Merrick Garland, Peter Diamond, and blocking Obama’s nominations

President Barack Obama greets the American 2010 Nobel Laureates in Economics, Peter Diamond, center, and Dale Mortenson, right, in the Oval Office, Nov. 30, 2010. (Official White House Photo by Pete Souza) This official White House photograph is being made available only for publication by news organizations and/or for personal use printing by the subject(s) of the photograph. The photograph may not be manipulated in any way and may not be used in commercial or political materials, advertisements, emails, products, promotions that in any way suggests approval or endorsement of the President, the First Family, or the White House.

Peter Diamond

Merrick_GarlandMerrick Garland

The kerfuffle around President Obama’s nomination of Merrick Garland to the Supreme Court reminds me of the same scuffle that’s been going on for the past eight years about the Federal Reserve.  Let me explain.

The Board of Governors of the Federal Reserve runs the nation’s central bank and sets American monetary policy.  According to the Federal Reserve Act, “The Board of Governors of the Federal Reserve System (hereinafter referred to as the “Board”) shall be composed of seven members, to be appointed by the President, by and with the advice and consent of the Senate.”  This should sound familiar because it’s the same language used in Article II, Section 2 of the Constitution.  Referring to the President, it states:

He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

There’s a small problem, however, with how the Board of Governors has operated during President Obama’s administration: there have never been seven governors over the past eight years.  Today there are five governors and at times there have been as few as four.

The reason for this is that what we see playing out over the Supreme Court nomination has been going on for seven years with regard to the Fed. Republican senators don’t want a Democratic president to appoint Fed governors to 14-year terms because they know that this will block them from appointing members more in tune with their views.  They are willing to keep the Fed shorthanded in order to do this, just as they are doing with the Supreme Court.

The most egregious case was the nomination of Peter Diamond to the Federal Reserve Board.  President Obama nominated Diamond in April 2010, September 2010, and January 2011.  Diamond never received a hearing because Senator Richard Shelby put a hold on the nominal and declared that Diamond wasn’t qualified.

The irony of Shelby’s assertion was that, in the midst of this tussle, Diamond was awarded the Nobel in economics.

So what are the Republicans looking for in a Federal Reserve governor?  At the relatively moderate end of the spectrum are candidates who advocate tying the Fed’s actions to a formal set of rules.  At the other extreme I can imagine Ted Cruz finding someone even more radical given his view of monetary policy is that the Federal Reserve should promote “sound money and monetary stability, ideally tied to gold.”

Republican senators are following the same playbook in the fight over the Supreme Court.  I hope Peter Diamond sends an email note or makes a phone call to Merrick Garland and commiserates with him.