Bill Dudley was chief economist for Goldman Sachs for the years 1997-2007. When his position as chief economist was winding down, other people within Goldman Sachs were creating mortgage bonds that were designed to fail. This would indicate that Dudley was either in on these scams or, in spite of being Goldman’s chief economist, one of the last people at Goldman to realize how bad the housing market was. However, given all the other dirty dealing on Wall Street during the housing bubble era and all the ignorance exhibited by PhD economists since time began, the relative amounts of huckster and ignoramus that comprise Bill Dudley isn’t critically important. In 2009 Dudley was selected to be president of the NY Fed, and this is where the story starts to get really interesting.
The Federal Reserve Bank of New York is, far and away, the most important of the twelve Federal Reserve banks in the Federal Reserve System. The NY Fed is responsible for monitoring and regulating what passes for “business” on Wall Street. The failure of Tim Geithner’s (#24) NY Fed to meet this responsibility played a major role in the financial crisis. Because the NY Fed has such a key role in controlling the actions on Wall Street, it would make sense that the selection of the NY Fed president would be independent or somewhat removed from the influence of the Wall Street banks. While this would make sense, it is not what occurs. The selection committee that selected Goldman Sachs’ Bill Dudley to be NY Fed President was chaired by – get this – Steve Friedman (#22) the former CEO of Goldman Sachs! What a joke! Does the Fed really expect people to believe this process is somehow above board?
The institutional cronyism between the Federal Reserve and the largest Wall Street banks that Dudley is an obvious product of is not even Dudley’s largest contribution to the financial crisis. Instead – and exactly like Charles Evans (#20) – Dudley’s largest role in bringing about the crisis is simple economic ignorance. It is this ignorance that perpetuates and provides the completely half-baked intellectual imprimatur for all the Federal Reserve’s monetary madness.
After the financial crisis and the Federal Reserve’s policy of quantitative easing was correctly criticized for bailing out the people who caused the financial crisis, the Fed came up with the idea of what was essentially a goodwill tour. The idea was to have Fed officials explain what they were doing and why they were doing it. One of the first stops on this tour was a grocery store in Queens, NY. Bill Dudley was there to explain all the great things the Fed was doing. When shoppers angrily questioned Dudley about why they had to pay so much more money for food and gasoline Dudley answered, “Today you can buy an I-Pad 2 that is twice as powerful as an I-Pad 1. You have to look at all prices.” To which one shopper, who has more economic knowledge than the former chief economist at Goldman Sachs, challenged Dudley and his economic ignorance with the retort, “I can’t eat an I-Pad!”
Needless to say, after confrontations such as this, the rest of the goodwill tour was cancelled. Because of all the fallacies that animate its actions, the Fed is institutionally incapable of providing answers that make sense to either the average person struggling to make economic ends meet, or to anyone who looks back with regret at what became of the country’s industrial heartland. Rather than confronting the millions of working class people damaged by their policies and potentially obtaining a different –and better - vantage point from which to view the problems they created, the Fed cowardly retreated to its Wall Street and K-Street cocoons. Nowadays, if the Fed should need to get a particular viewpoint out, they won’t send Bill Dudley to the grocery store. Instead, they will simply rely on one of their lackeys or stooges in the media.
See Lloyd Blankfein (#4) for details on mortgage bonds that Goldman created to fail. See Steve Friedman (#22) for another example of the well-traveled path between the Goldman Sachs executive lounge and the Fed. See Tim Geithner (#24) for more details on the critical role the NY Fed is supposed to play in the nation’s financial regulatory structure – but didn’t play when Geithner was president of the NY Fed. See Steve Liesman (#33) and Martin Wolf (#50) for the Fed and central bank propaganda masquerading as independent journalism.