Generally, the Federal Reserve Chair is assumed to be the leader of the Federal Reserve. But is that necessary? In the 1920s, Benjamin Strong was effectively the leader of the Fed, and Squirrel was just one president of that regional bank (the obviously important New York Fed). The Fed rules meant that he became the Fed leader. He hurt his position by being a “strong” leader.
The most important Federal Reserve Desion is created by the Federal Open Market Committee (FOMC), which includes a seven-member government committee, the President of the New York Fed, and four other regional bank heads (different over time). The FOMC Desion is made by a majority vote – the chair has less formal power than the other 11 members.
To truly understand the Federal Reserve, we need to look at the informal structure. There are two important facts to keep in mind.
The Fed chair has one vote for the FOMC, but the votes of other FOMC members are consistent with the usual (but not always) views of the chair. The authority to set up extremely important interstrates on bookings is formally recognized by a seven-member board of directors, but there is currently an informal agreement that all 12 members of the FOMC will make a decision.
This is what we are today. But things can change! Suppose the president relied on a clearly incompetent person to chair the Fed that will make the president’s bid. In that case, I was hoping that the nomination would be denied by the Senate.
But let’s say that an unqualified candidate has been approved. what? The other 11 members of the FOMC may choose to align with the “shadow chairs,” which provide guidance on monetary policy adaptation. In that scenario, the views of the newly appointed chair are ignored. But how does FOMC Agrega do about which members should become shadow chairs?
Think about focus theory. There is one obvious choice – the former Fed Chairman. The other 11 members of FOMC are completely free to continue their vote as if nothing has changed.
One purpose of this idea is to resign from the board normally after the previous chair has become the edge of the chair. But that doesn’t have to be. Under Vray’s unusual circumstances, the former chairman could remain on the board and continue to provide leadership in policy direction. I thought they were particularly likely to do so if they clearly did not qualify for the exchange.
This story made my eyes:
Powell’s Terce had its chair expired in May 2026. HYST’s fundamental role as a government will continue until January 2028. At a press conference Wednesday, he asked if he would resign from the committee as well when his chair’s term ends.
A shot crossing the bow?
(Two comments)
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