Richard Clarida

In fact, as I like to teach my students, we all know that World War II ended in 1945, but the Fed didn't get the memo until 1951 because the Truman administration pressured the Fed to keep a cap on rates.

The Fed declared independence in the accord.

I think now if there is a Treasury-Fed accord, it would not be so much focused on that.

It would be focused on, for example, should the Fed hold $2 trillion of mortgage-backed securities?

Should the composition of the Fed's portfolio really be tilted toward T-bills and less from holding 10- and 30-year Treasuries?

So I think there are a lot of conversations to have.

And even during my time on the Fed, there were discussions before the pandemic about rethinking the Fed's portfolio composition.

So I think that's an entirely...

But I think we're a long way away from any formal accord.

Well, first, we have to get the chair confirmed.

And that's not a foregone conclusion, right?

I think once he has a hearing, he will get confirmed because he's very well qualified.

But it may be a while before he has a hearing.

I think it's important to note that the PALFED in December, when they released those dots, those famous or infamous dots, the PALFED or at least a majority of the Fed in December thought at least one rate cut this year would be appropriate.

And I think eight folks thought maybe two rate cuts would be appropriate.

So I do think that when Warsh gets in, if the economic data play out the way that I and others expect, I think he'll be able to persuade the committee to continue to cut rates down to around 3%.

Tom, fantastic question because I do think that based upon what Kevin has said with his very voluminous paper trail over the last 15 years, I think that will be a discussion.

I think Kevin has expressed some skepticism for reliance on what he believes are flawed models, too much of a backward-looking approach.

What I would point out, at least during my four years,

is the PALFED and certainly the declarative vice chair was not handcuffed to the models, even though I developed many of them.