An Empty Seat at the Fed
When the Federal Reserve's Open Market Committee (FOMC) convenes Wednesday and Thursday behind customary locked doors to shape the nationÛªs economic fate, an empty seat will be a source of frustration and anger for administration policy makers.</br></br>Robert Heller unexpectedly resigned from the Federal Reserve's Board of Governors two weeks ago, pleading that $82,000 a year is not enough. That bars him from further participation in the central bank though he remains on the payroll through July 31. No replacement will be ready for months.</br></br>Thus, one less governor will be present as the FOMC convenes amid fears of impending recession. What rankles the White House is that HellerÛªs unscheduled absence means one less vote for economic growth and against obsessive caution. That underlines the archaic nature of the Federal Reserve Board as a policy instrument.</br></br>To appreciate how Heller has vexed the highest reaches of the Bush administration, it is necessary to understand the irritation of the presidentÛªs men with the Fed and its chairman, Alan Greenspan. Unlike all else in Washington, monetary policy is criticized only in whispers. Those whispers currently indict the Fed for keeping interest rates too high and ntoney too tight for too long, risking national and global recession.</br></br>Under backstage pressure from the administration, foreign central banks and the business community, the last FOMC meeting loosenedÛÓbut just barely with a quarter-point drop in the federal funds rate (interbank lending). With commodity prices stable and long bond rates down, Bush policy makers think much more should be done this week. What worries them is that it may not, even though a solid majorityÛÓmaybe allÛÓof the six remaining governors want to loosen.