A short list of candidates to be the next Fed chief

September 16, 2013

With political opposition mounting against him, former Treasury Secretary Lawrence Summers pulled his name from consideration on Sunday as the next chairman of the Federal Reserve. Here are some of the other people who could be considered to lead the Fed, in the expectation that chairman Ben Bernanke won’t seek re-appointment when his second term at the central bank ends in January.

Janet Yellen

Janet Yellen, the Fed’s vice chairwoman, is widely seen in financial markets as the leading contender. Ezra Klein said if Yellen is named the head of the U.S. central bank, she would be “the most qualified Federal Reserve chair in memory”.

Yellen served as the chairwoman of the Council of Economic Advisers under President Bill Clinton in the 1990s, and has held many jobs at the Fed, including governor, San Francisco Fed president and Bernanke’s second-in-command since October 2010.

Klein noted that Yellen, who has been an outspoken advocate of the Fed’s easy-money policies, presciently warned in 2007-08 that “the possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real.”

Her involvement in formulating current Fed policies could give her an advantage at the White House, by knowing how they work and how they can be reversed.

 She would be the first woman to chair the Fed. Here’s a link to find many of Yellen’s speeches.

William Dudley

Currently serving as the head of the New York Fed, and he’s also a vice chairman on the Federal Reserve’s Open Market Committee. In June Dudley suggested the Fed’s asset-purchasing program could be increased — rather than scaled back or tapered — if the US economy falters. Dudley’s been a strong proponent of aggressive monetary policy to help the economy, falling squarely in the dove category. In fact, in a June speech he suggested the Fed could have done more to stimulate the economy in 2008 and 2009. Dudley’s also suggested that the 2010 Dodd-Frank bill didn’t go far enough in granting the bank powers to save ailing financial firms.

Dudley was formerly Goldman Sachs’s chief economist for more than a decade, and an economist at the Federal Reserve board. Here’s a collection of his speeches while at the New York Fed.

Richard Fisher

The current Dallas Fed president told the WSJ a month ago that the “odds are zero” he will be nominated for the Fed chair position, as, he said, “there’s probably not a stylistic fit.” Fisher has been critical of the Fed’s quantitative easing policy, and is much more outspoken in his views than current Fed chairman Ben Bernanke or former chair Alan Greenspan.

In a speech in August, he said that “the Fed has created a monetary Gordian Knot” in reference to QE, noting that it was time for the Fed to start untying it, rather than adding more complexity. Fisher has also been criticized for being too political: In March he spoke at the Conservative Political Action Committee about the need to break up the country’s biggest banks — a move which is not likely to ingratiate him with an Obama administration whose first pick for Fed chair was pummeled by the left.

Fisher was born in the US, but grew up in Mexico. Before becoming president of the Dallas Fed, Fisher was an assistant to the secretary of the Treasury during the Carter Administration and the deputy US trade representative from 1997-2001, where he oversaw the implementation of NAFTA.

(In fun facts unrelated to the point of this article: Fisher’s son, Miles, is an actor who has appeared on Mad Men and Gossip Girl.) Here’s a link to some of his speeches.

Timothy Geithner

Geithner’s candidacy for Fed chair is marked by the number of times he’s denied wanting the job. Ever since stepping down as Treasury secretary in January there has been speculation that Geithner may be next in line for Fed chair. But Geithner’s own opposition has been firm: at the time he told Politico, “Not a chance. I have great respect for the institution, but that will be someone else’s privilege.” Reuters writes today “speculation has refused to die, despite Geithner’s public comment to the contrary, and the fact that he is writing a book about his time in office.”

Nonetheless, Geithner remains a qualified candidate: was under secretary of the Treasury for international affairs during the later years of the Clinton White House, then a director at the IMF before becoming president of the New York Fed from 2003 through 2009. While at the New York Fed he was he was vice chairman of the Federal Open Market Committee, and was central to rescue and bailout negotiations during the financial crisis. He was then appointed Treasury secretary by President Obama, and served throughout the administration’s first term.

Donald Kohn

Donald Kohn was a member of the FOMC from 1987 to 2010 and Fed vice chair from 2006 to 2010. He was one of only three potential nominees, along with Summers and Yellen, mentioned by President Obama in a closed door meeting with with House Democrats in July.

Kohn appears to have high profile support inside the administration. Charlie Gasparino reports that Tim Geithner recommended Kohn to President Obama.

Neil Irwin had a great rundown the key facts on Kohn. Given how highly the President appears to rate crisis management experience in central bankers, it’s significant that as Bernanke’s number two, he was a key part of every major Fed decision throughout the crisis. “His credentials as a crisis manager”, Irwin writes “are impeccable”. Those credentials, including participation in the AIG bailout, Irwin notes, could cut against him politically.

In 2005, in response to a prescient warning of an impending financial crisis by Raghuram Rajan, Kohn spoke in favor of financial deregulation:  “at times rolling back regulation, for example, by lifting the Glass-Steagall restrictions on banking organizations–will benefit competition and help the financial sector deliver services more efficiently and effectively”.

James Kwak makes a blunt assessment of that incident and Kohn’s general outlook.. “Let’s not mince words. Kohn was one of the leading cheerleaders for the Greenspan Doctrine”. Bloomberg’s Craig Torres takes a softer view, characterizing Kohn as a “policy pragmatist” who is likely to continue the Fed’s new post-crisis focus on financial stability.  ou can find Kohn’s speeches here.

Roger Ferguson

Roger Ferguson served as the Fed’s vice chair from 1999 to 2006, and is currently the President and CEO of TIAA-CREF, a not-for-profit investment manager for teachers, doctors, and cultural employees. He was vice chairman  of the Fed from 1999 to 2006. In 2005, there were rumors that  outgoing Fed chief Alan Greenspan was pushing President Bush to nominate Ferguson as Fed chair.

American Banker called Ferguson a “Goldilocks” candidate: “Someone not too hot (Larry Summers) or too cold (Janet Yellen.) Someone just right.”

Dylan Matthews calls Ferguson “a deliberative, thoughtful leader whose style tends to be more conciliatory than divisive, a particular contrast with Summers, who frequently finds himself in public and private scrapes.” But Matthews adds that it’s less clear if Ferguson wants the job, or how effective of a Wall Street regulator he’d be. In 2006, Ferguson went on record praising financial consolidation and derivatives innovation

Christina Romer

Romer was the chair of the Council of Economic Advisers for the first two years of the Obama administration and helped draft the stimulus legislation in the aftermath of the financial crisis.

The UC Berkeley economist is probably a long shot for the nomination. Still, Matthew O’Brien argues that she’s a “really perfect candidate,” and adds “The only way the Fed will give us a new day is with new thinking.” Matt Yglesias argues that there are three reasons she should be the leading contender for the job: “She believes in the power of the Fed,” she “represents regime change,” and she is “an expert on recovering from a disaster.” Fed number two Janet Yellen is the odds-on favorite to replace Bernanke, and would be a very good choice, but Christina Romer would be a better one.”

Romer somewhat infamously argued for a much larger, $1.8 trillion stimulus in 2009, but, according to various reports that was shot down by Larry Summers, then director of the National Economic Council. Her recommendations never made it into the final memo to the President and the final stimulus was $800 million.

In addition to being a tenured faculty member at Berkeley, she serves as the co-director of the monetary economics program at the National Bureau of Economic Research.

(Complied by Jennifer Ablan, Shane Ferro, Ben Walsh, and Ryan McCarthy)

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