, 37 tweets, 25 min read Read on Twitter
Too ancient history for a story, but here's a tweetstorm of how Larry Klane, Alfalfa Bill, London Whale & Swedes led to Fed Chair Jay Powell
In ‘07, Fed is perceived too eggheaded so Bush nominates Betsy Duke and Capital One bank exec Larry Klane to Fed marketwatch.com/story/white-ho…
But it’s getting close to election and Bush is super unpopular so Senate Banking chair Chris Dodd blocks the nominations.
Always pretty clear this was just a political maneuver to keep appointments for a Democratic president. reuters.com/article/us-usa…
Obama reappoints Bernanke, but early in his first term, thanks to the vacancies, has opportunity to appoint three Fed governors at once.
Everyone is mad about everything. About the crisis, about the Tea Party (remember the Tea Party?), mad about bailouts, mad about Dodd-Frank.
So 2010: Obama appoints SF Fed Pres Yellen as historic first female vice chair, along with MIT prof Peter Diamond, and Sarah Bloom Raskin
Nobody can deny Yellen’s credentials and Raskin had been counsel for Sen. Paul Sarbanes (of Sarbanes-Oxley) and he has her back.
With Yellen/Raskin untouchable, Diamond gets blocked by process of elimination. No real reason other than Shelby wants to get back at Dodd.
He needs some reason so invokes a crazy Congressman from 1913, Alfalfa Bill, as justification for the block wsj.com/articles/want-…
(There’s a classic Bloomberg story by @scottlanman on this too bloomberg.com/news/articles/…)
@scottlanman Yellen and Raskin get through in May; Diamond languishes. In October of 2010, Diamond wins the Nobel prize. wsj.com/articles/SB100…
@scottlanman Shelby keeps him blocked. (I think "Royal," "Swedish," "Academy," and "Sciences" are all epithets in this quote) washingtonpost.com/wp-dyn/content…
@scottlanman Everyone bangs heads against walls for 8 months, thinking the Nobel Prize will help. In June '11, Diamond withdraws. nytimes.com/2011/06/06/opi…
@scottlanman But Fed is facing vacancies that are giving Bernanke headaches (like: who will oversee the boring payment processing work?)
@scottlanman So in August 2011 WH floats idea to appoint a Democrat Jeremy Stein with Pimco’s Richard Clarida as the Republican.
@scottlanman Clarida withdraws. I don’t know if anyone ever reported out why. Hostile time for a big finance guy, I guess? wsj.com/articles/SB100…
@scottlanman Back to the drawing board, they find this guy Jay Powell. As @NickTimiraos and @d_harrison report today: wsj.com/articles/mr-un…
@scottlanman @NickTimiraos @d_harrison So basically they pick Powell because “he’s Repub but he’ll speak up before wrecking the country” and “his term only goes through Jan 2014”
@scottlanman @NickTimiraos @d_harrison They announce Stein and Powell as nominees in a news dead zone on December 27, 2011. Even a lot of close Fed watchers barely notice this.
@scottlanman @NickTimiraos @d_harrison And it wasn’t smooth sailing. They go nowhere for months and in May 2012, Reuters reports the nominations have died reuters.com/article/us-usa…
@scottlanman @NickTimiraos @d_harrison Powell’s Fed career would have ended before it started if not for one Bruno Iksil -- the London Whale himself
@scottlanman @NickTimiraos @d_harrison Just as Powell's about to fade away, @mdc and others blow open the story that JPMorgan has lost $2 billion on these crazy derivative trades
@scottlanman @NickTimiraos @d_harrison @mdc Harry Reid goes on a tirade about qualified Fed nominees dying on the vine. It breaks the logjam. nytimes.com/2012/05/18/bus…
@scottlanman @NickTimiraos @d_harrison @mdc Powell’s term is still up in 2 years. Guess what else happens in 2 years? Harvard professors (like Stein) lose their hard-won tenure.
@scottlanman @NickTimiraos @d_harrison @mdc There are no exceptions: “They wouldn’t do it for Henry Kissinger so they won’t do it for anyone else.” thecrimson.com/article/2010/9…
@scottlanman @NickTimiraos @d_harrison @mdc So by early 14, Stein quits, Raskin goes to Treasury, Yellen takes Bernanke’s job, Duke retires. They’re desperately short staffed again.
@scottlanman @NickTimiraos @d_harrison @mdc Meanwhile, Powell has quietly slogged on stuff like payment-processing (that econ PhDs think they’re too good for) wsj.com/articles/mr-un…
@scottlanman @NickTimiraos @d_harrison @mdc Republicans already voted Powell through once. So by default, he gets reupped to help get Stanley Fischer & Lael Brainard on the Fed board.
@scottlanman @NickTimiraos @d_harrison @mdc Meanwhile Dodd-Frank created a new regulation vice chair. But Dan Tarullo does the job de facto. Why go through bloody confirmation process?
@scottlanman @NickTimiraos @d_harrison @mdc In hindsight: because he was unconfirmed, it meant Trump could immediately appoint someone who formally strips Tarullo’s entire portfolio.
@scottlanman @NickTimiraos @d_harrison @mdc Yellen still has a year left, but Trump can get rid of Tarullo immediately, so he picks Randal Quarles. wsj.com/articles/meet-…
@scottlanman @NickTimiraos @d_harrison @mdc Now time to pick the Fed chair. But Quarles hates the the guy who has the easiest track to the job, Kevin Warsh bloomberg.com/news/articles/…
@scottlanman @NickTimiraos @d_harrison @mdc The other top contender, John Taylor, has spent his career arguing Fed should use policy rules to avoid getting tugged by political whims.
@scottlanman @NickTimiraos @d_harrison @mdc But his rule makes it implausible for op-ed writers to waive their arms and say “maybe he favors really low rates” when it’d be expedient.
@scottlanman @NickTimiraos @d_harrison @mdc Yellen probably could have been confirmed, but people underestimate how much bad blood is in that confirmation process from everything above
@scottlanman @NickTimiraos @d_harrison @mdc And so Powell’s old advice works. Everyone else blows up and he’s the last one standing. The End. wsj.com/articles/mr-un…
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