Joseph Stiglitz has said that labor should have a voice in the setting of interest rate policy. Is this change at the New York Fed, teh appointment of the AFL-CIO’s Denis Hughes as the replacement to ex Goldman co-chairman Steve Friedman as chairman of the New York Fed, a step in that direction?
If it proves to be, it will only be by dint of miscalculation. This is clearly an image-burnishing move by the Fed, throwing a bone to critics, But letting labor into the tent may have unexpected consequences, simply by allowing someone who has not drunk the financial services industry Kool-Aid more influence (Hughes was on the board, but as vice chairman). This appointment is only until year-end, but if the Fed continues to be under political pressure, it isn’t hard to imagine this appointment being extended.
The Journal’s Deal Journal voices the opposite possibility, that labor is being co-opted. The branding of labor as monolithic and radical is a bit of a canard. In the 1930s, the old AFL, which was a craft union, was comparatively conservative and regarded more favorably than upstart and aggressive CIO, for instance.
From the Wall Street Journal (hat tip reader LeeAnne):
Denis Hughes, president of the New York state branch of the AFL-CIO, had been serving as acting chairman of the New York Fed board since May, when Stephen Friedman stepped down from the position.
Mr. Friedman, a former Goldman Sachs Group Inc. chairman and adviser to President George W. Bush, had faced questions about his purchases of Goldman stock while serving on the New York Fed’s board.
The Fed decision formalizes Mr. Hughes’s role as chairman through the end of 2009. The Fed board in Washington will announce in November or December who will serve as chairman in 2010. Columbia University President Lee Bollinger was named deputy chairman, a position that Mr. Hughes previously held. Mr. Bollinger has been a New York Fed director since January 2007.
The New York Fed chairmanship typically has gone to prominent Wall Street executives or academics. The ascension of a labor leader is a new twist for the New York Fed and a sign of the public pressure the Fed has been under to loosen its close ties to Wall Street.
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Quick refresher on the NY Fed board courtesy of Elliot Spitzer.
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"The board consists of nine individuals: three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public.
"In theory this sounds great: Six board members are "public" representatives.
"So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman.
"Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner.
"These were the people who were supposedly representing our interests!"
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I wonder if this move signals anything about who (if anyone) will be appointed to fill the two vacancies on the FRB.
Compared to What? – Is a very interesting comment.
The Federal Reserve System is a Government Sponsored Oligarchy. It is notable as to who is selecting the so-called public representatives. There's the rub.
An independent monetary authority is a very interesting idea. Our independent monetary authority is a product of our legislature. Strikes me that there is an inherent conflict of interest there.
It seems to me that allowing a 'labor' person to the party is reasonable. More importantly, we would be better served if we dispensed with the canard of attempting to direct the economy from any of the several government agencies.
The principal objective of the government should be to ensure a stable money supply that can serve as a store of value. It should be the responsibility of the government to reconstitute are our long standing body of contract law; and most critically it should be the reponsibility of the government to prosecute fraud.
Here's a link to Mr. Hughes' bio:
http://www.nysaflcio.org/?zone=view_page.cfm&page=Officers
Here are 3 excerpts that lead me to think we may be heading toward (G. William) Miller time:
As President of the New York State AFL-CIO, Mr. Hughes has made creating a more mobile, active and aggressive statewide labor movement a top priority. He has set a tone for organizing new members into the movement and has led the way in developing proactive legislative and political statewide strategy.
As President of the New York State AFL-CIO, Mr. Hughes has made creating a more mobile, active and aggressive statewide labor movement a top priority. He has set a tone for organizing new members into the movement and has led the way in developing proactive legislative and political statewide strategy.
In addition, historic “card check” legislation was passed (Ed.: i.e., in New York State) that recognizes union designation by showing a majority interest through card check. This groundbreaking legislation speeds up the recognition process for those employees whose bargaining rights fall within the jurisdiction of the State Employee Relations Board.
How can you go wrong with mate rates, insert mate and get the rate.
Skippy…one is, the loneliest number la-la.