Citigroup, And Former Fed, Economist To Take Top Treasury Post

Citigroup, And Former Fed, Economist To Take Top Treasury Post

Confirming the floating rumor from last week that yet another Wall Streeter from a bailed out bank is going to set US economic policy, moments ago the Treasury announced that indeed the Citigroup economist Nathan Sheets – the bank’s global head of international economics – will start working next week as a counsellor to U.S. Treasury Secretary Jack Lew.

This is the same Sheets, who ten days ago wrote that “our empirical work presents evidence that over the next few years, 10-year U.S. Treasury yields are likely to move toward 5 percent (slightly above our projections for nominal GDP growth) and to stabilize near that level. Our work suggests that Japanese rates may be on a sharply rising trajectory as well, if policymakers there get traction in taming the deflationary demons that have plagued the economy.”

We already know why the Treasury likes him so much. Actually there is another reason why the Treasury likes him so much:

Nathan Sheets joined Citigroup as Global Head of International Economics in September 2011. In that role, he helps lead the firm’s team of economists around the  world. His own research focuses on global themes, with a particular emphasis on the position of the United States in the world economy.

Previously, Mr. Sheets worked at the Federal Reserve Board for 18 years in a variety of positions. From September 2007 to August 2011, he served as Director of the Board’s Division of International Finance and one of three Economists to the Federal Open Market Committee. He advised the Committee on macroeconomic and financial developments in foreign economies, as well as on the outlook for U.S. trade, the dollar, and global commodity prices. He also played a key role in developing the Fed’s swap line program with other central banks. From 2006-07, while on leave from the Board, he served as a Senior Advisor to the U.S. Executive Director at the International Monetary Fund.

Mr. Sheets received his B.A. from Brigham Young University in 1989 and his Ph.D. in economics from the Massachusetts Institute of Technology in 1993. He has published research in an array of academic journals. Mr. Sheets is a member of the Council on Foreign Relations.

Ah yes: the Fed… and MIT of course. Recall “How A Handful Of Unsupervised MIT Economists Run The World

Some more from Reuters:

Reuters reported on Friday that the Obama administration was considering nominating Sheets to be the Treasury’s top official for international affairs, a post that has been vacant since November. Sheets’ new job as counsellor would give him a position at the Treasury from which to advise Lew until he is nominated and confirmed by the Senate.

Counsellor posts are sometimes used for this sort of holding pattern. For example, the administration’s nominee for assistant secretary for economic policy, Karen Dynan, is currently a counsellor to Lew. The Treasury official had no comment on Sheets’ nomination prospects.

If nominated and confirmed, Sheets would be a key figure in U.S. financial and economic diplomacy and would help lead international discussions on the global economy.

This would include pressing Washington’s view that China should let its currency appreciate more quickly and that Europe should act more decisively to boost economic growth.

As the Treasury’s undersecretary for international affairs, Sheets would have to field questions from emerging market nations whose markets are reeling from a dramatic reversal of money flows tied partly to the U.S. Federal Reserve’s decision to curtail its economic stimulus.

So, in taking the “best” Citigroup idea implemented so far in the past decade, is a “bad Fed” or rather, worse Fed, on deck?

Anyway, good luck, dear former employee of Citi, the Fed and “MIT Engineer” – with EMs turmoiling you will need it.

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