As much as I disliked using Frederic Mishkin's book The Economics of Money, Banking, and Financial Markets in a M&B course a few years back, I did find his description of the fed structure, and the chair's dominance within it, quite good. Doug's post referred to the importance of the chair's staff (board of governor's staff) in controlling info, but this is only the tip of the iceberg. The chair also determines the agenda of the Board of Governors and FOMC meetings. As Doug mentioned, the board staff advises the FOMC. The structure of the Fed is dominated by the board of governors (BOG). There are 7 BOG members, AG is the chair. I would expect, although others will be able to show, that AG has had a great deal of sway over the selection of BOG members after he ascended to the chair position.They serve nonrenewable 14 year terms, with one retiring every other January. BOG members are nominated by the president and confirmed by the senate. If the chair has been a good boy, this process amounts to a rubber stamp.
The BOG has significant influence over directorships in each of the 12 Fed Res Banks (FRB), by directly appointing three of the nine directors to each FRB, the other six are elected by "member" commercial banks. My guess would be that there is a high correlation between the BOG's three appointees and the FRB directors who eventually take part of the FOMC. The board of directors also has a majority of the votes on the FOMC (7) compared to the other five votes.
The BOG therefore, appears to have direct control over the three functions of the Fed: they directly set the reserve requirement and the discount rate, and open market operations through a majority control the FOMC. Chairman AG and his staff dominate the BOG by virtue of his position as chair, his control over the agenda, and his influence over information through his supervision of the BOG's staff of economists. Of course, his influence is bound by some limitations, but how important are these limits if all other participants are of the same ilk?
Yet, control over the Fed and control over the money supply, broadly defined, are two different matters.
Jeff
---------- From: James Baird To: lbo-talk at lists.panix.com Subject: Re: Fed hawks Date: Thursday, September 17, 1998 3:06PM
Doug,
The Fed is always portrayed as being completely controlled by the Great and Merciful Greenspan. How much control does he actually have over policy? Is the FOMC a rubber stamp, or do they actually have an independent voice?
Jim Baird
>Fed policy is set by the Federal Open Market Committee, which consists
of
>the chair, AG; the vice chair, Alice Rivlin; the four other governors;
the
>president of the New York Fed; and four of the regional bank
presidents,
>who serve in rotation. Five of the FOMC members are on record as
hawkish -
>governors Roger Ferguson (who says the Asian crisis is good for us),
Edward
>Gramlich, and Laurence Meyer, and the hardass regional bank presidents
>Jerry Jordan (FRB Cleveland) and William Poole (FRB St Louis). Could be
an
>interesting FOMC meeting on September 29.
>
>Doug
>
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