All Articles Finance While You Were Working - April 17

While You Were Working – April 17

The missing piece of Glass-Steagall debate, markets get jittery, more Boeing layoffs and does the Fed need more diversity?

3 min read


Federal Reserve2

Does the Federal Reserve need more diverse views? - Photo credit: Chip Somodevilla/Getty Images

Does the Federal Reserve need more diversity?

The Trump administration reportedly has its sights set on Randal Quarles to fill the role of vice chair for supervision and regulation on the Federal Reserve’s Board of Governors. The position, which is currently vacant following the departure of Daniel Tarullo earlier this month, plays a crucial role in shaping financial regulation not only within the US. The position also exerts great power in shaping global financial rules via organizations such as the Basel Committee on Banking Supervision.

The nomination of Quarles seems like a relatively “safe” choice on the part of the White House. Quarles worked at the Treasury Department under both Bush administration and has also worked at the much-respected Carlyle Group. However, the resume that makes Quarles “safe,” leaves Narayana Kocherlakota unimpressed.

If anything, Kocherlakota contends that Quarles’ background should disqualify him because it is too similar to other Fed governors.

“It’s well-known (and intuitive) that homogeneous decision-making teams don’t explore a sufficiently broad range of ideas. … The Board of Governors has seven members so that its decisions can be shaped by seven different perspectives. But that can happen only if the president appoints governors who have sufficiently diverse life experiences. Quarles doesn’t come close to meeting this basic criterion.”

And it’s not like Kocherlakota doesn’t know what he is talking about: he served as president of the Federal Reserve Bank of Minneapolis from 2009 to 2015. The performance of the Federal Reserve in implementing policy measures that take all areas of the economy into account also supports the notion that a voice from a different perspective might serve the board and the country well.

Talk of a Glass-Steagall redux kept omitting one thing

With policymakers at the highest levels kicking around the idea of bringing back some form of the Glass-Steagall Act, it is important to keep tabs on what a Glass-Steagall Part Deux could and couldn’t do.

All the hypotheses are great, but what I find interesting is that most of the disagreement is based on what kind of activities the government should and shouldn’t backstop (business lending and mortgages=Yes, trading of exotic derivatives=No!!!). In our supposed free-market, capitalistic society it seems a wee bit odd that the discussion is not focusing on whether the government should be backstopping any activities at all.

The markets are trying to tell us something

It looks like financial markets are getting a bit jittery. I can imagine what has everyone so unsettled.

Some batteries required

The smartest energy trader I know told me a decade ago that the key to the renewable energy revolution would have less to do with developments in how power is generated (wind, solar, etc) and more to do with how energy is stored. And now, batteries are beginning to play a key role in steadying the energy grid in Southern California. The silver bullet will be when batteries can store the energy renewables actually produce, but for now batteries can make renewables more viable by helping utilities manage the periods when the wind doesn’t blow and/or the sun doesn’t shine.  

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