Richard Fisher’s Next Job?

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The outgoing president of the Dallas Fed has managed to pack into his interview this morning with the Wall Street Journal more intelligent talk about reform than we’ve heard from the central bank in the entire great recession. Richard Fisher, who’s earned a reputation as an inflation hawk, hasn’t yet — we retain hope — endorsed the kind of Fed audit for which the House of Representatives has twice voted and the Senate is considering. But he wants to reallocate power on the Federal Open Market Committee.

This strikes us as an important start. The idea sketched by Mr. Fisher would be, as phrased by his interviewer, James Freeman, “to recognize the rising population and economic power of the South and the West.” It’s not just the burgeoning population and economies of the South and West that motivates Mr. Fisher; he also aims to “limit the influence of Washington and Wall Street,” as Mr. Freeman puts it. He would also end the tradition of the New York Fed President serving as the vice chairman of the Open Market Committee.

Mr. Fisher would rotate the vice chairmanship among the regional banks. It strikes us that even the most chauvinistic of us New Yorkers are going to have hard time disputing the logic of that demarche. Mr. Freeman points out that during the financial crisis of 2008, the job was held by Timothy Geithner, who ended up leading the rescue of the big banks that, as Mr. Freeman puts it, “under his oversight had been allowed to accumulate massive mortgage risk.” Says Mr. Fisher: “to me there’s a little bit of a conflict of interest there.”

There’s a bit of gamesmanship going on here, in that — as Mr. Fisher marks in a straightforward way — his reform ideas are also an effort to head off agitation in Congress for an audit of the Fed that would go beyond the typical audit of the books, which the Fed has always had, to encompass its policy making and international entanglements. “Mr. Fisher believes the real aim is to exert political influence over monetary policy,” Mr. Freeman writes. Or, as we would put it: Confound our blasted democracy.

Mr. Fisher “recognizes the constitutional authority of Congress to coin money,” Mr. Freeman writes (that’s right generous of Mr. Fisher, we’d add). He notes, as Mr. Freeman paraphrases him, “the disastrous consequences when monetary policies have been dominated by political considerations, such as the German hyperinflation of the 1920s, and — on a lesser scale — the U.S. inflation plague of the 1970s.” Forgive us, but there’s quite a strait between the Scylla of Bernanke and the Charybdis of Weimar.

For our part, we don’t actually believe it’s the coinage power the Fed is acting under (Congress in 1792 delegated coinage to the United States Mint). It’s a mystery as to why the Fed, whose officers are sworn to the Constitution, are so all-fired fearful of the very Congress that created the Fed. But no one disputes that the Congress possess the monetary powers and also that the Constitution establishes certain monetary disabilities. Jeb Hensarling, chairman of the Financial Services Committee, strikes us as every bit as responsible as any Fed governor.

In any event, it is just terrific to see an insider with Mr. Fisher’s stature speaking up for reform. We are now almost 50 years into the age of fiat money. “By now, I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success,” says no less a sage than Paul Volcker. It would be a theme for Mr. Fisher to pick up after he leaves the presidency of the Dallas Fed. Paul Volcker, Richard Fisher, Congressmen Jeb Hensarling, Paul Ryan, and Kevin Brady, Senator Rand Paul, and tribune James Grant — we can imagine a powerful group coming together to lead a reform.


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