The central bank of the United States has been running at less than its full leadership capacity for almost five years. The body whose job it is to oversee big banks, set short-term interest rates and generally act as economic guardrails has had more empty seats around its boardroom than filled ones for months.
In the week ahead, the Trump Administration's effort to fill those vacancies, and potentially reshape the Federal Reserve, is scheduled to move forward.
On Tuesday, the Senate Banking Committee will hold a hearing on the nominations of Richard Clarida and Michelle Bowman as Federal Reserve System governors. These are not names familiar to most investors.
If confirmed by the full Senate Clarida would become the second in charge at the Fed. He worked at the Treasury Department in the early 2000s. He's an economics professor and serves as a global strategy advisor to an investment firm that runs the world's largest bond funds. Bowman is the top banking regulator in Kansas.
While their credentials are important, what investors, and Senators, should concentrate on during their nomination hearing is their independence.
The Federal Reserve is designed to operate beyond the confines of politics. A full appointment lasts 14 years. Economic cycles don't operate on political schedules so having leaders immune from significant political influence is important to underscore investor confidence.
All presidents put their imprint on the Fed one way or another. Some have had little influence. President George H.W. Bush blamed his 1992 re-election loss on the Fed not lowering interest rates fast enough. Others, like President Nixon, have pressured the agency to keep from raising rates fast during an election. (Those efforts in 1972 helped feed inflation later on that decade.)
No agency or individual has absolute sovereignty over the American economy. The Federal Reserve leaders should remain committed to that.
