George Selgin on Geography and the Fed
Although one might suppose that, to be eligible to serve as a Federal Reserve governor, a candidate should know something about monetary policy or banking or both, so far as the law is concerned, only two things clearly matter: a candidate cannot serve more than once, and he or she can’t be from just anywhere.
Few Americans will know that that second requirement exists, why it does, and how it has come to be routinely ignored. Yet the question of geographic eligibility is likely to be raised during upcoming Senate confirmation hearings for two current Fed Board nominees, Judy Shelton and Chris Waller. Hence this brief “Fed Geography Lesson,” written for the sake of those who, should a fuss be raised about where a nominee comes from, wonder what it’s all about.
This is from George Selgin, “A Fed Geography Lesson,” Alt-M, February 4, 2020.
I found it fascinating throughout.
Another highlight showing George’s even-handed approach:
For most of the Fed’s existence, the Federal Reserve Act’s geographical diversity provisions drew little public attention. But in 2011 they became front-page news when Richard Shelby (R-AL), then ranking member of the Senate Finance Committee, appealed to them, and to the first provision especially, in successfully opposing Nobel Laureate Peter Diamond’s appointment to the Board. Although Diamond was supposed to represent the Chicago Fed district, he had only tenuous ties to it, whereas he’d long resided in Boston, a district that was already being represented at the time by Daniel Tarullo.
Some commentators, including the CMFA’s own Mark Calabria, defended Shelby’s stand, holding it to mark a needed return to strict adherence to the law and to the intentions of the Federal Reserve’s founders. Others, however, including Diamond himself, saw it as mere cover for a strictly partisan act, namely, Republican retaliation for Democrat Senators’ having blocked Randall Kroszner’s Board reappointment several years before.
In truth, both interpretations were valid.
One thing I’ve gotten a kick out of since the early 1970s, when I first learned what the Fed’s 12 districts were: Missouri. Take a look at the map and see why. That’s what happens when you choose districts according to early 1900s population patterns and don’t adjust them.