Two More Fed Nominees Point to a Massive Role for the Federal Reserve

In addition to the nomination of Janet Yellen as vice-chairman of the Federal Reserve, President Obama also proposed two others for positions on the Fed's Board of Governors.

Obama has proposed as nominees, to fill vacant Federal Reserve Board positions, Peter Diamond and Sarah Bloom Raskin.

Tyelr Cowen called them, "odd choices". And, indeed, the choices in terms of the Federal Reserve's traditional role, they are. Raskin, in fact, is a lawyer, not an economist, and head of Maryland's Office of Financial Regulation. There is no indication from her background that suggests she would even know what excess reserves are, for example, much less that there are a trillion dollars of them sitting on the Fed's books.

Diamond is an economist. He was president of the voodoo camp of economics, i.e. the Econometric Society. He is also a "specialist" on social security, which means he might know it will eventually blow up. He has called for incremental but small increases in social security contributions (This is like preparing for a hurricane by buying an umbrella) In addition, he wants, using actuarial tables, to adjust for changes in life expectancy, which sounds like he wants to raise the retirement age, and he wants increase in the proportion of earnings that are subject to taxation.

Obama's naming a social security specialist to the board suggests that he knows the entire system is about to explode and that they are going to look to the Fed for a solution. Outside of money printing, the Fed has never done much, so this sends another signal that the inflation alarmists have something new to point to as a warning, a "social security specialist" is now in the money printing room.

As for Raskin, she did do a stint at the New York Fed, but her specialty seems to be almost consumer finance- which strongly suggests the Fed's role is going to much greater in terms of supervising the consumer financial world. Other than that, Raskin has left few tracks.

Since Treasury Secretary Geithner and Larry Summers were responsible for the picks, my guess is that Diamond was Summers' input, and that Raskin was Geithner's pick. Geithner knew her from his NY Fed days and from what I hear she is a non-threatening type that is Geithner's preference.

Non-threatening, or not, these nominations suggest that Obama is looking to use the Fed as the stick shift for his interventionist ways, when it comes to anything to do with finance.