An opportunity is coming for progressives to have a voice inside the Federal Reserve that represents working people and can influence how the Fed does business.
This week we learned that two members of the Federal Reserve’s open market committee, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas, will step down from the board in early 2015. Both Plosser and Fisher have been so-called inflation hawks on the Fed, arguing that monetary policy should err on the side of controlling inflation even at the cost of slower economic growth and higher unemployment.
That view has been rejected so far by Federal Reserve Chair Janet Yellen and a majority of the Fed board. Economic realities support Yellen’s view: Last week, the Commerce Department reported that consumer prices are running well under the 2 percent inflation rate that the Fed considers optimal, while unemployment, at 6.1 percent, reflects continuing weakness in economic growth five years after the technical end of the 2008 recession. The Fed’s mission is to work toward low unemployment as well as low inflation, and the majority under Yellen have wisely not yielded to pressure to prioritize an inflation problem that does not exist over an unemployment problem that remains very real.
But it would be a mistake to conclude that, because Plosser and Fisher are out-of-step dissenters of mainstream Fed thinking whose departures, as The New York Times’ Binyamin Appelbaum wrote, “are unlikely to have a large influence on policy,” we need not concern ourselves with who replaces them.
Plosser is a macroeconomist who graduated from the famously conservative economics department at the University of Chicago. Fisher, a product of Harvard and Stanford, is by profession a Wall Street investment banker and founded Fisher Capital Management, which now has a portfolio that exceeds $40 billion.
Plosser and Fisher are not anomalies on the Fed in their pedigree as either members of the 1 percent or intellectual guardians of their privilege. The Fed’s 10-member regional bank boards are filled, almost to a person, by representatives of either the financial sector or business. The Philadelphia and Dallas Fed memberships are no exception. Neither have members that come from labor, the nonprofit sector, or a non-finance-related small business.
Simply put, while there may be empathetic advocates for working people in Fed meetings, working people aren’t in the room to represent themselves. There aren’t even people in Fed meetings whose business it is to address the economic struggles working people face. It is true that the Fed has shouldered the burden in recent years of offsetting the damage done by obstructionist Republicans in Congress who have refused to allow the stimulative fiscal policies necessary to move us more quickly to a full-employment, high-wage economy. But it is also accurate that the biggest beneficiaries of Fed policies are on Wall Street, where equity prices are at record highs, and not Main Street, where incomes continue to erode and joblessness remains unacceptably high.
The Dallas Morning News is reporting that an unnamed search firm is looking for a replacement for Fisher. There is no sign that either the search firm or the advisory committee, which includes the CEO of JC Penney and a university chancellor, will cast a net beyond the usual suspects in banking and business.
That calls for a people’s intervention. It’s time for the people who are affected by Fed policies to be at the table where they are made. The Fed’s governors and open market committee members should include representatives from labor and other people with expertise beyond finance, big business and academia. In fact, the creation of 12 regional Fed bank boards in the Federal Reserve Act of 1913 was originally intended to allow for a diversity of interests to be represented. It’s time for public agitation to move the Fed toward that original vision.