The MIT economics professor is one of President Obama’s three nominees to fill empty spots on the Federal Reserve board. 

The Senate this week allowed the nominations of two candidates, San Francisco Fed chief Janet Yellen and Maryland financial regulator Sarah Bloom Raskin, to move forward. But Senate Republicans sent Diamond’s back to the White House.

Senate Republicans said their problem was with Diamond’s qualifications, but the move shows the proud tradition of playing politics with Fed nominations is alive and well.

Sen. Richard Shelby (right), the Alabama Republican who is the ranking member of the Senate Banking Committee, spelled out in some detail at a hearing last month why he would support the candidacy of Raskin but not of Yellen and Diamond. See if you can follow his logic.

Of Diamond, an expert on tax policy and Social Security, he said:

Our government could certainly benefit from Professor Diamond’s expertise. However, I do not believe he’s ready to be a member of the Federal Reserve Board. I do not believe that the current environment of uncertainty would benefit from monetary policy decisions made by Board members who are learning on the job.

That’s the case against Diamond, such as it is. Note to self: learning on the job is to be discouraged at all costs. Much better to choose people who keep their opinions fixed as the facts change.

Now here’s Shelby’s take on Yellen.

I also will not support (inaudible) Yellen from the Federal Reserve Bank of San Francisco for the position of member and vice chair of the Board of Governors. I believe that accountability is important. President Yellen presided over a regional housing bubble and failed to restrain the excesses.

So we don’t just need someone with monetary policy experience. We need someone with monetary policy experience but who didn’t get that experience in the past decade, which would allow them to be blamed for the housing bubble.

As an aside, I wonder what Shelby thinks Yellen should have done. Should the San Francisco Fed have raised interest rates in the Bay Area?

Of course, Shelby and his colleagues aren’t the first to play politics with the Fed nomination process. Sen. Chris Dodd, the Connecticut Democrat who leads the Senate Banking Committee, earned scorn with his 2007 decision to run out the clock on Bush Fed nominees.

As the most vocal critic of that charade, David Kotok of Cumberland Advisors, asked at the time, “Is this any way for Congress to address the need for an independent central bank?”

Pathetically enough, our most illustrious senators seem to agree that it is.