Fed Governor nominee Marvin Goodfriend - the negative-rate-loving, QE-hating, Carnegie Mellon professor and former Richmond Fed economist - is testifying at his Senate Banking Committee confirmation hearing this morning.
“I intend to draw on my academic and professional experience to promote policies that would further increase transparency and accountability at the Federal Reserve,” Goodfriend said in prepared testimony for his hearing that was released on Monday by the Senate Banking Committee.
“Marvin is going to be a counterweight to the more conventional thinking coming out of the Federal Reserve establishment,” said Vincent Reinhart, chief economist at Standish Mellon Asset Management and a longtime colleague from years when Reinhart worked as an economist at the Fed board and Goodfriend at the Federal Reserve Bank of Richmond.
“He is coming from a different perspective. It will not exactly be seamless.”
And it did not take long for his "different perspective" to peek out...
Goodfriend, peppered by questions from Senate Banking Committee Democrats about his earlier warnings that low interest rates risked a breakout of inflation, said that:
...he now feels the Fed “is more or less on the right path going forward....We should get to 2 percent (inflation) in a year or so.”
Amid the collapse in the dollar, SMRA notes that Goodfriend agreed "absolutely" that a stable currency is important and helps in maximizing employment. He noted that while the global economy "has become much more integrated over the past 10, 20 years", the US has a flexible exchange rate that allows it to act independently on monetary policy and price stability.
However, after that initially supportive comment, Goodfriend seemed to go a little off-narrative:
He agreed that the Fed should be "aiming to get back to all Treasurys" in its holdings. He said the of first two asset purchase programs, "I think it was okay to do that to save the system", but that the third round "was not called for" as a routine tool for stabilization.
Seemingly agreeing with President Trump and not The Fed, Goodfriend said that
"low growth is more corrosive than low inflation..."
And perhaps most notably, Goodfriend warned:
"can't be certain that there are no asset bubbles forming...
worrying about financial stability is an equally complementary part of the Fed’s mandate..."
Perhaps hinting at the Plunge Protection Team?
Additionally, as SMRA notes, Goodfriend said steps should be taken to increase transparency and accountability of the Fed, and specifically in transparency on regulation and supervision. He agreed on the need and value for cost/benefit analysis of regulation.
He affirmed that he "completely believes in Fed independence."
Finally, as a reminder, Goodfriend is relatively infamous for his belief in a 'tax on cash'...as WSJ notes, normally, banks pay interest to their customers on their deposits. With negative interest rates, the customers pay the banks to hold their deposits.
When central banks impose negative rates, they hope private-sector banks will lend more and their customers will spend more rather than pay the interest charges. But the customers—consumers, businesses and other account holders—could opt to hold their savings in cash rather than in banks to avoid the charges.
To counter that, Mr. Goodfriend has suggested the Fed could either abolish paper currency outright or charge people for taking cash out of banks.
He has proposed several mechanisms to implement the idea, including inserting a magnetic strip on bank notes to track when they enter into circulation.
So far there has been no comment on Goodfriend's war on cash.