Federal Reserve board nominee withdraws, blasts confirmation process

Peter Diamond, who Obama has nominated three times for the Federal Reserve board of governors, decided to withdraw amid strong Republican opposition to his nomination.

Diamond sharply criticized opponents of his nomination in a New York Times op-ed that argued Sen. Richard Shelby (R-Ala.) and others did not understand the link between unemployment and monetary policy. 

“We should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its congressional oversight,” wrote Diamond, who won the Nobel Prize in October for his work on the labor market. “We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms.”

For his part, Shelby, the ranking member on the Senate Banking Committee, responded to Diamond’s move by calling on the president to nominate someone who could gain support from both parties.

“It would be my hope that the president will not seek to pack the Fed with those who will use the institution to finance his profligate spending and agenda,” the Alabama senator said in a statement, according to news reports.

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Diamond’s nomination was approved by Senate Banking for a third time last month, on a party line 12-10 vote. The Massachusetts Institute of Technology professor was first nominated for the Fed board in the 111th Congress. 

Shelby has long been skeptical that Diamond has the requisite experience for the Fed board, and has derided what he called Diamond’s “big government" views.

But in his op-ed, Diamond argues that “understanding the labor market — and the process by which workers and jobs come together and separate — is critical to devising an effective monetary policy.”