The Reagan legacy at the Fed
RONALD REAGAN's nominations to the Supreme Court of the United States have been closely watched because people realize that the justices he names will continue to shape the course of American jurisprudence long after he himself leaves the White House. The President will leave a similar legacy at the Federal Reserve. If John LaWare, whom he named Monday to the Fed's Board of Governors, is confirmed by the Senate, the board will consist wholly of Reagan appointees. The term for which Mr. LaWare would be appointed, to replace the ailing Henry Wallich, who left in December 1986, runs until the year 2002.
And where is the Fed today? More pragmatic and less ideological than in years past. The Fed, under chairman Alan Greenspan, has apparently moved toward a consensus base of operation, in contrast with the more autocratic style of Paul Volcker. Instead of focusing so narrowly on money supply, the board now tends to look at a range of economic indicators, with individual governors having specific interests.
The board as a whole has been concerned about low unemployment - read ``upward pressure on wages'' - and other indications of an overheating economy. With the more overtly political actors in Washington moving into election season, responsibility for managing the economy has been pretty much left to the Fed. Not that its actions have not been well received. The recent preemptive strike against incipient inflation, in the form of interest rate increases, has generally been seen as appropriate.
How would LaWare fit into this board? Fairly well, we should think; he is not identified with any particular school of thought and has said he is comfortable with the Fed's current policies.
He is a banker himself, from Boston, in a part of the country where the banking and thrift industries have being doing well, and specifically, where moves toward deregulation and interstate banking have been made sensibly and cautiously. Restructuring of banks and thrifts is a national issue right now, one not limited just to Texas or the Southwest. LaWare can be expected to bring useful expertise to the discussion.
The biggest question is, why has it taken so long to fill the Wallich vacancy? The staff director of the Senate Banking Committee has been quoted as expressing doubts that LaWare can be confirmed. Paper work from the White House will take some time, and with Inauguration Day less than eight months away, we are moving into a period where the Democratically controlled Senate may prefer to let the next president make the next appointment.