Lost in the bizarre Yellen vs. Summers tug-of-war into which the debate over the next Federal Reserve Chairman has devolved, is the notion that President Barack Obama is getting a second shot at revamping the U.S. central bank.
The perk of a two-term president, Obama will get to appoint another three, potentially four officials to the Fed’s influential seven-member board of governors in Washington. This may buy the president some political wiggle room when it comes to his pick for Fed chair, since he might be able to placate Republicans with one or two “concession” appointments. Every Fed governor gets a permanent voting seat on the policy-setting Federal Open Market Committee.
Elizabeth Duke, the last George W. Bush appointee, is already on her way out. So is Sarah Bloom Raskin, who after a relatively short stint at the board is moving to the Treasury, to be Jack Lew’s Deputy Secretary. Then there’s the awkward suspicion that, if Obama passes up Fed Vice Chair Janet Yellen, by far the favorite for the top spot, she will also step down after a long career in the Federal Reserve system, including many years as head of the San Francisco Fed.
To boot, Jerome Powell’s term as governor ends at the end of January 2014, at the same time as Bernanke’s.
While such a large number of openings could make for a turbulent ride at a time when the Fed is expected to be starting a pullback of its bond-buying stimulus plan, it also confers a great deal of discretion on the president. In the recent past, political leanings have not made an enormous difference to monetary policy, though perhaps a bit more on regulatory matters. But in the future, they could. No wonder the president wants to sleep on the issue for a couple more months.