Whose Main Street?

If I had been born a decade earlier, I might have grown up to be a Kremlinologist (probably for the best that I wasn't!). Perhaps the most comparable job today is that of Fed-watcher (or maybe NY Mets front office-watcher).

Today, Washington Post FOMC-ologist Nell Irwin sees evidence of division in the marble temple:

In contrast to the consensus that characterized the Fed for most of the past 20 years, there are now divisions over some of the most fundamental challenges that Fed Chairman Ben S. Bernanke is facing: how to combat the financial crisis, the slumping economy and high inflation.

These divisions are rooted in the structure of the Fed -- which includes 12 regional banks with independent boards of directors, and a central board of governors in Washington chaired by Bernanke -- but have come to the fore only because of the twin problems of weak growth and inflation.

Presidents of the regional banks are appointed by bankers and businesspeople in their communities and, like them, tend to put a premium on keeping inflation in check. The Board of Governors, along with the New York regional bank, has been more attuned to the troubles roiling financial markets, such as those for complicated debt securities and the spillover into the wider economy.

"The presidents bring a wealth of knowledge acquired from their regional contacts," Bernanke said in a speech dedicating the new headquarters of the Kansas City Fed earlier this month.

"Thus, in making policy, we are able to view the economy not just from a Washington perspective or a Wall Street perspective but also from a Main Street perspective."

As Irwin explains, the regional Fed presidents tend to be more "hawkish" (i.e. inclined to favor higher interest rates). However, this doesn't mean that they represent "Main Street," or at least not all of it. The regional Feds are owned by the member banks, which elect most of the board members, and the board chooses the bank presidents. So, it would probably be more accurate to say that the regional Fed presidents represent the interests of Main Street banks, but I would think many that other "Main Street" businesses - a car dealership or real estate agency, for example - would prefer lower rates, even at the risk of higher inflation (I'm not sure about the establishments on Bob Seger's "Main Street"; their business might be counter-cyclical).