Austan Goolsbee’s announcement yesterday that he is resigning as chairman of President Obama’s Council of Economic Advisers to return to his tenured professorship at the University of Chicago, underscores the large number of vacancies in key positions dealing with the economy and financial matters at a time of serious problems in both areas.
There also are two vacancies on the seven-member Federal Reserve Board. On Monday, Professor Peter A. Diamond of the Massachusetts Institute of Technology, a Nobel laureate in economics, withdrew his nomination to one of those spots. He cited strident opposition by Republican Sen. Richard Shelby of Alabama, ranking minority member of the Senate Finance Committee, who contended that Diamond was not experienced in either monetary policy matters or crisis management.
The position of director of the Comptroller of the Currency, the agency within the Treasury that supervises national chartered banks, has been vacant for months, and the term of Sheila C. Bair as chairman of the Federal Deposit Insurance Corporation expires next month. The White House has not nominated anyone to those jobs, though officials say nominees will be named soon.
Treasury Secretary Timothy Geithner noted Monday that the failure to fill vacancies in several agencies was making it difficult to write all the rules called for by new financial regulatory legislation, such as the Dodd-Frank bill passed last year.
Blocking confirmations makes it “less likely that there will be enough capable people in the regulatory bodies to bring the care and judgment necessary for the new rules to work,” Geithner said.
The job of Treasury assistant secretary for economic policy also is vacant, although Obama recently nominated Janice Eberly, a professor of finance at Northwestern University’s Kellogg School of Management, to fill the position. But there are two other members of the Council of Economic Advisors in place: Katharine G. Abraham, a University of Maryland economist who was commissioner of labor statistics from 1993 to 2001, and Carl Shapiro of the University of California at Berkeley, whose specialty is industrial organization and competition policy. Both are highly respected, and Abraham is well versed in the political back and forth of Washington.
Diamond’s case was a prime example of how difficult it is to get even highly qualified nominees through the confirmation process. Shelby blocked his appointment on the grounds that Diamond’s specialty is in labor markets and unemployment rather than monetary policy. In March, the Senator said, “Does Dr. Diamond have any experience in crisis management? No.”
In the fall of 2008, at the height of the worst financial crisis since the Great Depression, Shelby objected to every proposal put forth by either Fed Chairman Ben S. Bernanke or President George W. Bush’s Treasury secretary, Henry Paulson, to deal with the situation and never put forth any recommendations of his own.
And by claiming that knowledge of labor markets doesn’t have anything to do with monetary policy, Shelby ignored the fact that, by law, one of the central bank’s two key responsibilities is to help the economy achieve maximum sustainable employment.
Diamond announced his intention to withdraw his nomination in an op-ed piece in Monday’s New York Times. In it he said, “Skilled analytical thinking should not be drowned out by mistaken, ideologically driven views…” It’s not that unusual for there to be numerous vacancies in key jobs, because the U.S. Senate operates in such a way that a single determined senator can block the confirmation of eminently qualified people.
Shelby said a Nobel Prize doesn’t qualify one to be a Federal Reserve governor. But when a panel of prominent economists picked the 20 most influential articles in in the first 100 years of the American Economic Review, the journal of the American Economic Association, of the 27 economists among the authors and co-authors, only one had his name on three of the articles, Peter Diamond.
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