Nobelist Diamond Renominated by Obama for Fed Board

Nobelist Diamond Renominated by Obama for Fed Board

By Scott Lanman

Jan. 5 (Bloomberg) -- President Barack Obama nominated Nobel Prize-winning economist Peter Diamond to the Federal Reserve Board, marking a third try to win Senate approval for the Massachusetts Institute of Technology professor.

The White House announced the renomination to the Fed’s Board of Governors in an e-mailed statement today. The Senate adjourned last month without approving Diamond, 70, and his nomination was previously returned to the White House in August under a procedural objection.

Diamond faces a larger Republican minority that could block his nomination again after the party took seats from Democrats in November’s midterm elections. Last year, while Obama’s two other Fed nominees were approved by the Senate, Republicans questioned Diamond’s monetary-policy expertise and the nomination’s compliance with a law that bars having two governors come from the same region of the U.S.

There is one opening out of seven on the Fed’s Washington- based board. All governors, along with five of the 12 regional Fed presidents, have a vote on monetary policy at each Federal Open Market Committee meeting. The FOMC voted 10-1 on Dec. 14 to maintain its unconventional-stimulus plans and buy $600 billion of Treasuries through June.

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This is disgusting: Senate Republicans holding up Peter Diamond’s nomination to the Federal Reserve Board on the grounds that he may not be qualified to make monetary policy. Aside from the fact that the same Senators cheerfully confirmed Bush nominees who didn’t know much about economics of any kind, this is especially stupid right now.

Why? Because right now one of the hot topics is whether the apparent shift in the Beveridge curve signals a rise in structural unemployment — and Diamond wrote the seminal paper on the whole subject — the top result on Google scholar.

Diamond is exactly the man we need — which, given the way things have been going lately, probably means he won’t get confirmed.

Update: Some commenters note, correctly, that there’s an ongoing dispute over what the rise in vacancies without a corresponding fall in unemployment means. But that’s precisely the point: we want Peter Diamond, who pioneered the whole study of this subject, in the Fed, where he can help make sense of the situation.