Fed Developments

The talk of the day is that Bernanke will be re-nominated by President Obama for a second term. It was hardly surprising. As of yesterday, www.intrade.com had a it the most likely outcome by a a 3 to 1 margin. The real surprise was that NY AFL-CIO leader Denis Hughes was named the chairman of the NY Fed's board for the remainder of the year. He was appointed by the Federal Reserve Board. He has been a member of the board since 2004 and has been acting chairman since May. He replaces Stephan Friedman, who resigned in May amid controversy stemming from his relationship to his former employer, Goldman Sachs. Also announced yesterday, the deputy chair was also named, Columbia University President Lee Bollinger. Bollinger's appointment also lasts for the remainder of the year.

Some financial types might object to the former electrician and academic at the helm of the NY Fed, though officials deny any political impulse. Some will see it purely as a reaction to the Friedman controversy, but the issue may be bigger than that particular episode. At stake is the balance between the financial sector and the rest of the economy. At stake is the appearance of conflicts of interest, with a revolving door between Wall Street and regulators. One can say what one wants about Greenspan, but few others who shared his faith in the ability of banks to look out for shareholder interest have had a mea culpa. Some Wall Streeters may not be happy than one of their own did not get the nods, but in the court of public opinion, to the extent it is noticed, is unlikely to meet disapproval.