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All the President's Central Bankers
How Obama Shored Up His Legacy at the Federal Reserve
SYLVESTER EIJFFINGER is Jean Monnet Professor of European Financial and Monetary Integration and Professor of Financial Economics at the Center for Economic Research at Tilburg University. EDIN MUJAGIC is a monetary economist and Ph.D. candidate at Tilburg University.See more by Sylvester Eijffinger See more by Edin Mujagic
Regardless of who wins the 2012 U.S. presidential election, President Barack Obama will end his first term having decisively shaped U.S. monetary policy for at least the next two decades. Thanks to a stroke of lucky timing -- the Federal Reserve Board happened to have an unusually high number of vacancies during the president's first term -- Obama will have either appointed or reappointed every single one of the seven members of the Federal Reserve's Board of Governors, including its chairman, Ben Bernanke, by the end of 2012. With the governors each set to serve a 14-year term, they will ensure Obama's long-term impact on the U.S. economy.
Bernanke was originally appointed board chair by President George W. Bush in 2006. In 2010, Obama reappointed him until 2014. Even if Obama or his successor stripped him of that role, he will continue to sit on the board until 2020. Janet Yellen, the economist and vice chairman of the Fed board, whom Obama appointed in April 2010, is set to serve until 2024. Daniel Tarullo, a professor of law at Georgetown University whom Obama appointed to the Fed board in January 2009, is not scheduled to step down until 2022.
Two of the other governors, Elizabeth Duke and Sarah Bloom Raskin will serve until 2012 and 2016, respectively. That means Obama will certainly be able to reappoint or replace Duke and might be able to do the same with Raskin, locking in his picks until 2030. Finally, the two last seats on the board are currently vacant because Obama's nominations have been held up in the Senate. If those two are appointed this year, they will stay at the Fed until 2026.
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The idea that the administration has tried to use Fed board appointments to shift economic policy does not withstand scrutiny...