I think the institutional authority of the Fed Chair is overstated in this post. Ultimately the Fed Chair's authority comes from an ability to convince a bunch of big ego other people to go along. AG has been in for a long time, has the rep of having "saved the system" back in 87, has outlasted all other BOG members, and out datawonks anybody in the room, probably beating out our much revered Doug Henwood even.
Often Fed Chairs are like AG, but some are not, the most recent example being William Miller during the Carter presidency. BTW, BOG members can be reappointed, Henry Wallich being the most recent example who served from 1960-88.
The major loose cannons are the Federal Reserve Bank Presidents, all of whom attend and speak at FOMC meetings, even if only five of them vote on policy (meaning generally what the target fed funds rate will be the next month). There are nine Board of Directors members voting on Fed Bank presidents, only three of whom are appointed by the BOG. Many banks have distinct identities and their presidents come to represent those identities. Thus, it is not surprising that the monetarist William Poole is president of the traditionally monetarist St. Louis Fed. Also they represent regional interests in a variety of ways. In short, Doug is right that there could be a very interesting FOMC meeting coming up.
AG has traditionally liked to play the master of consensus, in contrast to his predecessor, Paul Volcker. But it is not at all clear that there is a consensus on the FOMC or what it is, although the extreme hawks who wanted to raise interest rates seemed to have been silenced for now (with the possible exception of Jordan of the Cleveland Fed), thus allowing Greenspan to have made his market-calming speech at Berkeley.
BTW, along with that I see the selection of Primakov as having calmed the markets far more than the publishing of the Starr Report, as so many ludicrously obsessed US commentators have pontificated. Barkley Rosser On Thu, 17 Sep 1998 16:30:00 -0400 "Fellows, Jeffrey" <jmf9 at cdc.gov> wrote:
>
> 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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-- Rosser Jr, John Barkley rosserjb at jmu.edu