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December 28, 2011

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Posted: 28 Dec 2011 12:06 AM PST

"I Can't Think of a Better Intellectual Qualification"

Posted: 27 Dec 2011 01:29 PM PST

Richard Green on Jeremy Stein (nominated earlier today to fill an open position on the Federal reserve Board):

Personally, I am a big fan of Stein's work. The shortest way to explain why is to list the titles of his five most cited papers:

  • Herd Behavior and Investment
  • A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets
  • Rick Management: Coordinating Investment and Financing Policies
  • Bad News Travels Slowly: Size, Analyst Coverage and the Profitability of Momentum Strategies
  • Internal Capital Markets and the Competition for Corporate Resources.

Stein has spent his career trying to figure out how capital markets really work instead of pledging fealty to models that don't work very well.  I can't think of a better intellectual qualification for a Federal Reserve Board member.

Obama Noninates Jeremy Stein and Jerome Powell to Fed Board of Governors

Posted: 27 Dec 2011 10:42 AM PST

During the biggest financial panic in many, many decades, Congress has refused to confirm nominees to the Federal Reserve Board leaving the Fed short-handed. David Wessel reports there's some chance that will change:

President Barack Obama will announce Tuesday that he plans to nominate a Harvard University finance professor and a former private-equity executive to fill the two vacancies on the seven-member Federal Reserve Board, a White House official said.

The nominees are Jeremy Stein, 51 yeas old, an economist who did a five-month stint in the Treasury and White House in the early months of the Obama administration, and Jerome Powell, 58, who was undersecretary of the Treasury for domestic finance in the early 1990s during the George W. Bush administration.

If confirmed by the Senate...

A Republican and a Democrat -- this looks like an attempt to get both through by allowing one from each side of the political fence. But as Justin Wolfers said, "An independent Fed is not one that is half from one team, and half from the other."

More on Stein from Noam Scheiber.

...he's an absolutely terrific choice. He was consistently on the side of more capital for banks (often to the discomfort of other Obama officials and regulators throughout Washington). Relatedly, he was in favor of bank shareholders suffering large losses through dilution, and even favored foisting losses onto some of the banks' junior debt-holders, which put him at odds with colleagues in Tim Geithner's Treasury Department. Anyway, anyone frustrated with a generally overly-credulous, overly-sympathetic posture toward the banks among the powers-that-be in Washington should want to see Stein confirmed. ...

Powell is more of a mystery. From the first link above:

Mr. Powell would fill a different niche on the Fed board, which has been without a governor with Wall Street experience since Kevin Warsh, a Morgan Stanley alumnus, left in April. A lawyer, Mr. Powell worked before and after his Treasury stint at investment bank Dillon Read & Co. He also has worked at private-equity firms Carlyle Group and Global Environment Fund and at Bankers Trust Co.

Known as Jay, Mr. Powell ... took a high-profile role over the summer warning about the adverse consequences of a failure to lift the federal debt ceiling.

One outcome would be for Powell to get confirmed, but not Stein (the reverse -- Stein but not Powell -- is harder to imagine).

Un-Unpivoting

Posted: 27 Dec 2011 08:46 AM PST

While I try to find something to post, a quick thought.

A few weeks ago Paul Krugman said:

what strikes me is just how wrong-headed the Obama administration's "pivot" away from jobs and toward the deficit back in 2010 really was. It was bad economics; but it was also really bad politics, shifting the debate to exactly the ground where the right tends to have an (undeserved) advantage.

The good news for Democrats is that Obama is now in the process of unpivoting.

But the political establishment and the Very Serious Pundits are doing their best to turn the discussion back to deficit reduction.They already are.

Don't let them.

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