This morning another new poll has former Speaker Newt Gingrich leading nationally in the race for the GOP nomination (it’s on page 8 of this link).
Among the promises Gingrich routinely makes of things he would do as president, promises to fire Federal Reserve Board Chair Ben Bernanke, to whom Gingrich assigns substantial blame for the economic meltdown and the failure of the economy to bounce back more strongly. He likes the term “disastrous” to describe Bernanke’s performance and says that Bernanke is the “first person” who needs to be fired.
(Those are from this debate, in which Bernanke is mentioned 11 times.)
Herman Cain also says he would fire Bernanke. Rick Perry has suggested that Benanke’s actions border on “treason” and that Bernanke would be “treated pretty ugly” in Texas if he continues to “print money.” Ron Paul wants to do away with the Fed entirely. Mitt Romney has managed to skate by without a clear statement on “firing” Bernanke, saying he “wouldn’t keep Ben Bernanke in office,” and would “choose someone of my own,” which might mean he would make the change when Bernanke’s current term expires in 2014.
I have no strong opinion about Bernanke’s record or his competence, but I have wondered whether presidents are really authorized to fire the Fed chair, because I have so often heard it described as an “independent” agency, and the chairmanship (unlike, for example, cabinet members) serves for a fixed four-year term which does not coincide with the presidential term. Bernanke, a Princeton economist, was serving as chair of President George W. Bush’s Council of Economic Advisers in 2006 when Bush named him (and the Senate confirmed him unanimously) to chair the Fed. Obama nominated Bernanke for a second term in 2010, and he was confirmed but this time there were 30 no votes, the highest ever for a Fed chair nominee.
I turned for guidance to St. John’s/St. Ben’s economist Louis Johnston (who also writes an economic column for MinnPost). Johnston told me that no Fed chair has ever been fired by the president.
The Federal Reserve Act establishes both 14-year terms for members of the board and four-year terms for the chair and adds: “each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.”
It’s not clear what that “for cause” language might mean. It’s never been tested. It implies to me that the president is supposed to have some “cause” other than disagreement over monetary policy, although it’s not really clear, hasn’t been tested, and I almost can’t imagine a Fed chair fighting to stay in office if a president was trying to dump him. But bear in mind, the president doesn’t need to establish a “cause” to fire most of his appointees, and the language is probably intended to underscore that the Fed chair is different from, let’s say, a cabinet member.
Johnston said it sounds like the president can, at least technically, remove a fed chair under this language but he added:
“My guess is that firing the Fed chair would provoke big gyrations in the financial markets. Central bank independence has, for better or worse, become the norm throughout the world and an attempt by the president to fire the chair would certainly be perceived as a threat to the Fed’s independence.”
I have asked Team Gingrich for a response to the question of Gingrich shares the concern over Fed independence or the impact on the markets of a Fed chair firing, but I haven’t heard back yet. If I receive a reply, I’ll pass it along.