Friday, August 4, 2017

Some Former Goldman Sachs People Are Laughing at the Idea of Gary Cohn as Fed Chairman

Let's put it this way, there are some who know Gary Cohn from his Goldman Sachs days and they don't exactly see Cohn as a deep thinker.

Bloomberg just posted an essay considering Cohn's qualifications to head the Federal Reserve and the news organization was able to pull these quotes:
“Gary is definitely an instinctual thinker,” says Michael Dubno, who was the chief technology officer at Goldman before he left in 2005. He saw Cohn as aggressive and blunt, someone who would make threats and not veil them. “Whether he can go really deep on things or not,” he says, “I don’t know.”
“I can’t see why he would want to spend all his hours in those meetings dealing with material that’s as dry as a bone,” says Jay Dweck, a former Goldman partner. “He has no patience for that kind of stuff.”
Another former colleague tried to imagine how a Chairman Cohn would handle silly questions from members of Congress or reporters, then started laughing.
Of course, no one should be in charge of money printing at the Fed. There should be none. But at least the Keynesian eggheads, who usually get the position, deep down know they are playing with fire with their money printing and keep it somewhat restrained.

It is the guys like Cohn who have no economic background, and on top of this he is dyslexic, who can really let the money printing get out of control.

G. William Miller, a corporate CEO (and a lawyer!), comes to mind as an object lesson in an out of control Fed chairman. Jimmy Carter put him in at the Fed.

I'll let Wikipedia take the story from here:
Miller succeeded Arthur Burns as Fed Chairman in March 1978. He inherited a high inflation economy, still suffering from the increase in oil prices from OPEC. The change in the Consumer Price Index was 4.9% in 1976 and 6.7% in 1977. Nevertheless, Miller believed that inflation was not too high, and would be self-correcting. He thus pursued a strongly dovish policy and opposed raising interest rates. The effect of this was to send the dollar's value spiraling downward.In November 1978, only 11 months into his term, the dollar had fallen nearly 34% against the German mark and almost 42% against the Japanese yen...

Miller's lackadaisical measures against inflation caused distress among members of the Carter Administration itself. Treasury Secretary Blumenthal, Inflation Adviser Alfred Kahn, and Chief Presidential Economist Charles Schultze all advocated for increasing the interest rate prior to the April 1979 meeting, where Miller opposed such measures. Carter had to admonish his own staff over the press leaks used to carry on the dispute...

 A 2003 article in The Economist said that "America's central bankers have all made their weight felt across the political sphere, with the possible exception of William Miller, whose brief tenure in 1978-79 was notable for his attempts to ban smoking at the board."...

By early 1980, inflation was running at 14 percent per year.
I know a top Fed assistant who worked at the Fed during the Miller, Paul Volcker and Alan Greenspan years at the Fed. She told me that before each Fed FOMC monetary policy meeting the Fed chairman gets a briefing of the current monetary and economic situation.

She said that she and other assistants could tell by the creases at the staple holding the pages together that Greenspan read the entire briefings.  Volcker read the 3 page lead summary to the briefing and there were no creases at all in the briefings given to Miller.


1 comment:

  1. If we've had deep thinkers at the Fed, how has that made a difference? They all sing from the same hymn book. It seems worse having deep thinkers, because then folks give them more deference.