Fisher: Fed selection process has been 'terribly' mishandled
The White House has "terribly mishandled" the process of picking the next chair of the Federal Reserve, allowing the U.S. central bank to be politicized and potential nominees to be denigrated in the process, a top Fed official said on Monday.
Picking a Fed chair "should not be a public debate," Dallas Fed President Richard Fisher told the Texas Association of Independent Bankers.
Former Treasury Secretary Lawrence Summers, considered President Barack Obama's preference, withdrew his name from consideration a week ago, saying his confirmation would incite acrimony.
Fed Vice Chair Janet Yellen is now seen as the front-runner.
As a policy dove, she stands at the opposite end of the policy spectrum from the hawkish Fisher, who said she "would make a great chairman," adding that they exchange a kiss at the start of every Fed policy-setting meeting.
Fisher said there are other possibilities for the post, without naming any.
Earlier, Fisher said the Fed's unexpected decision last week to keep its massive bond-buying program in place has hurt the U.S. central bank's credibility.
"I disagreed with the decision of the committee and argued against it," Richard Fisher, president of the Dallas Federal Reserve Bank, said in remarks prepared for delivery to the Independent Bankers Association of Texas.
"Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question," Fisher said he told his colleagues at the Fed's policy-setting meeting last week.
"I believe that is exactly what has occurred, though I take no pleasure in saying so," he said.
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Fisher has long opposed the Fed's super-easy monetary policy because he believes the bond-buying program is ineffective and could lay the groundwork for future inflation. Before last week's meeting, he called for the Fed to start winding down its $85-billion-a-month bond-buying program in September.
Investors were ready for just such a reduction after Fed Chairman Ben Bernanke in June said tapering could start later this year, and several other Fed officials said they were open to pulling back on bond-buying sooner rather than later.
Instead, Bernanke kept the program in place, sparking a global stock rally and prompting criticism that the Fed had misled investors about its intentions.
Fisher, who will be a voting member of the policy-setting committee next year, did not offer any fresh details on his thinking about monetary policy in his prepared remarks Monday.
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He spent much of the speech warning the audience of community bankers of the dangers from large banks, the failure of which could bring down financial markets in a repeat of the financial crisis that came to a head five years ago.
Wall Street reform legislation designed to ensure the government never again is forced to rescue failing big banks has instead made the problem worse by allowing the large banks to get bigger and undercutting the profitability of smaller banks, he said.
"Am I exaggerating when I say that the TBTFs (too-big-to-fails) are a dagger pointed at the heart of the economy?" he said. "The megabanks remain a potential lethal force."