The Federal Reserve can't stop hiring Goldman Sachs executives. On Monday, the Dallas Fed named former Goldman Sachs Vice Chairman Robert Kaplan as its president -- a post with significant regional regulatory responsibilities and influence over critical monetary policy decisions.
Kaplan will serve on the the powerful Federal Open Market Committee, which sets interest rates that have a massive impact on economic growth, unemployment and inflation. He'll also be a major regulator. Kaplan has been critical of the regulatory response to the 2008 financial crisis, saying that the Wall Street reform law passed by Congress is hurting small businesses.
"My complaint about Dodd-Frank is that it should be slimmed down and focused on two or three top priorities," Kaplan told The American Interest in 2012. During the same interview, Kaplan hinted that he’d be willing to end the Fed’s historic eight-year adherence to zero interest rate policy, saying that "what the Fed thinks it has been doing over the past three years [2009-2012] is what the ECB is now doing for Germany and Europe: buying them time, and hopefully putting on the pressure for [fiscal policy-makers] to get in gear because they can’t keep on indefinitely with hyper-aggressive monetary policy.”
The Fed has two main policymaking bodies -- the Board of Governors in Washington, D.C., and 12 regional bank branches. With Kaplan heading the Dallas Fed, three of those 12 regional banks are now headed by Goldman alums. The head of the Philadelphia Fed, Patrick Harker, was the former trustee of the Goldman Sachs Trust, part of the company’s private wealth management group, and the head of the New York Fed, William Dudley, was Goldman’s chief economist.
None of this is, of course, proof of a cephalopod conspiracy to suck value from the beating heart of the U.S. economy. But it’s not the kind of thing that's entirely helpful for persuading people who already believe there is such a conspiracy that there isn’t.
And it clearly shows the continued dominance of the revolving door between Wall Street and top political positions. Last year, as Sen. Elizabeth Warren (D-Mass.) rallied opposition to ex-Lazard banker Antonio Weiss' nomination to a top Treasury job, Goldman Sachs CEO Blankfein publicly worried that bankers were about to stop taking public service jobs. “Why does the country benefit from making something hard so much harder?” he asked the audience at a New York Times conference.
Blankfein's concerns appear to have been premature. Or perhaps bankers are simply more in demand when the vetting and approval process takes place entirely within their elite peer group. Regional Fed presidents are selected by the directors of each regional Fed bank -- a group made up of bankers, corporate leaders and community representatives. Treasury posts, by contrast, require formal Senate confirmation.
Kaplan has fretted that corporations are getting a bad rap about the Great Recession.
"It is dangerous to suggest that corporate interests, in effect, took away the ability of the middle class to make ends meet," Kaplan said in the 2012 interview. "I voted for Obama, but I think it is a huge mistake for him to introduce rhetoric that suggests that the interests of corporations and working people are in opposition. I think it’s not true and unhelpful to reviving the economy."
Kaplan also has a reputation as a centrist deficit hawk. "Entitlement reform and the budget deficit are the two burning issues of our time," he told The American Interest, lavishing praise on the Simpson-Bowles deficit reduction plan, and taking Obama to task for failing to secure its enactment. Deficits have plunged in the years since.
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