The Best Man for the Fed Chair Could Be a Woman

Every market cycle has its genius.

Even a market cycle as wild and volatile as this one has been.

And the latest genius might be just what the U.S. Federal Reserve needs to restore order around here: She might even be able to bring credibility back to the global financial markets.

Elizabeth Duke goes by "Patsy." And while the nickname may be soft, the person behind the moniker isn’t soft. In fact, we believe that Patsy Duke - a career commercial banker - is the only Federal Reserve insider who understands how the global money markets actually work.

As such, she might just be the next central bank chairman.

We say that because, unlike current Fed Chairman Ben S. Bernanke and the rest of the Beltway Boys - all of them academic theoreticians, data experts, or policy wonks - Duke has real commercial banking experience.

A Real "Find" at the Federal Reserve

Over the last 32 years, Duke worked her way up from the teller’s window, where she started, to an executive vice president’s post at Wachovia Corp. (WB). Along the way, she also became the first woman to chair the American Bankers Association - no small feat, considering how much of an "Old Boy" industry banking has always been.

Duke actually understands the consequences - what will happen - when you hand out $37.5 billion in taxpayer-subsidized freebies a week like the Federal Reserve is doing right now. And as the only commercial banker on the Fed’s governing board, she’s literally the only one with a firm grasp on the key regulatory issues the central bank should be addressing.

We realize that whenever someone hears the word "regulatory," there’s an almost-unstoppable urge to yawn, followed by the desire to surf the Web for last night’s West Coast baseball scores.

But don’t be so quick to forget that the seeds of the current global financial crisis were sown by the almost-complete breakdown of mortgage-lending standards and banking-industry oversight - some of which can be laid right at the feet of the arrogant theoreticians who thought they knew better and who viewed the borrowing public (read that to mean consumers like you and me) as merely a bunch of numbers.

In the interest of realism, let me say right now that for Patsy Duke to be given the Federal Reserve’s scepter, she’s clearly got a long line of hurdles to clear. But we’re hoping that she does.

As Money Morning readers know very well, I believe that Team Bernanke fishtailed badly as it tried to get up to speed on the subprime mortgage mess, turning what could have been a very clean race into the Global Garbage Grand Prix. And the central bank’s weak-dollar policies have the potential to hurt the U.S. economy for years to come.

The Financial Backdrop Facing the Fed

From a global perspective, fears of an ever-worsening contagion finally seem to be subsiding even if a weak housing market, a badly outdated regulatory system, and increasingly illiquid funds and still more write downs suggest the risk of a sharp economic pullback or even a recession are still extant. But those are the very types of insidious financial nightmares we’re hoping Duke’s influence and experience will help prevent.

None of this eradicates the inflationary pressures we’re all feeling right now.

But the chances are very good that Duke is the first Federal Reserve governor who understands, on a personal level, just how hard it is to make ends meet when the economy slows down, inflation takes hold, and investors get pinched.

Of course, none of this really matters unless the markets turn around. But when it comes to the Fed, the distinction of having a single, real-world executive included in its ranks will help it restore confidence, and perhaps even fix the financial markets before they get any worse.

Comments

[user 2lakes:]

Real world experience! Wouldn't that be refreshing!

2008 Jul 11 01:34 PM

[Sumit Batra:]

Bernake , bush and greenspan all are pussy. They can't take tough decisions, but can take stupid decisions like invading iraq

2008 Jul 11 01:53 PM

[CaptBob:]

The last place I would look for a Fed Head would be "In House"!!
The first prerequisite would be working and living within a personal Budget based on that working income!!--no taxes or donations allowed!

Better yet Jack up the building like the radiator cap on a 58 Edsel and when everything falls out scrap it -(save the gold)--scrap the presses, and mint gold and silver Eagles. Of course they'd have to be smaller and thinner than dimes to reflect true value.

A few years of living on reality-(as our Forefathers wrote in the Constitution) might restore some fiscal clarity, if it was ever there in the genes to start with.

Challenge of the Day. can anyone point to a date and circumstances when the Fed performed in a manner that was a net benefit to the American citizenry?? **one caveat>>fiat money not allowed!!<<

2008 Jul 12 03:13 PM

[chagrinned1:]

Balderdash!!The current problem is primarily due to Geenspans inattention to the impact of 1% Fed funds Rate and the effect it was having on the mortgage markets. No Doc mtge loans were a way of life towards the end of this bubble and he did not act soon enough to fix that. The low interest rates doomed the value of the dollar,ergo oil price soared as producers sought higher rates. And the biggest flaw in the Federal Reserve is the mandate by Democratic led Congresses to have an absurd number of public forums with the Fed chair, so that they can get their faces on TV. They declared it "the end of secrecy at the Fed" and was a fool move on their part. Prior to that the Fed made moves without "consulting" congress and it worked! The truly low rates scalped savers, made our $ depreciate daily, BUT it allowed everybody to own a house(true socialism) even if that was not feasible economically. (gotta think of votes)
But to show you how sensitive I can be I will visit my Wachovia Branch Monday and seek out the lady I know has been there for many,many years and holds a supervisory posn for a recommendation to the Fed Board. That is AFTER I find out her reasons for the utter bombing of our banking system. Patsy may have a compeditor here. Chagrinned1

2008 Jul 12 04:27 PM