Bernanke Likely Leaving Federal Reserve In 2014
Mitt Romney has made clear several times his intention to replace Ben Bernanke as Chairman of the Federal Reserve Board, but it looks like whoever wins the election will have to find a new chairman:
For the last couple of months, there has been a parlor game on Wall Street and in Washington about who will become the next Treasury secretary. After all, Timothy F. Geithner has made it clear he plans to be out of that office at the end of the year whether President Obama is re-elected or not.
But there is another wrinkle in the parlor game calculus: Ben Bernanke, the Federal Reserve chairman, is likely to need a successor, too. If Mitt Romney wins the presidency, he has already pledged he will replace Mr. Bernanke, whose term as chairman ends in January 2014, in just over 15 months. However, Mr. Bernanke has told close friends that even if Mr. Obama wins, he probably will not stand for re-election.
That would be a one-two punch, with two of the most important jobs in the nation up for grabs. And over the last couple of years, especially at the depth of the financial crisis, the relationship between the two people in those roles has been increasingly important. They are the equivalent of roles in a buddy movie.
This isn’t entirely surprising. At the end of his current term, Bernanke will have been in office for eight years and will have presided over some of the most economically perilous times that any Fed Chairman has had to deal with in recent memory. For much the same reasons as Timothy Geithner, who has already said that he will be leaving at the end of the President’s first term, Bernanke likely just wants to move on. Of course, it’s not as simple a matter of that and the markets will be watching closely to see who replaces these two men.
With respect to the Chairman’s position, the Democratic bench is a little thin:
It is slim pickings. At the top of the list is Lawrence Summers, Treasury secretary under President Clinton and director of the National Economic Council for President Obama. He’s a serious economist who knows his numbers and has a worldview that is similar to the president’s. He would be expected to continue the loose money policy of Mr. Bernanke.
But one of the knocks against Mr. Summers is that he has a reputation for not playing well with others. He has had his own run-ins with the president. And if you consider the Treasury secretary and Federal Reserve chairman as a tag team, you would have to be confident that whomever you pick for Treasury secretary would get along well with Mr. Summers.
There are a couple of other names in the Democratic economist world, but virtually all of them would be long shots: Janet L. Yellen, the vice chairwoman of the Federal Reserve. She would be the first woman to run the Federal Reserve and could provide some continuity. Alan Krueger, an economist who was briefly an assistant secretary ofIersonality clash not just for the President but for other players in the financial world. The logical choice would seem to be Yellin given the fact that she’s been working closely with Bernanke for several years now.
On the Republican side, we’ve got a few more names:
A range of experts regard two of Mr. Romney’s economic advisers as the most likely candidates: R. Glenn Hubbard, who was chairman of the Council of Economic Advisers under President George W. Bush, and N. Gregory Mankiw, who followed Mr. Hubbard in that role. John B. Taylor, a Stanford University economics professor and outspoken critic of Fed policy, also is mentioned frequently.
The choice of Professor Taylor — or a like-minded critic — would represent a dramatic step to change the course of monetary policy. By contrast, Professor Mankiw, an economist at Harvard University, and Professor Hubbard, dean of the Columbia University business school, both are seen as centrists.
Professor Mankiw co-wrote a 2011 paper endorsing policies like those the Fed has pursued as the best way for government to enliven the economy. Professor Hubbard told Reuters TV in August that Mr. Bernanke is “a model technocrat” who should get “every consideration” for another term.
“If people really do think it would be Taylor, I would think that would interfere” with the Fed’s ability to influence markets, said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and former Fed economist. “But if it’s not Taylor, I don’t think it would have such a large effect.”
It’s hard to say who has the inside edge here. Some speculation I’ve read suggests that Hubbard is more likely to go to Treasury in a Romney Administration, making Mankiw the likely candidate to replace Bernanke. If that happens, he’ll be the first blogger to head the Federal Reserve. Taylor seems like a long shot here.
There is, of course, another possibility, either Romney or Obama could convince Bernanke to stay on another term. That seems to be more likely with Obama than Romney, though.