Herman Cain's Dirty Fed Past... So?
I have specifically avoided discussing most issues related to the 2012 presidential campaign due to the fact that A) I am no longer a registered Republican and therefore have no political stake in who the GOP picks to run and B) don't care. Events of the last few years have affirmed my worst fears; D or R, it's all the same bullshit, with the same handful of puppetmasters pulling the strings behind the curtain. I would love to see Ron Paul actually get the GOP nomination but don't believe the party is that smart (or that stupid, depending on how you feel about these sorts of things).
That said, I couldn't help picking up today's piece in The Atlantic by Joshua Green, which reveals possible presidential hopeful Herman Cain as a - gasp! - Dirty Fed operative. Sort of. First, let's get to what Green wrote, then we'll rip it up:
But Cain has a fascinating background and has followed a political path that's the opposite of what you normally see. It's not uncommon to move from the fringes of the business world to the center of the political world: Harry Truman was a haberdasher and became president; Tom DeLay was an exterminator and became House majority leader. But it's rare for someone to journey from the top of the business world to the tea party political fringe. That's what Cain has done. Although it hasn't gotten much attention, he was actually chairman of the Kansas City Federal Reserve Bank in the mid-1990s. That's the epitome of the Establishment and the opposite of the tea party.
The Kansas City Fed is one of twelve regional banks that advise the Federal Reserve Board and initiate changes in the discount rate. The Kansas City Fed in particular has a reputation for monetary conservatism and distrust of central authority. (Along with the Dallas Fed, it's one of only two Fed banks currently pushing for higher discount rates.) Curious about Cain's chairmanship, I requested an interview with Thomas Hoenig, the president of the Kansas City Fed (then and now), who is a famous inflation hawk. I didn't get to talk to Hoenig, but he sent along this statement:
From 1992 to 1996, Herman served as a director of the Federal Reserve Bank of Kansas City in the capacities of deputy chairman and then chairman of the Board. Fed directors are dedicated representatives of Main Street business, community development, organized labor and financial services sectors who agree to give their time to help the Federal Reserve understand the economy and to oversee our operations. It was my privilege to work with Herman very closely during his five years on the Kansas City board.
I appreciate the opportunity to provide greater understanding of the role of Federal Reserve Bank directors because they provide a tremendous service to our country.
I had better luck with Drue Jennings, a Kansas City lawyer who served with Cain on the Federal Reserve Board and succeeded him as chairman. Jennings is quite fond of his old colleague. "Herman was a pleasure to work with," he told me. "His views were pretty consistent with those of the Fed at the time. Alan Greenspan was, of course, chairman and Herman was in lock stop with the policies of the Fed." Jennings added that this was not atypical; he could not recall a single dissent from anyone during this three-year term. Still, he said, Cain was no pushover. "He's a guy you'll never find in a gray area," Jennings said. "He's intelligent, well spoken, and very assertive to the point of almost being aggressive. He's anything but shy."
Jennings said Cain fit the profile of the Kansas City Fed. "Inflation was always the big bugaboo," he told me, "and when it comes to monetary policy, he was an inflation hawk. I'll tell you, that's the most conservative bunch of guys I've ever met."
Please! Before we go any further with this, we need to point out the obvious: chairmen of regional Fed boards are little more than economic spies who report back to the Bank on matters of business that they are familiar with. They don't call the big monetary shots, despite what this Jennings guy may say, and to paint it as such is reckless journalism, in this particular reckless journalist's humble opinion.
As pointed out in the article, the main duty of members of the regional Banks' boards is to find a new president to head the Bank - which Cain wouldn't have had to do as Kansas City Fed President Thomas Hoenig has been president since 1991 (back when JDA was still wearing pink spandex pants, slap bracelets and a side ponytail).
From the Fed's own The Federal Reserve System, Purposes and Functions:
Each Reserve Bank has its own board of nine directors chosen from outside the Bank. Three, designated Class A, represent commercial banks that are members of the Federal Reserve System. Three Class B and three Class C represent the public. The member commercial banks in each district elect the Class A and B directors. The Board of Governors appoints the Class C directors, one of whom it selects as chairman. No Class B or Class C director may be an officer, director, or employee of a bank or a bank holding company. The directors in turn nominate a president of the Reserve Bank, whose selection is subject to approval of the Board of Governors.
Cain's duties for the Kansas City Fed, therefore, cannot possibly be construed as anti-tea party. Who could possibly be more anti-government than the very business owners impacted by big government's overreaching authority? In fact, it could almost be considered patriotic on his behalf to penetrate the Dirty Fed in a "consulting" capacity and be sure his voice was heard through Hoenig's actions at the FOMC during his time. That's the point.
Not only that but the Kansas City Fed is about the least dirtiest Dirty Fed Bank there is. They don't supervise any TBTF banks and last I checked, farmland wasn't quite the same as a handful of banks with market caps in the bazillions.
I couldn't care less about Herman Cain and wish him the best of luck with whatever it is he's trying to do but am merely pointing out that I thought The Atlantic was above cashing in on anti-Fed sentiment to get pageviews. As has happened before, I guess I was wrong.