FED, Joe Lavonia, Natixis discussed on Sound ON

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In politics as we focus today on one of the biggest unfinished items of the year in Washington filling the empty seats on the Federal Reserve Joining us to talk about it is Joe lavonia chief economist of the Americas at natixis and former chief economist on The White House national economic council Joe it's good to have you back What's taking so long That's a very good question I guess you'd have to ask the president but there are three open seats and there are also two president seats that are open and while the administration doesn't have the direct influence on those seats I'm sure there are people in the administration that would like those filled as well What I can tell you Joe if you look at the composition of the FOMC and 2021 versus 2022 you wind up losing some very dovish or I should say market friendly Presidents and the committee will become more hawkish So there certainly is an incentive for the administration to put forward the candidates they want And my guess is they would do so in a way to try to blunt the hawkishness or I should say less dovishness that's likely to be on the committee next year Well that's gonna be an interesting line to walk right Because here you have an administration that wants to make good with progressive Democrats looking for diversity looking for a new approach on the fed but you've also got inflation knocking on the door Yes you've got inflation knocking on the door I mean I remember that when I studied monetary policy back in school we learned that the fed funds rate was a very blunt tool Since then the fed's tools kit has expanded largely Jurassic purchases but they're certainly limits to what monetary policy can do And one of the problems the administration is going to face in 22 if they want to get all three people filled is getting Senate confirmation and if they wind up going with somebody who is who is more extreme we saw for example what happened with the comptroller of the currency That's going to be very difficult for them to fill all three of those spots So they may have to pick more of a centrist or maybe a center left leaning economist type to maybe get it through the Congress Because it's going to be hard to get all three through right now I guess that's the good problem in having three seats to fill here although it does also seem that progressives and namely senator Elizabeth Warren who's driven this as a political issue on Capitol Hill are really zeroing in on this supervisory role That's the one that will be judged Joey The supervisory role is important having said that brainerd who basically had that role has not been elevated to the vice chair and she does work quite closely and from everything I've seen in red works very well with Jay Powell So that revision role is important but that's some continuity there in terms of the key people Still running the fed are there So maybe that's the push maybe the push is going to be trying to get somebody on the supervisory side So if the P's one faction of the party but you still need good people on the monetary side ultimately I think that's what matters Well let's throw a couple of names around Joe Lavon we see the short lists They're pretty consistent based on where you're looking or depending on where you're looking William spriggs appears to be on most all of them Chief economist at the AFL CIO economics professor Howard University gives you good feelings or concerns about confirmation when you hear that name Look the administration hasn't called me to ask who I would say We did that You did that exactly but there are some people who I think would be very very good in the governor role who would potentially be a lot less provocative or much easier Much less of a fight I'm thinking someone for example is hypothetical item talk to them about this I don't know him But Jason Ferdinand for example adjacent to me seems very reasonable I don't agree with everything he says by any means but Jason Rand the accounts economic advisers under president Obama and he seems like a very thoughtful reasonable person So if someone like him would be would be my choice I know Jared Bernstein I haven't talked to him in a while I know he's also now the council economic advisers under President Biden And I kind of like you're going to go left I like sort of a little bit center left And that will kind of be my thought I'm not sure whether the gentleman you mentioned would go through So easily it'd probably be a fight and the fact that case you might only get one person through not two other Well it's interesting because I was gonna ask you what you thought of those with actual fed experience When we talk about people like Sarah bloom Raskin for instance or even Raphael bostick's name keeps coming up as well That's right Look to me we talk about diversity and things of that sort and you want breadth aggressive experience And too often in the past we had sort of fed people of just one similar PhDs from saltwater schools who had a lot of academic experience but not the other stuff So pick somebody maybe has never been in academia It's in the private sector Let's try that There are a lot of people I'm sure that would do it Comes from banking or not Sure I mean you've got three spots but I would think banking I mean given the fact that fed is the primary banking regulator effectively although due respect to the FDIC and the comptroller the currency if that is the main entity the main governing body the main regulatory body I should say Wouldn't you want somebody from the private sector to give you a different set of views that would not say the private sector is always right but they would at least have some sympathy or understanding with how the sector works And I would think you'd kind of want that breath I mean people seem to like Jay Powell is almost certainly going to go through with flying colors Jay has a private sector background He doesn't get that similar mold Maybe we should have another person like him What will these confirmations look like We're not talking about the fed share Obviously these are lower level positions but very important ones within the Central Bank but not household names These aren't household jobs like a secretary of labor for instance where people are going to be sitting in their living room watching these confirmation hearings But of course Joe the markets will be watching The markets will be watching and I think back my days when I was at the fed and I learned how government sometimes works and it's sort of like sometimes the smaller the stakes the bigger the fight and while these people are very well ultimately may not be household names There is a midterm coming next year We all know we know there's a lot of division at divisiveness and I can't help but think unfortunately we're going to fight over this Even though we like to fill these spots I think it's going to be hard to get all three and my concern would be the administration moves in a more progressive further left vein and that doesn't allow them to get the people they want confirmed and by default will not allow them to fill all the seats So basically the midterms I think are going to throw a kibosh on things Interesting To extrapolate all of this and look ahead to.

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