tag:blogger.com,1999:blog-2499715909956774229.post7951983525042493865..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Fed SalariesStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-2499715909956774229.post-39437169380335994952012-01-25T02:27:29.598-08:002012-01-25T02:27:29.598-08:00"What does that have to do with the performan..."What does that have to do with the performance of people working at the Fed"<br /><br />Integrity is an important part of performance.<br /><br />And for you to suggest it was one guy is disingenuous, given we know that the Board leaked material, non-public information to its buddies (just as the previous Treasury secretary did).<br /><br />Regarding firing top officials - does anyone think Arthur Burns did a good job? And if not, was he sanctioned? I think the answers are "no" to both questions. Put differently, the Fed monumentally screwed it up, but there were no adverse consequences for the decision makers. Just for the economy and the public.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-37966560600432687242012-01-20T09:50:59.534-08:002012-01-20T09:50:59.534-08:00You have to ask why Ben Bernanke would rather run ...You have to ask why Ben Bernanke would rather run the Fed than work at Princeton, or why Charles Plosser would rather be a Fed President than a business school Dean, or work on Wall Street. It certainly can't be the current salary that these people find attractive, as they are all taking salary cuts relative to the best alternative. You might think that bigger salaries await them after they leave these jobs than they would otherwise get. However, some people will serve very long terms as Fed Presidents and then retire - Gary Stern at Minneapolis for example. There's something about having power that motivates people, I think.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-84478490214926065482012-01-20T09:43:55.505-08:002012-01-20T09:43:55.505-08:00Very interesting article. I would highlight this p...Very interesting article. I would highlight this phrase:<br />"These disparities show that compensation, like people, is a complicated issue. People are willing to forgo earnings for prestige and other benefits like job security."<br /><br />It comes very handy providing I am actually writing a paper on the link between mean earnings and earnings volatility across sectors of the US economy. For instance, Finance sector is much more volatile than the Government and, according to our preliminary results; the premium for a risk averse worker for bearing that risk could be as high as 36% on average. (http://myweb.uiowa.edu/gcubas/files/CubasSilos-slides-Dec2011_BB.pdf)Germanhttp://myweb.uiowa.edu/gcubasnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-57072920735239941122012-01-20T09:27:12.547-08:002012-01-20T09:27:12.547-08:001. The latter one was misbehavior of a guy on the ...1. The latter one was misbehavior of a guy on the Board of Directors of the New York Fed. What does that have to do with the performance of people working at the Fed and what they get paid?<br /><br />2. For the top Fed officials, there would be a problem if it were too easy to fire them on the spot - Bernanke for example. Independence of the Fed from Congress is important. However, in New Zealand, the Governor of the Reserve Bank can be dismissed for failing to meet his or her inflation target. That's not a crazy thing. When I mentioned that "officials" can be fired, I was thinking about lesser ones than the Governors or the Regional Fed Presidents. It's possible for a regional Fed President to fire a Vice President, for example.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-74864227045899708272012-01-20T09:04:28.983-08:002012-01-20T09:04:28.983-08:00"quite a few of the Governors and Presidents ..."quite a few of the Governors and Presidents know all about private sector incentives that you describe"<br /><br />You mean like this? http://online.wsj.com/article/SB10001424052970204554204577025922155198762.html<br /><br />Or like this?<br />http://seekingalpha.com/article/170281-when-is-insider-trading-legal-the-strange-case-of-stephen-friedman<br /><br />Yes, indeed they do know about private sector incentives.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-81407316952937681792012-01-19T20:10:43.162-08:002012-01-19T20:10:43.162-08:00"Out of curiosity, have any Board or FOMC mem..."Out of curiosity, have any Board or FOMC members ever been fired?"<br /><br />Governors serve for 14 year terms. I believe that Congress can remove them from office for malfeasance. Reserve Bank Presidents serve, at most, two 5-year terms at the pleasure of their Boards of Directors. <br /><br />http://www.federalreserve.gov/aboutthefed/bios/board/default.htm<br /><br />http://www.federalreserve.gov/aboutthefed/bios/banks/default.htm<br /><br />"...how does the Fed evaluate performance at those levels (Board member or regional FRB president)?"<br /><br />Actually, the difficulty is not in getting rid of Board members or Presidents, it is keeping them. <br /><br />The Governors, in particular, make the same salaries as Congress but don't have the same sort of prestige. Because the Governors have almost all had successful political or academic or business/banking careers, they can make much more on the outside. They often serve for a few years and then move on. It is a boring job. <br /><br />Thus, very few Governors actually serve their full, 14-year terms. <br /><br />Incidentally, quite a few of the Governors and Presidents know all about private sector incentives that you describe. Governor Warsh, for example, was a Vice President and Executive Director in Morgan Stanley's Mergers and Acquisitions Department.Chris the regression runnerhttp://outsidethemartinbuilding.comnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-68828788251010527312012-01-19T15:43:14.961-08:002012-01-19T15:43:14.961-08:00(previous Anonymous)
Thanks, I was not aware of ...(previous Anonymous) <br /><br />Thanks, I was not aware of that.<br /><br />Out of curiosity, have any Board or FOMC members ever been fired? And how does the Fed evaluate performance at those levels (Board member or regional FRB president)?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-25609125847859717902012-01-19T09:54:10.539-08:002012-01-19T09:54:10.539-08:00"Fed officials get paid no matter how badly t..."Fed officials get paid no matter how badly they screw up."<br /><br />Actually, I know that's not true. Fed officials can be fired, and compensation depends on performance.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-52005724995125818432012-01-19T09:18:28.637-08:002012-01-19T09:18:28.637-08:00"Fed salaries...are certainly low relative to..."Fed salaries...are certainly low relative to hedge fund salaries"<br /><br />No, they're not. You are mistaking total comp - determined largely by performance-based bonus - and base salary.<br /><br />Fed officials get paid no matter how badly they screw up. That is not true of those at buyside firms in the private sector.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-88837368069525931112012-01-18T12:06:38.816-08:002012-01-18T12:06:38.816-08:00I'm just a nice guy.I'm just a nice guy.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-26300710416717953912012-01-18T11:51:59.779-08:002012-01-18T11:51:59.779-08:00Begs the question, why do you do it?Begs the question, why do you do it?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-58025784711237016082012-01-18T10:52:00.270-08:002012-01-18T10:52:00.270-08:00That could be part of the story too. What I get fo...That could be part of the story too. What I get for giving advice to the Fed is much less than what an economist would typically get for giving advice to a hedge fund.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-47599486113594719562012-01-18T10:25:24.469-08:002012-01-18T10:25:24.469-08:00Don't you get paid by the fed too?Don't you get paid by the fed too?Anonymousnoreply@blogger.com