Game of Chairs

July 8, 2013

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Here’s the speculation over the next Fed chair in one line: “The people who know aren’t talking, and the people who are talking don’t know,” Neil Irwin writes. The talking-but-not-knowing group apparently includes the Friends of Larry Summers, some of whom tell the WSJ that Summers is “more than a little interested in the Fed job.”This isn’t the first time Summers has flirted with the top Fed job. Damian Paletta reports that President Obama and Summers discussed the possibility of Summers being the next Fed chair in a private conversation at the end of 2010, and there were similar rumors when President Obama’s first term began.

In some dark corner of the West Wing, Jack Lew keeps a shortlist of candidates for the top position at the Fed, Reuters reported last month. Summers is rumored to be on that list, along with Tim Geithner. In December William Cohan thought the smart money was on Geithner; In February, Charlie Gasparino jumped on the same improbable bandwagon.
Now, however, the presumptive favorite is the Fed’s Janet Yellen. 40 of 44 economists polled by Reuters in June said Yellen would take over for Ben Bernanke when his term ends on January 31, 2014.

In late May, Ed Luce, a former speechwriter for Summers, made the case for his old boss as Fed chair. Summers, Luce says, wouldn’t make a great mediator in Syria, but should be awarded the Fed chairman’s role largely because of his “intellectual leadership.”  Matt Yglesias, however, would prefer Yellen:

Taking a pass on the opportunity to appoint the first woman to run a major central bank in favor of the guy who said women don’t succeed in academia because math is too hard for them would be terrible, and it’s difficult to think of a persuasive reason to do it.

If Yellen is the statistical favorite, she’s also a historical anomaly. The Fed has never been run by a woman, and in the central bank’s 100-year history its number 2 has never risen to the top job. Alison Fitzgerald of the Center for Public Integrity looked at Yellen’s record, and found that she’d likely be tougher on banks than any recent Fed chair. Yellen wants to “require big banks to hold more capital, to boost the margin requirements on derivatives trades and to require foreign banks that do business in the U.S. to hold capital in the U.S.”

Yellen is also, Yglesias notes, the continuity choice. Bloomberg’s Rich Miller and Joshua Zumbrun argue that this Fed pick just won’t matter as much previous appointments simply because the Fed has very specific criteria for winding down its asset purchasing program and raising interest rates. As former Fed vice chairman Donald Kohn told Bloomberg: “I’d be quite surprised if the president nominated a chairman who wasn’t broadly in agreement with the policies that the current chairman has led on the committee.” — Ryan McCarthy

On to today’s links:

S&P plans to argue in court that its ratings were “puffery” that no one should listen to – Bloomberg

Interpretation of the Volcker Rule is, for the moment, mostly subjective – WSJ

The world according to investors – Josh Brown

The Singularity
How driverless cars could reshape cities – Nick Bilton

After spending $5 billion buying homes, Blackstone now wants to lend to your landlord – Bloomberg

Deutsche Bank paid Tim Geithner $200,000 to speak at a conference – FT

Thomson Reuters will no longer let some clients see economic data early – NYT
NY attorney general will supervise when and how news organization can report news – Matt Levine
Turns out that “just buying ETFs” won’t fix all your problems – Bloomberg

Mayor Bloomberg is canceling free Bloomberg terminals for the city after he leaves office – NYPost

“The main locus of econoderpitude these days involves inflation” – Paul Krugman


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