Senator Bob Corker Whining to British Bankers About the US Fed.

commentary by Roger Erickson

Bernanke should show some humility

Overall, Corker's article causes my hair to stand on end. More than anything else, it makes me feel that there's a banking lobby once again running circles around US policy - a lobby that has Congressmen eating out of their hands. People this confused should NOT be on the Senate Banking Committee.

First off, why on earth would a US Congressman publish a rant in the FT, a bankers rag in a foreign country? That strikes me the same way LIBOR does, catering to a London banking cartel vs your own constituency. We don't need our Congresspeople discussing our policy in foreign newspapers.

Plus, the article is riddled with inconsistencies. (Fed watching is a distraction ... so complain about the Fed! Really?) Maybe we could send Corker some Nike shoes, with a note saying "Just Do It" ?

After reading the article, I'm not sure exactly why Corker is bringing up the issues he mentions, in a letter to a foreign banking newspaper. Classic politics? Bring up a few valid points, but twist their relevance?

For whatever reason, Corker has a problem with the Fed's dual mandate.

'A big part of the problem is that the US Congress has given the Fed an overly broad "dual mandate" of price stability and full employment. In 1978 Congress congratulated itself for “ending unemployment” via its passage of the Humphrey-Hawkins Act, which added full employment to the Federal Reserve’s existing mandate. This approach has not only proved unsound. It undermines the free market system, allows Congress to use the central bank as a scapegoat while avoiding tough policy decisions, and creates Fed addicts in our financial markets.'

He might have had a bit of a point there, if some Congresspeople really thought they'd delegated responsibility by abrogating it! Yet that's only a fraction of the whole story. He's doing the Humphrey-Hawkins Act a sweeping & severe disservice, and pandering to the 1% who would prefer right of first refusal on private ownership of any publicly-funded R&D. I smell a rat!

'[The Fed's Dual Mandate] undermines the free market system, allows Congress to use the central bank as a scapegoat while avoiding tough policy decisions, and creates Fed addicts in our financial markets.'

Perhaps, but that's no excuse for not acting like a Senator! If he were serious, wouldn't he be having this conversation with colleagues behind closed doors? This sort of public rant in a foreign banker's newspaper would irritate me if I were trying to serve on the Banking Committee. So what's the real purpose? Was the rant requested by certain lobbyists? For what reason? Who are Corker's financial advisors and main campaign finance contributors?

"We are one of the only developed countries in the world that has such a mandate. The European Central Bank, the Bank of England and the Bundesbank, to name but a few examples, all have single mandates."

First, wanting to be like the ECB or other CBs is not necessarily a positive!  Second, it's questionable how true his thesis is. And either way, what's the point for a Congressman responsible for shaping domestic banking policy? I have a bad feeling that Corker simply doesn't know what he's talking about, and is being used & abused by his campaign donors.

Comments at the FT article are all over the place, but one raises a killer point:

"This is the gentleman who when he had a chance to question Jamie dimon. Just brushed aside any serious questions and showered praise on the gentleman- these are the same guys who don't want any regulation" [sic]

In publishing his letter to the FT, what is Bob Corker showing?