A lousy start for the new Fed chairman

The Federal Reserve’s 2025 budget shows the full-time equivalent of Fed employees to be more than 3,000 people in DC and over 21,000 throughout the country, the vast majority being professional staff, including economists, analysts, examiners, lawyers, IT specialists, and supervisory staff. I think these are relevant statistics given Kevin Warsh’s recent announcement to create five new task forces drawing on external expertise.

Here are the various task forces and those appointed to lead them:

1. Communications Task Force

Co‑leaders:

• Peter R. Fisher — University of Washington; former Treasury Under Secretary
• Arminio Fraga — Former President, Central Bank of Brazil; founder of Gávea Investimentos
• Mervyn King — Former Governor, Bank of England

2. Balance Sheet Policy Task Force

Co‑leaders:

• Karen Dynan — Harvard University; former Chief Economist, U.S. Treasury
• Raghuram Rajan — University of Chicago Booth; former Governor, Reserve Bank of India
• Jeremy Stein — Harvard University; former Federal Reserve Governor

3. Data Task Force

Co‑leaders:

• Raj Chetty — Harvard University
• Kevin Murphy — University of Chicago
• Doug McMillon — Former President & CEO, Walmart Inc.

4. Productivity & Jobs (AI) Task Force

Co‑leaders:

• Marc Andreessen — Andreessen Horowitz; tech investor
• Charles I. Jones — Stanford University (on leave at Anthropic)
• Asha Sharma — Executive VP and Xbox CEO at Microsoft

5. Inflation Frameworks Task Force

Co‑leaders:

• Greg Mankiw — Harvard University; former Chair, Council of Economic Advisers
• Thomas Sargent — NYU; Nobel laureate
• William White — C.D. Howe Institute; former BIS economic adviser

Although the resumes of these appointed advisors are sterling, I take exception to the initiative.

Full disclosure: my first job as a professional economist was at the Board of Governors in Washington, where my concentration was the housing sector. It was an honor to get that job offer. I found myself in great company. My colleagues and I provided intelligence to senior staff and the Board members about the goings-on in the respective sectors that we covered. Our regularly scheduled briefings to the Board aided the governors’ assessments of the state of the economy and the formulation of monetary policy.

While it’s been decades since I was at the Board, I have no doubt that the quality of the staff has, if anything, only improved; and given that, it seems entirely unnecessary to me that among Warsh’s first acts is to go outside the talent already at his disposal even before having had the opportunity to assess their competency. Setting up these task forces is an affront to the Federal Reserve System’s staff. It seems more like a vanity exercise on the part of Warsh than anything that is truly necessary. Perhaps more critically, establishing these task forces seems to me to be a back-door way for Warsh to diminish the authority of this independent body and change its character to give himself greater authority by hand-picking these panels — panels that are likely to exhibit at least some degree of deference to him.

Although Warsh’s stated goal in setting up these task forces was “to ensure the Fed is best positioned to achieve our objectives in this consequential time,” it’s unclear to me that these additional task forces will bring the institution any closer to achieving those goals than would be the case in their absence.

Given the sterling quality of the appointed task force leaders, how could these task forces hurt? My fear is that they could be severely detrimental to the morale of the employees of the Federal Reserve System. Warsh is disrespecting his most valuable asset: the staff of the Federal Reserve System. It’s a lousy way to start his tenure as Chairman.