QE2 Supporter Peter Diamond Withdraws Bid for Federal Reserve Governor
Jun 8, 2011 at 10:13 AM
In a small victory for anti-Fed activists, MIT Professor and Nobel Prize recipient Peter Diamond withdrew his nomination for the Federal Reserve Board of Governors, citing vigorous opposition by Republicans on the Senate Banking Committee, led by Ranking Member Richard Shelby of Alabama. In a New York Times article, Mr. Diamond calls his rejection to a "fundamental misunderstanding" in the body's ability "to recognize that analysis of unemployment is crucial to conducting monetary policy." In other words, it is the duty of the Federal Reserve to use the dollar as a tool against unemployment, better known as quantitative easing.
Sure, many Federal Reserve supporters are quick to call this denial an example of a polarized government and a refusal of a good candidate who would continue the practice of quantitative easing, which Mr. Diamond supported. This is important because of the speculation of a third round of quantitative easing, a program of buying large quantities of treasury bonds. The previous program, QE2, promised relief to the unemployed and a spur in job growth. To accomplish this, the Fed bought $600 billion in Treasury bonds, but the results were small and insignificant. Unemployment continues to go up, and the dollar continues to weaken.