Saturday, January 26, 2019

Federal Reserve Names "MIT Mafia" Member as New Research Director

Stacey Tevlin
It's clear the " MIT mafia" remains in control of the Federal Reserve Board.

Stacey Tevlin, an economist with the Fed’s Washington-based board of governors, will succeed David Wilcox, who recently retired after a 30-year career at the Fed, as director of the central bank’s division of research and statistics. She will assume her new position on Feb. 4.

“Stacey brings many years of leadership and research experience, a keen understanding of the U.S. economy, and extensive public service at the Federal Reserve to the position,” Fed Chairman Jerome Powell said in a statement.

This is a serious position.

Notes The Wall Street Journal:
The Fed’s research director ranks among the top central bank staff, overseeing an extensive team of economists producing analysis and forecasting related to the domestic economy and financial markets.
The director also briefs central bank policy makers on the U.S. economic outlook when they meet to set interest rates.
Here is the key takeaway: Tevlin joined the Fed in 1995 after receiving her economics Ph.D. from the Massachusetts Institute of Technology.

There seems to be something of an MIT cabal running the Fed.

In 2011, Bob English noted:
It's official: Fed led by quartet of MIT grads.
File under curious. I wonder if they all had a similar mentor whose legacy is now driving the Fed.
At the time,  all three of Federal Reserve Ben Bernanke’s top staff advisers were MIT grads.

William English (no relation to Bob) was the director of the Division of Monetary Affairs, He received his PhD from MIT, as did Wilcox who was then director of the Division of Research and Statistics.

Bernanke also received his PhD from  MIT.

In 2012, The Wall Street Journal reported (my highlight):
Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.

The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world's biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world's economic output...

Their monetary strategy isn't found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.

While many national governments, including the U.S., have failed to agree on fiscal policy—how best to balance tax revenues with spending during slow growth—the central bankers have forged their own path, independent of voters and politicians, bound by frequent conversations and relationships stretching back to university days...

Three of the world's most powerful central bankers launched their careers in a building known as "E52," home to the MIT economics department. Fed Chairman Ben Bernanke and ECB President Mario Draghi earned their Ph.D.s there in the late 1970s. Bank of England Governor Mervyn King taught briefly there in the 1980s, sharing an office with Mr. Bernanke...

Many economists emerged from MIT with a belief that government could help to smooth out economic downturns. Central banks play a particularly important role in this view, not only by setting interest rates but also by influencing public expectations through carefully worded statements.

While at MIT, the central bankers dreamed up mathematical models and discussed their ideas in seminar rooms and at cheap food joints in a rundown Boston-area neighborhood on the Charles River.

Over Sunday dinners in Basel, which often stretch to three hours, they now talk of pressing, real-world problems with authority. The meals are part of two-day meetings held six times a year at the BIS. Dinner guests include leaders of the Fed, ECB, Bank of England and Bank of Japan, as well as central bankers from India, China, Mexico, Brazil and a few other countries...

The Bank of England's Mr. King leads the dinner discussions in a room decorated by the Swiss architectural firm Herzog & de Meuron, which designed the "Bird's Nest" stadium for the Beijing Olympics. The men have designated seats at a round table in a dining area scented by white orchids and framed by white walls, a black ceiling and panoramic views...

Serious matters follow appetizers, wine and small talk, according to people familiar with the dinners. Mr. King typically asks his colleagues to talk about the outlook in their respective countries. Others ask follow-up questions. The gatherings yield no transcripts or minutes. No staff is allowed.

The 18-member group, formally known as the Economic Consultative Committee, has only once issued a public statement: a two-line missive in September, promising to look for solutions in interbank lending markets, responding to allegations that some private banks had conspired to manipulate the Libor interest rate.

On Mondays after the dinner, the bankers join a larger group of central bankers at a large round table on a lower floor of the BIS building, which is shaped like a rook chess piece. Staff members sit nearby at desks decorated in white leather.
Of course, the MIT models are just fancy cover for central bank money printing. No doubt Tevlin has been trained and vetted to ensure the money printing justifications will continue flow out of the Fed's research department.

Also, current Fed board member Lael Brainard was Assistant and Associate Professor of Applied Economics at MIT. Former Federal Reserve Vice-Chairman under Janet Yellen, Stanley Fischer, was was a professor of economics at MIT from 1977 to 1999 and associate professor from 1973 to 1977.

-RW .

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