Despite the growing debate and endless speculation as to who the next chairman of the Federal Reserve will be, the White House has confirmed that President Obama will not tap the successor of Ben Bernanke until the fall.
A White House official speaking on the condition of anonymity also noted that the president still has not decided who will lead the nation’s central bank once Bernanke’s term expires early next year. Since the Federal Reserve has now essentially run the economy, financial experts, traders and others are in high anticipation as to who will be the next money printer.
In an interview with the New York Times (via Economic Times) last week, President Obama noted that he has narrowed down his choice “to some extraordinarily qualified candidates.” He reaffirmed the latest reports in stating that a final decision will be made in the course of the next several months.
Furthermore, the president explained that he wants someone who understands and will apply the Fed’s dual mandate.
“And when unemployment is still too high, and long-term unemployment is still too high, and there’s still weak demand in a lot of industries, I want a Fed chairman that can step back and look at that objectively and say, ‘Let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation,’” said President Obama, according to a transcript released last week. “If the markets start frothing up, let’s make sure we’re not creating new bubbles.”
Obama refrained from listing the finalists, but industry experts have speculated for quite a while that the two leading successors are Federal Reserve Vice-Chair Janet Yellen and former Treasury Secretary Lawrence Summers.
According to a new survey by USA Today, 32 economists have concurred that President Obama will select Yellen, while four chose Summers, a key player in the president’s economic plan when entering office. The survey is the latest look at economists’ viewpoints amid the wave of media reports.
Vincent Reinhart, chief U.S. economist of Morgan Stanley and former head of monetary affairs at the Fed, told the national news organization that the president likes to recompense allegiance to the administration.
“The president really has tended to reward loyalty,” Reinhart said, “and Summers has that history with the president that Yellen doesn’t. But we haven’t heard anything that can really be construed as a trial balloon about Yellen.”
As Washington and Wall Street debate as to who should be the next chair, Richmond Fed President Jeffrey Lacker, a fiscal conservative and critic of the central bank’s bond-buying program, has discussed policy and has urged the Fed to end the quantitative easing program quickly.
“We must make our exit from the bond-buying programme quick. An end to these bond purchases came into sight at the latest Fed meeting,” explained Lacker in an interview with a German magazine Sunday, reports Reuters. “First of all we should end the monthly purchases of mortgage bonds as quickly as possible. We need a sustainable solution and the sooner the better.”
In the end, Lacker believes the federal government and the Fed should avoid bank rescues in the future and stress tests should be performed periodically.