in July 2007, and Chicago Fed President Michael Moskow in August 2007. Once again, eight of the 19 top decision-makers all left within about a year and a half period.
Now perhaps this is just the natural fallout resulting from the change in Chairmen. When the big boss is replaced, sometimes those around him might take advantage of the turnover to seek their own new opportunities. Or maybe the incoming chairman’s style doesn’t mesh well with the incumbents, so they look for a chance to exit gracefully.
But Greenspan’s exit, coming as it did as the housing bubble was already starting to burst, essentially left Bernanke holding the bag as the economy came crashing down around him from late 2007 to early 2009. Surely Greenspan knew that the crash was coming and tried to get out while his star was still shining bright. Is it too much to think that maybe some of the Fed Governors and regional Fed Presidents thought the same thing too? Could this be the reason for the recent spate of retirements that we’re seeing?
If quantitative easing (QE) has created large asset bubbles that are poised to burst in the next few years, there’s no better time for many Fed officials to retire than right now. They can bask in the plaudits from the mainstream media for “saving the economy” via QE and milk that for all it’s worth. And when the crash inevitably comes, they can point fingers at Janet Yellen and company and say “It wasn’t us, it was them.” It’s worth keeping this in mind, especially if the exodus of Fed officials continues in the coming months.
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About Paul-Martin Foss:
Paul-Martin Foss is the founder, President, and Executive Director of the Carl Menger Center for the Study of Money and Banking, an Arlington, VA-based think tank dedicated to educating the American people on the importance of sound money and sound banking.
Prior to founding the Menger Center, Mr. Foss worked in the U.S. House of Representatives for seven years, including six years as Congressman Ron Paul’s legislative assistant for monetary policy and financial services, and one year as Deputy Legislative Director for Congressman Thomas Massie.
As Congressman Paul’s legislative assistant, he assisted the Congressman in his duties as Chairman of the Subcommittee on Domestic Monetary Policy by helping to develop hearing topics, agendas, and briefing Congressmen and their staffs on monetary policy topics. Mr. Foss also was responsible for the management of Dr. Paul’s monetary policy and financial services legislation, including the “Audit the Fed” and “End the Fed” bills, and was co-editor of Ron Paul’s Monetary Policy Anthology, a multi-thousand page compilation of hearing transcripts, lecture transcripts, and other documents related to Dr. Paul’s chairmanship.
Mr. Foss received his Bachelor’s degree from The University of the South (Sewanee), and Master’s degrees from the London School of Economics and Georgetown University’s Edmund A. Walsh School of Foreign Service.
This article appeared on the Carl Menger Center for the Study of Money and Banking and is reprinted with permission, “Creative Commons 4.0.”
Source: http://thenewsdoctors.com/no-one-wants-to-be-left-holding-the-bag/
