The Senate Banking Committee on Thursday holds its first, and possibly its last, hearing on the confirmation of Janet Yellen as the next chair of the Federal Reserve.
Senators Rand Paul (R-KY) and Lindsey Graham (R-SC) -- neither of whom are on the committee -- have threatened to hold up the nomination pending consideration of other business: a Fed transparency bill for Sen. Paul and more information about the attack on the US. mission in Benghazi, Libya on September 11, 2012 for Sen. Graham.
Related: Rand Paul's Threat to Block Yellen Nomination Kicks Us All in the Gut: David Kotok
Given this latest drama surrounding the Yellen nomination and the ongoing controversy about Fed policy in the financial markets, The Daily Ticker arranged a debate between two veteran Fed watchers who have both worked in finance and government: David Stockman, who opposes Yellen's nomination, and David Kotok, who opposes the Senators holding up Yellen's nomination.
Rand Paul has an "absurd hold" on the Yellen nomination, says Kotok, chairman of Cumberland Advisors, and a former Commissioner of the Delaware River Port Authority and former board member of the New Jersey Economic Development Authority. "This only adds a risk premia to the markets, puts more uncertainties about the Fed in the marketplace and accomplishes nothing, except make Rand Paul look as isolated as he's positioning himself."
Even if Yellen isn't confirmed as Fed Chair, Kotok notes she will move up from her current role as Vice Chair "no matter what" after Ben Bernanke leaves at the end of January.
Related: Janet Yellen: Five Things You Should Know About Obama's Fed Chair Nominee
"We need uncertainty," counters Stockman, Ronald Reagan's budget director, a former Michigan Congressman and founder of Heartland Industrial Partners, a private equity firm. "Fed policy is off the deep end so far that we're in danger of financial instability of massive magnitude. I praise Rand Paul for trying to stop this nomination...zero interest rates for six years is an invitation to massive speculation, carry trades, the best thing the 1% ever had happen to them."
Related: "No Urgency" for the Fed to Taper Despite 'Strong' Jobs, GDP Data: Girard
Though they disagree about Yellen, both Davids agree that the Fed should reduce its monthly purchases of $85 billion in assets, and should have done so already.
"The Fed needs to get to tapering," says Kotok. "But it can't start it until March" after Bernanke leaves and Yellen is more settled into the job as Fed chair and several vacant seats among Fed governors are filled. "Why saddle her with baggage?" asks Kotok. "Then in March start the a tapering process, make it gradual and make it transparent."