Interest in the Fed Chair’s succession is now on par with that of the Chief Justice of the U.S. Supreme Court. A public and Congress, capable of consideration of constitutional questions with regard to the Supreme Court, should be capable of considering substantive questions regarding the governance of the independent Federal Reserve. Yet commentary in the media has focused on personality, style, and gender and has been sorely lacking in substantive content.
Senate confirmation of the Chief Justice turns on the Supreme Court’s jurisdiction, and on how much deference the Supreme Court should grant to political institutions. One should view the confirmation process for Fed Chair, in a like manner, as an opportunity to consider the appropriate boundaries for the Federal Reserve’s independent operational policies. The Fed Chair has the decisive say in whether the Fed will utilize broad operational means or narrow operational means to achieve its objectives. The Chair’s judgment establishes operational boundaries between the Fed and the markets on one hand, and between the Fed and the fiscal authorities (Congress and the Treasury) on the other. The Chair’s succession matters hugely for how the Fed will act in the future.