This is the Cato Daily Podcast for Monday, June 6, 2011. I'm Caleb Brown.

Peter Diamond has withdrawn his nomination to serve on the Board of Governors at the Federal Reserve,

but the politics of this episode at the Fed shows the agency is anything but independent.

Mark Calabria, Director of Financial Regulation Studies at the Cato Institute, comments.

Peter Diamond, who has taught at Massachusetts Institute Technology since about 1966, recently won the Nobel Prize in economics.

He has been appointed, actually three times have been appointed by President Obama to serve

on the Board of Governors of the Federal Reserve System.

Each time his nomination has essentially been

opposed by Republican senators.

He is at this point recognized that he's unlikely to get a confirmation from the Senate and has withdrawn

his nomination essentially given up in going back to Cambridge. A lot of this

this discussion about Peter Diamond's nomination has taken a variety of turns and touches on a variety of issues.

First of which is there are provisions in the Federal Reserve Act that actually stop him from being able to serve on the Federal Reserve Board.

For instance, the Federal Reserve Act requires each of the governors to be from

different Federal Reserve districts.

Peter Diamond, as he himself is admitted, is from Massachusetts, has lived there essentially all of his life, or most of it.

We already have a Fed governor, Dan Tarilla, who's from Massachusetts, so you cannot point another governor to serve when another

governor is already from that district. This has been brushed over, sometimes

ignored in the past, but this is probably the most egregious example.

The administration has actually said that because Peter Diamond once gave a lecture at

Northwestern that makes him from Chicago.

So it's become ever creative definitions of the definition.

...