Photo finish: AEI scholars place their picks in Fed chairmanship race

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Any day now, President Obama will nominate the next chair of the Federal Reserve.  Bernanke’s successor will inherit the Fed’s aggressive quantitative strategy and enormous balance sheet.  A mistake on the next Fed chair could mean a huge mistake for the economy.

The race appears down to two people: Larry Summers and Janet Yellen.  Who is best for the job? AEI scholars and columnists share their thoughts.



“[Yellen] would make a good Fed chairman. Summers, by virtue of the breadth of his market, government, and academic experience, is more likely to make a great Fed chairman.”  John Makin, “Wild about Larry”

“Yellen’s policy stance has been consistently dovish in recent years because she sees an economy with a stubbornly weak labor market and subdued inflation. Her forecasts, as it turns out, have been more accurate than those of the FOMC’s hawks, who have been looking for higher inflation around every corner. If her outlook for the economy were different, her policy recommendations would be as well.” Steve Oliner, “The myth about Janet Yellen being soft on inflation.”

“Boil all that down and the case for Summers really revolves around both Obama and influential Wall Street Democrats being more personally comfortable with Summers…If Summers should somehow be confirmed, he will emerge as a politically weakened Fed chair.” Jim Pethokoukis, “Obama may want Larry Summers at the Fed. But in Heaven’s name, why?”

“There don’t seem to be great differences on policy between Summers or Yellen, or at least discernible ones, and in any case no one can predict the economic environment which the next Fed chairman will face between 2014 and 2018. But I think Cass Sunstein and Steven Rattner make a strong case for Larry Summers.” Michael Barone, “Federal Reserve colleagues rally to support Larry Summers.”

 “The Financial Times’ Edward Luce acknowledges and pooh-poos Summers’ lack of charm…. Recent evidence shows tact will be critical in calming the markets and presenting a unified front at the Fed.” Abby McCloskey, “What does Larry Summers really think of QE?”

“If Summers is the pick, I look forward to the confirmation hearings and his analysis of unconventional monetary policy, financial deregulation, and the role of 1990s housing policy planting the seeds of the housing bubble.” Jim Pethokoukis, “Is Larry Summers a lock to replace Bernanke as Fed chairman?”

 

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