Wed, Oct 13, 2010 - Page 7 News List

Nobel Prize may not help Fed nominee

HOLDOUT:The senator who blocked Peter Diamond’s nomination said that Sweden’s Academy of Sciences doesn’t determine who is fit to serve on the Federal Reserve board


You’d think that having a Nobel Prize under your belt would be a clincher for getting a promotion or a job change, but it might not help economist Peter Diamond win a coveted seat on the US Federal Reserve.

Diamond, a professor at the Massachusetts Institute of Technology, won a Nobel Prize in economics with two other economists, American Dale Mortensen and British Cypriot Christopher Pissarides, on Monday.

However, Senate Republicans have so far blocked his nomination because they suggested he lacked the experience to serve on the Fed’s board of governors.

Given the partisan rancor that permeates US politics these days, the news from Stockholm won’t necessarily lead to a confirmation nod for Diamond.

“While the Nobel Prize for economics is a significant recognition, the Royal Swedish Academy of Sciences does not determine who is qualified to serve on the Board of Governors,” said Senator Richard Shelby, the senior Republican on the Senate Banking Committee.

Diamond and the two other economists won the prize for their insights into unemployment and the impact of government policies on helping people find jobs or cushioning their periods of joblessness.

Republicans have railed against the administration’s spending, suggesting the tens of billions of dollars in bank and auto bailouts and stimulus programs have done little to produce jobs. Many have fought extensions of unemployment benefit programs pushed by US President Barack Obama and the Democratic-controlled Congress, saying that the extensions have reduced incentives for finding work.

Some of Diamond’s research findings may run afoul of Republican campaign dogma.

Diamond, 70, widely considered a world expert on labor analysis, once taught Fed Chairman Ben Bernanke. He was one of three individuals Obama nominated in April to fill vacancies on the seven-member board. The others, Janet Yellen and Sarah Bloom Raskin, were unanimously confirmed last month before the Senate left town for break ahead of next month’s mid-term elections. Yellen was president of the Federal Reserve Bank of San Francisco and Raskin was Maryland’s commissioner of financial regulation.

Diamond’s nomination was returned to the White House.

At the time Shelby said: “I do not believe he’s ready to be a member of the Federal Reserve Board. I do not believe that the current environment of uncertainty would benefit from monetary policy decisions made by board members who are learning on the job.”

Obama re-nominated Diamond anyway.

Senate Banking Committee Chairman Chris Dodd plans a hearing on Diamond’s new nomination when the Senate reconvenes after the elections next month.

Obama said on Monday that he had selected Diamond “to help bring his extraordinary expertise to our economic recovery. I hope he will be confirmed by the Senate as quickly as possible.”

Peter Morici, an outspoken University of Maryland business economist who was a trade official in former US president George H.W. Bush’s administration, said he thought the Nobel would help Diamond’s prospects.

“It’s going to be more difficult for Shelby now” to hold Republicans in line in opposition, Morici said.

He said Diamond and the two others who shared the prize “did interesting work. This cannot be overlooked.”

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