Tuesday the Senate Banking Committee meets for the second time to consider the nomination of Peter Diamond to a seat on the Federal Reserve's Board of Governors. Since Professor Diamond was first nominated, he has been awarded the Nobel prize in economics.
Putting aside his academic qualifications, and his misguided views on Social Security, Professor Diamond is not qualified to be a Fed governor for one very simple reason: he is from a Federal Reserve district that already has representation on the Fed. Paragraph 10-1 of the Federal Reserve Act requires that:
In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.
Mr. Diamond's Senate paperwork states he is from Massachusetts, which is also the case for sitting Fed governor Dan Tarullo. In fairness this provision of the law has been ignored and violated in the past. In fact, both current Fed Governors Duke and Raskin are both from the Richmond district. As Duke was there first, it would seem clear from a reading of the law and Raskin's bio that Raskin is serving in violation of the statute. But then given the actions of the Fed over the last few years, the Fed has certainly shown that it doesn't feel constrained by statutes.
Bloomberg reports that despite what Diamond's paperwork says, the White House claims he's from Chicago. Not that he's ever lived there, but because he once gave a lecture at Northwestern. Next I suspect the White House will claim an extended lay-over at O'Hare is sufficient for residency.
For perhaps the first time in history, all the Federal Reserve governors are from coastal states. Also every single Fed governor is from a state that Obama won. Only one governor is from west of the Mississippi river. How anyone can believe the current make-up of the Board is a "fair representation" is beyond me. Perhaps this is one explanation for the currently low public opinion of the Fed; it has become more a Cambridge-Wall Street-Washington echo chamber than anything else.