Fed Reserve Board Reflects Obama's Influence

       The story in a Wall Street Journal piece today is quite different from the criticism you often hear of Obama's record of Fed appointees. While Sumner and company make him sound very passive, this piece actually uses the A word-Obama's is an activist monetary policy!

     "With the swearing in of a seventh Federal Reserve board member, the panel is operating at full strength for the first time since 2006, amplifying the activist stamp of President Barack Obama.
Mr. Obama appointed six of the seven, including naming Fed Chairman Ben Bernanke to his second term. His picks for the central bank's board—and the demands of steering the economy from the brink of financial collapse—have pushed the Fed to adopt easy money policies to spur growth and to write new rules aimed at making the financial system safer. Fed governors also have prodded federal agencies and Congress to do more to help heal the housing market, sparking criticism that they have strayed beyond their mandate."

     "Mr. Bernanke on Wednesday swore in the board's seventh member, former Harvard economics professor Jeremy Stein. Mr. Obama nominated Mr. Stein, a Democrat, and Jerome Powell, a Republican former private-equity executive who was sworn in last week, to the Fed's board in late 2011. The Senate confirmed the bipartisan pair this month."

     http://online.wsj.com/article/SB10001424052702303640104577436161957650788.html?mod=WSJ_WSJ_US_News_5

      So while some may think he's been unaggressive, the fact is this is the first time since 2006 the entire seven member board has been filled. Of course the other question is the quality of his appointments-what kind of imprint has his appointments put on monetary policy?

     Certainly my taste like many Keynesians and Monetarists these days wants an aggressive Fed as both schools see the problem chiefly as a demand shortfall.  It seems there is a case to make that the Obama Fed has been considerably more aggressive certainly at least as measured by appetite for unconventional Fed policy:

     "In early 2009, board members included skeptics of the Fed's large-scale efforts to support an economy reeling from the financial crisis. Just days after the Fed announced plans for a second round of bond-buying, Mr. Warsh warned in a Wall Street Journal editorial that the central bank's steps to stimulate the economy posed risks to the recovery."

     "With the arrival of Vice Chair Janet Yellen in October 2010 and Mr. Warsh's resignation in April 2011, the board tilted in favor of those more at ease with unconventional steps, such as large-scale bond buys, to reduce unemployment and stabilize the economy."

    "It's a subtle shift in a direction that is somewhat more comfortable with continuing an activist policy," said Stephen Oliner, a former senior adviser at the Fed and now a resident scholar at the American Enterprise Institute, a conservative think tank.

     Of course things like hawkishness or dovishness or boldness vs timidity are relative. It's true that it never quite seems like the Fed acts like Krugman's proverbial men with their hair on fire. But they may still be an improvement over the pre-Obama Fed.

     What we seem to have alas, is a Fed that won't allow deflation but not too much inflation either. During the Depression of course the Fed did allow deflation so it's an improvement. And the Fed looks great compared with say the ECB.