Janet, Janet: The Shrewd San Francisco Fed
By David Henderson
This is my long overdue comment on what I observed at the meetings of the San Francisco Federal Reserve Bank in April 2014. I had previously given some highlights of my talk here and commented on Glenn Rudebusch’s talk here.
When I made the agreement with the San Francisco Fed two years ago, I was told that the talks of the three presenters, of whom I was one, would be put up on the web within a few months. They weren’t. When I inquired almost a year later, I was told that “regrettably” they never ended up posting the videos. I’m virtually positive that it was not because one of the technicians had messed up. They were obviously professionals and the equipment they used was very high quality.
I’m guessing that their not using the videos had more to do with the content of my talk, and the fact that in the Q&A period, one of the other presenters, Atif Mian, said that he agreed with me that the Federal Reserve could probably not spot bubbles in advance and that Hayek had a good point about information. I may never know the real reason.
Now to an observation that I made at the time, an observation that leads to the first two words of this post. Both in the lunch and dinner and in the various presentations, a number of people would refer to the previous president of the SF Fed, Janet Yellen, as, simply, Janet. I heard business people from Utah, from California, from Oregon, from pretty much ever state in the SF Fed’s district, refer to her as Janet.
Why, I wondered. Here’s what I think. Janet Yellen is shrewd. Duh! And she figured out some time ago that one of the main ways to get people on your side is to encourage them to be familiar and buddy-buddy with you.
Moreover, the various regular everyday business people whom I spoke to or who spoke up betrayed no particular understanding of monetary policy. The impression I got is that they wanted to feel as if they were “in on things.”
But why would the SF Fed want this? Here’s why I think. And, if I were doing this “Scott Alexander style,” I would give it a higher than 80% probability. The SF Fed did it to create good will, at very little cost to the Fed and somewhat of a cost to the U.S. Treasury. The strategy reminded me of a passage from Enoch Crowder, The Spirit of Selective Service, 1920, which is quoted in David M. Kennedy’s excellent book Over Here: The First World War and American Society. The passage is about Selective Service administrator Crowder’s strategy for having local draft boards manned by prominent citizens rather than having a central board. Crowder wrote:
[T]hey became the buffers between the individual citizen and the Federal Government, and thus they attracted and diverted, like local grounding wires in an electric coil, such resentment or discontent as might have proved a serious obstacle to war measures, had it been focused on the central authorities. Its diversion and grounding at 5000 local points dissipated its force, and enabled the central war machine to function smoothly without the disturbance that might have been caused by the concentrated total of dissatisfaction.