Who should replace Ben Bernanke as Fed chairman?
The Irish gambling site Paddy Power weighs in
During a June interview with Charlie Rose, President Obama hinted that Federal Reserve Chairman Ben Bernanke won't pursue another term when his current one ends in January.
"He's already stayed a lot longer than he wanted or was supposed to," said the president.
Bernanke refused to comment on his future at the Fed in a press conference days later, but that didn't stop the already thriving debate over who could be/would be/most definitely will be the next person leading the most powerful economy in the world.
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Friday morning, the Irish gambling site Paddy Power weighed in with a list of 13 names and numerical odds for each pick. Janet Yellen, the current vice chairman of the Fed board landed first at 1/5; Nassim Nicholas Talem, author of The Black Swan, was last at 1000/1.
Here are three picks that have generated the most buzz, with their corresponding Paddy Power odds.
Janet Yellen: 1/5
Odds: If Bernanke steps down and Obama is seeking a continuity candidate, Yellen is essentially a shoo-in, say commentators, even those who don't seem to support the pick. Matt Yglesias at Slate says, "There's been zero indication that at any point in his political career Barack Obama has given a moment's notice to the idea that innovative thinking on monetary policy should be part of his legacy. So it's Yellen, Yellen, Yellen, Yellen, Yellen."
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Resume: President of San Francisco Fed, head of the White House Council of Economic Advisors under Bill Clinton.
What she'll bring to the table: Yellen is famously dovish, which means her policies prioritize lowering the unemployment rate, rather than keeping a lid on inflation. "Perhaps her most famous paper, which she co-wrote in 1986 with her husband, George Akerlof, a Nobel-winning economist, was about the theory of 'efficiency wages,'" says The New Yorker's John Cassidy. "It argued that, contrary to the free-market model, lower wages can lead to higher unemployment." Cassidy goes on to quote a speech Yellen gave at a Washington conference in February:
"We know that long-term unemployment is devastating to workers and their families. Longer spells of unemployment raise the risk of homelessness and have been a factor contributing to the foreclosure crisis. When you’re unemployed for six months or a year, it is hard to qualify for a lease, so even the option of relocating to find a job is often off the table. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children." [The New Yorker]
According to The Washington Post's Neil Irwin, who presented his list of top picks, "If she is not selected, it would likely be because of worries that she would be viewed by markets as being too dovish, or soft on inflation, and/or because of worries about whether she is dynamic enough."
Larry Summers: 8/1
Odds: Second on Paddy Power's list, Summers has plenty of supporters and detractors alike. Fortunately for him, one of his supporters may be Obama. "Messrs. Obama and Summers explicitly discussed the possibility he could become Fed chairman in a private conversation at the end of 2010, as Mr. Summers was leaving his post as the director of the White House's National Economic Council, according to a person familiar with the matter," reports the Wall Street Journal.
Working against him: The now infamous comments he made in 2005 about how fewer women than men climb to the top of science and engineering fields because of "different availability of aptitude at the high end." Summers has apologized for the sexist comments, but the optics of passing over Yellen for Summers could be too much for the White House to stomach.
Furthermore, as Obama's top economic adviser during the Great Recession, Summers has been blasted by both sides of the aisle for his handling of the crisis, with liberals criticizing his policies for being too meek, and conservatives for being wasteful and ineffective.
Resume: Treasury Secretary, President of Harvard University, top economic adviser to Obama, chief economist at the World Bank.
What he'll bring to the table: Experience, experience, experience. "Mr. Summers is widely considered one of the top economists of his generation. He is known for being able to quickly and clearly analyze economic issues, identify the challenges and conceptualize solutions," says the Journal.
And as a supporter tells Ben White at Politico, "LHS is a battled tested veteran who knows his way around the international financial system like no one else. Hard to discount that. As for why now, I have no idea but the White house shouldn’t let this drift into fall."
But with experience comes a long, often controversial record. Summers has drawn plenty of criticism in recent years for his role in championing legislation in the late '90s to repeal the Glass-Steagall Act, a law passed following the Great Depression that was supposed to separate commercial banks from investment banks. Many economists think the repeal was one of the chief causes of the financial crisis.
Roger Ferguson: 50/1
Odds: The Irish odds-makers put Ferguson sixth, behind both former Treasury Secretary Timothy Geithner and Christina Romer, who often clashed with Summers during her tenure as the head of Obama's White House Council of Economic Advisers. U.S. commentators give the former Fed official slightly better odds. Irwin, for one, wrote he "could be just the thing Obama needs if he elects not to appoint Yellen or Summers."
Resume: Vice chairman of the Fed, president and chief executive officer of the Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF).
What he'll bring to the table: Back in April, when the who's-it-gonna-be debate started heating up, the New York Times weighed in on Ferguson, citing both rich experience (like Summers), and a stellar reputation (unlike Summers): "Mr. Ferguson is regarded as a skilled manager deeply versed in the mechanics of the financial system. He is also well liked by former colleagues. But he is not an academic economist. And as the Fed’s vice chairman, Mr. Ferguson oversaw the central bank’s regulatory operations in the period leading up to the financial crisis, when it failed to check the excesses of the financial industry."
Carmel Lobello is the business editor at TheWeek.com. Previously, she was an editor at DeathandTaxesMag.com.