Why does the Fed chair need to be American?

By Felix Salmon
November 26, 2012

Today’s rapturously-received news that Mark Carney, a Canadian, will be the next governor of the Bank of England reminded me of this tweet from Charles Kenny:

As far as I can tell, absolutely everybody thinks that Carney is the best possible person for the Bank of England job, and that it’s an absolute triumph for UK chancellor George Osborne that he managed to persuade Carney to change his mind and accept it.

Much the same can be said of Stanley Fischer, who’s done a fantastic job running the Bank of Israel. Indeed, in general, high-profile public-sector jobs tend to be done better when they’re done by foreign nationals. The logic is simple: if you’re choosing from a global pool of candidates rather than simply a national pool of candidates, you’ll end up with a better person at the end.

Which raises the obvious question: why is such a move still unthinkable in the US? There are lots of big jobs coming up here: Treasury secretary, SEC chairman, Fed chairman — and all of them are going to go, automatically, to US nationals. Think about it this way: Mark Carney is the best central banker in the world, and he would be an amazing replacement for Ben Bernanke. What’s more, given the choice, he would surely plump for the Fed over the Bank of England. So it’s reasonable to assume that if the US wanted him, they could have had him.

In England, everybody has cheered the choice of Carney as inspired — but if the same announcement had happened in the US, there would be an immediate chorus of boos. Apparently US exceptionalism is so deeply ingrained in the national psyche that not only must everybody always believe that the US is the greatest nation on the planet, it is also necessary to believe that all the greatest people on the planet were born here too. (Except Jesus, maybe.)

It’s obvious that the leadership of the world’s most important international financial institutions — the World Bank and the IMF — should go to the best-qualified candidate, rather than whomever happens to have been chosen for the job by the US and Europe respectively. But the fact is that the same is true for the world’s most important national financial institutions as well. If England can have a Canadian central bank chief, why can’t the US pick a Brazilian? Arminio Fraga for the Fed! It would be inspired.

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This section of the Federal Reserve Act seems to me to be pretty clear that a nominee has to at least be a US resident: “In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.”

Also, would the UK have the same rapturous reception if Carney were, say, a Frenchman, and not from a Commonwealth country still subject to the Queen, which has had a particularly close relationship and two-way movement of high-level individuals even for a Commonwealth country?

Posted by Hippopotamax | Report as abusive

Axel Weber for Fed Chair : – )

Posted by genauer | Report as abusive

Don’t be daft; of course Jesus is American.

Anyway, I do think there’s some level on which a decent chunk of Americans don’t think of Fed chairman as a technocrat, which (probably?) is what he is or should be. Although I guess a decent chunk of Americans don’t seem to think much lately of allowing Americans to hire non-Americans for much of anything else, for that matter, whether a job that is essentially political or one that is essentially technical.

Anyway, I understand that Carney is at least expected to seek some sort of British “national” status. So if what’s-her-name at Pepsico gets one of these jobs, perhaps that’s not entirely different.

Posted by dWj | Report as abusive

Beyond the obvious legal requirements the answer to why the Fed Chairman has to be American is easy: The U.S. is no longer a meritocracy, it’s an AffirmativeActionocracy.

Until there are at least several U.S. ethnics and/or females who serve in this position (whether qualified or not…), and anyone but a white male all get a chance to sit in the Chair it’ll be impossible for a non-U.S. citizen no matter how uberqualifed to even have a shot.

Posted by Twinkbait | Report as abusive

FS must have gotten an early start the ‘Christmas cheer’ this year. I mean, for Christ’s sake – any clown with Harvard-econ and 13-years at GS to answer for, well … that résumé should have gone straight to the shredder.

Posted by MrRFox | Report as abusive

“As far as I can tell, absolutely everybody thinks that Carney is the best possible person for the Bank of England job”

I think that needs to be taken with a pinch of salt; this is the same “absolutely everybody” that thought Paul Tucker was the best possible person until about 1439 GMT yesterday. Nobody wants to start their relationship with a new Governor in a hostile manner; if Coco the Clown had been selected, you would still have got an FT editorial about his statesmanlike qualities, and it would have been roughly as fulsome and embarrassing as the one they actually wrote.

Posted by dsquared | Report as abusive

The movement of a resident from a commonwealth country back to England is not exactly a good example of “head-hunting for foreigners”.

Posted by SchWI | Report as abusive

The GOP would scream holy hell and accuse Obama of selling out the nation and turning over our central bank to a shyster.

Posted by Chris08 | Report as abusive

“Anyway, I understand that Carney is at least expected to seek some sort of British “national” status.”

He’s a Commonwealth citizen who already owes allegiance to the Queen, so he’s good to go. He could serve as a Royal Navy officer, Member of Parliament, even Prime Minister (PM Andrew Bonor Law was Canadian)– unless of course he’s Catholic.

The US Government generally requires US citizenship for most appointments. The President has authority to waive all sort of requirements, but since the Senate has to confirm Fed Chairmen and governors anyway, I’m dubious any President would try. On the bright side, the US Govt is remarkably tolerant of Catholics.

Posted by beowu1f | Report as abusive

Forgive me for still not being over having lost the election but permit me to repeat one of the few thoughts Mitt managed to communicate to the electorate.

“There are superior cultures in the world and ours is one.”

Even my friends at Fox News now understand the demographic trends at this point. We know the Latino citizens want their friends and family in and if we don’t welcome them with open arms we’ll never again win a national vote. Fine.

We do need to remember though that as politically incorrect as it might be to say out loud… there is a REASON several billion people would like to move to The US, Northern Europe, Canada and Australia.

Charles Kennedy is nothing less than childish as it pretends that the Earth can support 7 billion western lifestyles instead of 1.

Posted by y2kurtus | Report as abusive