The Federal Reserve has spent much of the last five years since the financial crisis fighting attempts to turn the independent central bank into a political football. So it raised some eyebrows when one of its top officials held court over the weekend at the annual conference-cum-pep rally for the Conservative Political Action Committee.
Dallas Fed President Richard Fisher spoke about breaking up the country’s biggest banks, which he said have license to take excessive risks because investors believe the government will bail them out. This is not the first time Fisher has made this argument. But it is the first time he has made it at CPAC. And that raises the question of where the boundary between open communications and overt politicking lies.
The Fed’s guidelines seem clear on this issue but still leave plenty of room for officials’ discretion:
“To protect the independence of the FOMC’s decision-making process from short-term political pressures, participants will strive to avoid any appearance of political partisanship and will be prudent in selecting venues for their speaking engagements.”
In the aftermath of the financial crisis, the Fed has stepped up its efforts to connect with the public and explain its policy decisions. That has led to some unorthodox appearances, such as when Fed Chairman Ben Bernanke gave a lecture to undergraduates at George Washington University. It also means there’s a higher chance for a conflict of interest.
Earlier this year, Fed governor Janet Yellen addressed an economic conference sponsored in part by the AFL-CIO. Though it was not a political event, per se, it featured liberal economists such as James Galbraith and Dean Baker. Yellen spoke about the social and economic costs of high unemployment as justification for the central bank’s massive stimulus efforts -- actions that conservatives have criticized.
The CPAC conference, however, is primarily viewed as a stage for the Republican Party’s biggest stars. Headliners included Florida Sen. Marco Rubio and House Budget Committee Chairman Rep. Paul Ryan. Fisher’s speech came shortly before an appearance by former vice presidential candidate Sarah Palin.
To be sure, Fisher put in the requisite disclaimers: Ending Too Big To Fail “is a cause that should be embraced by conservatives, liberals and moderates alike,” he said. Fisher has run for public office as a Democrat, though he invoked former President Reagan in his weekend speech.
The one thing that is clear is that Fisher is not finished campaigning to break up the big banks. He plans to issue a report on Tuesday and promises to respond to “questions and criticisms … including those raised by proponents for the megabanks.”