Elizabeth Warren subjected Fed chairman Janet Yellen to one of her fiercest interrogations ever in Congressional hearings yesterday. The Massachusetts senator has taken note of how the Board of Governors’ general counsel and Greenspan-era holdover Scott Alvarez exerts outsized influence at the Fed, to the detriment of regulatory reform. As Matt Stoller wrote in an in-depth post on Alvarez last October:
Alvarez is a regulatory specialist who controls the bulk of the legal expertise in the Fed, whereas Yellen is a macroeconomist who doesn’t know regulations that well. Alvarez’s institutional opponent is Fed Governor Dan Tarullo, and Tarullo as a single Governor doesn’t have the resources to fight the entire Fed legal staff. So Alvarez is likely to continue to win. In other words, what Yellen really needs to do to put her stamp on the Fed is to fire Alvarez and replace him with someone who actually sees the legal mandate of the Fed in the context of the institution’s recent failures. Alvarez is simply too wedded to Greenspan’s legacy to do so; he is incapable of recognizing the needs of today’s Fed.
As we noted then:
http://www.nakedcapitalism.com/2015/02/yellen-defies-congress-defends-greenspanian-general-counsel-scott-alvarez-elizabeth-warren-grilling.htmlYellen has said she wants to make financial stability as important a priority of the Fed as monetary policy. That means, among other things, being willing to regulate banks. Scott Alvarez is too deeply invested in an out-of-date world view to carry that vision forward. If Yellen intends to live up to her word, Alvarez has to go.
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