This year, three of the four rotating seats on the Federal Reserve Open Market Committee have been filled by the three newest regional Fed presidents: Robert Kaplan of the Dallas Fed, Patrick Harker of the Philadelphia Fed, and Neel Kashkari of the Minneapolis Fed. This will be the first time any of the three have wielded a vote in the most powerful monetary committee in the world. More tellingly, none of the three are economists.
Who Votes At Fed Interest Rate Meetings?
The seven-member Federal Reserve Board of Governors have permanent seats on the FOMC. Two of these Governors are the Chairman and Vice Chairman. Five seats are reserved for designated regional Federal Reserve presidents, giving the Board a majority.
Since the New York Fed’s seat is also permanent, in reality there are only four voting seats among the other 11 regional Fed presidents, which rotate annually among three groups:
- Boston, Philadelphia, and Richmond rotate in one seat (blue);
- St. Louis, Atlanta, and Dallas share a second (green);
- Cleveland and Chicago trade off every year in the third seat (orange); and
- San Francisco, Kansas City, and Minneapolis take turns in the fourth chair (purple).
New Members, New Ideas
Patrick Harker was the first of the “freshman class” to take his seat, appointed in July 2015 to lead the Philadelphia Federal Reserve. Former President of the University of Delaware, he lectured as a professor of engineering and business. He also served as dean of the famous Wharton School of Business for seven years. Harker served on the Board of the Philadelphia Fed from 2012 to his elevation to the presidency in 2015. While holding a doctorate in civil engineering, he only has a Masters degree in economics. However, his involvement at the Philly Fed at the highest levels should make transitioning to the head of the table easier.
Harker considers himself a centrist on monetary policy.
Robert Kaplan, another regional Fed president with a foundation in business, took the helm of the Dallas Fed in September 2015. Formerly a senior associate dean at the Harvard Business School, where he earned his MBA, he served as an investment banker at Goldman Sachs for 22 years (1984-2006). While there, he worked with Henry Paulson, who later became Secretary of the Treasury. Kaplan was made a partner Goldman Sachs in 1990. Kaplan’s focus has been on business leadership, and has written several books on the subject.
Kaplan has espoused monetary views that place him just to the hawkish side of center.
Neel Kashkari is the newest regional Fed president, having started only a year ago. Perhaps the most high-profile of the three new presidents, Kashkari made an unsuccessful bid for governor of California in 2014 against incumbent Democrat Jerry Brown.
Originally an aerospace engineer, Kashkari earned his MBA at the Wharton School before being hired by Goldman Sachs to cover the tech sector. In 2006, Kashkari joined the Treasury Department, where he served during the global financial crisis as Assistant Secretary of the Treasury for Financial Stability. Dubbed “the Bailout Czar”, Kashkari was in charge of the Troubled Asset Relief Program (TARP), created to bail out Too Big To Fail (TBTF) banks.
His experiences while running TARP made Kashkari an aggressive advocate for breaking up the giant Wall St banks. This has also been his focus since his appointment as president of the Minneapolis Fed.
A self-declared fiscal conservative, his views on monetary policy are mostly unknown.
Two of the seven seats on the Board of Governors have remained vacant since 2014, due to political fighting between the Senate Republicans and President Obama. This means there is a 5-5 split between the Washington DC Board of Governors and the regional Fed presidents. In actuality, Dudley nearly always sides with the dovish Fed Chairman Janet Yellen. This makes for a 6-4 split to the doves’ advantage.
The fourth of this year’s rotating FOMC chairs is held by noted dove, the Chicago Fed’s Charles Evans. This would theoretically put seven votes solidly in the “dove” camp. That said, even dovish members of the FOMC such as Evans have stated that the presumed fiscal spending programs advocated by Donald Trump would force the Fed to increase rates at a faster pace to hold down inflation.
The three newest members to the Fed Open Market Committee have more of a business background than a past focused on economic theory. If nothing else, it will be interesting to get a view of the monetary leanings of the three at January’s FOMC meeting.
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