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White House to Nominate Two to Fed Board of Governors

I don’t think there’s been a complete slate on the Federal Reserve Board of Governors during the entire Obama Administration. But that would end if they somehow got these two economists past the Senate for confirmation.

The Obama administration has identified two economists, one Democrat and one Republican, for two empty seats on the seven-member Federal Reserve Board, according to several people familiar with administration deliberations.

The two are Jeremy Stein, a Harvard University specialist in finance, and Richard Clarida, an executive vice president at money manager Pimco and professor of economics and international affairs at Columbia University.

Mr. Stein did a stint in the White House at the beginning of Barack Obama’s presidency. Mr. Clarida was a Treasury official in the early years of the George W. Bush administration.

The speculation is that the bipartisan set of nominees is the mix required to get Richard Shelby to sign off on the nominations and get them on the Fed Board. Of course, there’s no actual need for Shelby’s sign-off, as the President can adjourn Congress and make recess appointments at his leisure in the event of obstruction. But he’s clearly made the decision not to go that route.

I’d be lying if I said I knew much about Stein or Clarida. Matt Yglesias has some early thoughts. Stein has apparently done some research on excess reserves. As you may know, the Fed is currently paying banks to keep excess reserves at the Fed, and removing that incentive may actually spur investment and lending. Clarida’s work circa 2009 seemed to discount the value of fiscal stimulus, and even though the evidence shows the stimulus worked I could imagine an elegant way for Clarida to talk his way out of that. He isn’t being chosen for the Senate, however, but the Fed, and he does seem to have a belief in the value of monetary policy to boost recoveries.

I’m not sure if either of these picks will see the world the way Floyd Norris does, where inflation is not seen as evil but as a tool to aid deleveraging and fix balance sheets. And if the Fed remains consumed by the spectre of inflation, they won’t do much to fix the economy.

Still, I could see these two choices falling in line behind Ben Bernanke on most issues, and if Bernanke isn’t driving monetary efforts on the Fed, they won’t happen. So ultimately, while these picks may provide ballast against the inflation hawks, they probably won’t change the balance of power to a major degree.

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David Dayen

David Dayen