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Larry Summers has an edge in the race to head the Federal Reserve
Larry Summers has an edge in the race to head the Federal Reserve
When Wall Street predicts something will happen in Washington, it is often wise to bet on the opposite. Multiple polls show Janet Yellen, vice-chair of the US Federal Reserve, as the strong favourite to be named Ben Bernanke’s replacement as chair – an announcement that is likely by September.
Such certainty is puzzling: there is no evidence President Barack Obama sees Ms Yellen as a shoo-in. Nor does his likely shortlist – which includes two former Treasury secretaries, Larry Summers and Tim Geithner; and a former vice-chairman of the Fed, Donald Kohn – suggest Ms Yellen as the inescapable choice. Each is an impressive name, as are possible outsiders such as Stanley Fischer, governor of the Bank of Israel (who holds dual nationality). Mr Obama has a deep bench from which to choose.
It is my bet he will settle on Mr Summers. The case for Ms Yellen is strong. Her economic credentials are a match for anyone’s, including Mr Summers. Having been head of the San Francisco Fed, her central bank experience is also deep. Yet Ms Yellen has a reputation as a dove at a time when the cycle may be close to turning. By next January, when Mr Bernanke’s successor takes over, the long phase of monetary easing is likely to be tapering off. Last week, Mr Bernanke assured Congress that the monthly $85bn of asset purchases in the third round of quantitative easing would continue as long as there was any question about the US recovery. Such doubt grows a little weaker with each Fed meeting. The US economy is picking up speed.
Mr Bernanke’s successor will need to reassure the markets that he or she is tough enough to raise interest rates when necessary. Much as a dovish president might feel under pressure to order air strikes, Ms Yellen’s reputation could push her to tighten too soon. Such are the perverse incentives of expectations. As for Mr Geithner, his résumé is equally stellar. But he insists he is uninterested in the job. The continuing Washington controversy over the Internal Revenue Service’s targeting of Tea Party groups would also risk an ugly Senate confirmation process. The events took place while Mr Geithner was Treasury secretary and the IRS is supervised by the Treasury department. No one suggests Mr Geithner knew of the audits. But Republicans would be tempted to revive the 2009 controversy over his failure to pay $34,000 in taxes on time. In contrast, Mr Kohn would probably sail through Senate confirmation. But most people are betting that, at 70, he will be seen as too old.
http://www.ft.com/intl/cms/s/0/3b5311e6-c232-11e2-8992-00144feab7de.html
Larry Summers looks set to pip Janet Yellen at the post to take over from Ben Bernanke as head of the US Fed
For a long time it looked that Yellen, vice-chairman of the Fed, would be taking a short walk across the corridor to replace Bernanke when he steps down next year. However it now appears that informed sources in Washington and pointing at former Treasury secretary, Larry Summers, as a dark horse candidate for the role.
Despite the fact that the announcement of who will be replacing Bernanke next year is only due in September, most followers of government policy were more or less convinced that President Obama would not be looking any further than Ms Yellen to be Bernanke’s successor.
Now it appears that the choice of successor is far away from being a closed book, with not only Larry Summers being a strong contender but also another former Treasury secretary Tim Geithner, as well as another former vice-chairman of the Federal Reserve Bank Donald Kohn and even Stanley Fischer, due to relinquish his role as governor of the Bank of Israel in the summer, also believed to appear on some form of unofficial shortlist to take up the role.
The reason why many in the know speculating that Larry Summers’s name has risen to the top of the list, is that Obama may be fearful that despite case for Ms. Yellen having the strongest of economic credentials as well as many years of practical experience in central banking as head of the San Francisco Federal Bank, Ms. Yellen may not have the strength to handle the buffeting that is suspect to begin at a time when the almost four years of easy capital flow driven by the Fed begins to be eased off. Something that is due to happen almost immediately after Mr Bernanke leaves his post at the Fed.
http://jewishbusinessnews.com/2013/05/27/larry-summers-looks-set-to-pip-janet-yellen-at-the-post-to-take-over-from-ben-bernanke-as-head-of-the-us-fed/
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