Economic Pulse: Meet the top contenders to replace Ben Bernanke as US Fed chairman
Wednesday, August 7, 2013/
The chairman of the US Federal Reserve is sometimes called the most powerful man in the world.
Able to steer the economic fortunes of the largest economy, current chairman Ben Bernanke’s reign has been celebrated and scorned, depending on your view of the massive stimulus spending he’s undertaken.
On January 31, 2014, his term expires. And for the past few weeks, the financial press pages have been filled with speculation as to who could replace him. The decision is President Barack Obama’s, but it would be confirmed by the Senate.
Here at SmartCompany, we’ve decided to condense that speculation into a single article. Here are the top contenders:
If Larry Summers retired tomorrow, he’d still have left a sizable imprint on the global economy.
A celebrated economist who has worked in policy, academia, and the private financial sector, he was most recently (until 2010) the director of the National Economic Council, which advises the US President on economic policy.
It’s not his only public service role. He was Treasury Secretary from 1999 to 2001, and the chief economist of the World Bank from 1991-1993.
Unlike Bernanke, who was relatively unknown outside of academia when he was picked, Summers already has a huge reputation. If you’ve seen Aaron Sorkin’s hit film about the founding of Facebook, The Social Network, you’ve seen him played by Douglas Urbanski. Summers was the president of Harvard who swatted down the Winklevoss twins when they tried to get the university to punish Zuckerberg.
It wasn’t the only consequential Harvard moment for his public standing. In 2005, he said a reason for a lack of women in the highest echelons of maths and science might be a lack of “intrinsic aptitude” (he has since repeatedly apologised).
Summers has been central to economic decision-making through plenty of financial crises in the past two decades. And critics point to his handling of some of these situations as reasons why he should not be Fed chair.
For example, Summers graced the front cover of TIME magazine in 1997 as one of three men responsible for the market-driven, austerity-tinged solutions to the Asian Financial Crisis being pushed by the IMF and the American administration at the time. It didn’t work – many of these countries experienced ongoing recessions, and this approach is a large part of why the IMF has a bad reputation today. To this day, Summers is not well liked in Asia.
Nonetheless, Summers is one of the most experienced public-sector economists around. It’s not inconceivable, though it would be highly controversial, if he were to be given the role. He’s widely seen as a front-runner.
Obama seemed to be laying the groundwork for appointing Summers earlier this week, when he reportedly said critics of the economist were not giving him a fair hearing.
Janet Yellen has been at the Federal Reserve in some capacity or other since 2004. In a world with few high-ranking female economists, she’s been chair of the Council of Economic Advisers, another advisory body to the US president, and has been a professor of economics and management at Harvard University.
Generally considered a monetary ‘dove’ (someone more concerned with unemployment than inflation), she’s deemed likely to pursue a monetary policy more in keeping with Bernanke.
Yellen doesn’t have Summers’ reputation or resume (she has a kickass resume but Summers is Summers). She’s far less well known. Nonetheless, she’s generally quite a popular choice on Wall Street. And Asian financiers, who some argue are now America’s true bankers, prefer her over Summers.
And yes, if picked, she would be the first female Fed chair, though far from the first worldwide. There are currently 17 female central bank heads, out of 177 central banks in total. Australia has never had a female RBA chief.
More than any of the two already mentioned, Kohn is a Fed insider, having worked there for close to four decades. The Washington Post described him as “Bernanke’s No. 2 during the financial crisis”. He’s been at the Fed since Alan Greenspan’s day. Greenspan was perhaps the most powerful Fed chairman ever, and he and Kohn got along.
Mind you, Greenspan’s come in for some flack since the credit crunch, as he’s been accused of having held interest rates too low, for too long, thus inflating the credit bubble.
Like Yellen and Greenspan, he’s considered a ‘dove’. He retired from the Fed in 2010, and has worked with the Bank of England since 2011.
At 70 years old, many of those years spent guiding the Fed’s response to economic crises, he rivals Summers in experience.
And like Summers, having been too close to the controversies of the past means he’ll have some hard questions to answer should he be picked.