Filibuster Reform May Make the Fed More Dovish

When Senate Democrats detonated the so-called nuclear option last Thursday limiting the use of the filibuster, the catalyst was the nominations of three judges to the D.C. Circuit Court of Appeals that Republicans were blocking and showed no signs of letting up on. But now that the filibuster rules have been reformed and a nominee can advance with a simple Senate majority, rather than the 60 votes required to break a filibuster, the implications are much broader than just the fates of judicial nominees.

For one thing, it will be a lot easier for the Obama administration to fill Federal Reserve posts, which would seem to herald a more dovish institution, given the views of the chairman-in-waiting, Janet Yellen, and the understanding in the White House that economic stimulus and help for the unemployed aren’t going to be forthcoming from Congress. Three seats on the Fed’s seven-member governing committee will need to be filled—and the fact that nominees will have a significantly lower hurdle to clear will likely encourage the White House to put forward more dovish candidates than it might have otherwise.

How much of a difference could this make? Obama’s first-term difficulties trying to stimulate the economy, and the regrets of one of his former top economic advisers, suggest it could make plenty of difference. Last year, in this Bloomberg Businessweek story on White House efforts to improve the recovery, Obama’s first chairman of the Council of Economic Advisers, Christina Romer, revealed that one of her main regrets was not pushing harder to fill two vacancies on the Fed’s board of governors, which presumably would have tilted the board in a more dovish direction and empowered Fed Chairman Ben Bernanke to act more aggressively. “For two years I had a Post-it note on my computer: ‘Hound Tim [Geithner] about Fed governors,’” Romer told me.

As one prominent economist marveled to me at the time, Obama could have filled those seats with crash-test dummies and been better off than have them sit vacant with no one balancing out the board’s hawks. Presumably, the difficulty of confirming nominees after Democrats lost their 60th Senate vote (when Republican Scott Brown was elected from Massachusetts in early 2010) was a major factor behind this inexcusable delay. Obama was already unlikely to repeat this mistake—but filling the Fed board with governors more inclined toward activism will be even easier now that the path to confirmation has been smoothed.

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