This graphic gets the Fed Chair race exactly wrong

August 19, 2013
summers see saw
For the interactive version, click here.

Business Week has an interactive graphic that purports to show the "seesaw" that is the Fed Chair choice:

Picture the choice of the next Federal Reserve chair as a seesaw. Some influential Wall Street types with Democratic ties, including Steven Rattner and Roger Altman, are sitting on former Treasury Secretary Larry Summers’s side of the teeter-totter. Fed Vice Chair Janet Yellen has strong support among women and Summers haters. The person with the power to tip the seesaw, President Barack Obama, is sitting right in the middle—for now.

It's a neat graphic that -- no offense to Businessweek -- gets the process completely wrong.

The graphic suggests an open inclusive process with a neutral President Obama receiving input from an array outside experts and stakeholders. The reality is precisely the opposite: It's been a narrow process dominated by current and former White House staffers who almost all share their boss's inclination to choose Larry Summers.

If you look at the seesaw, a neutral Obama appears to have about four or five times the influence of Evercore Chairman Roger Altman and maybe 15 times the influence of ex-Financial Commission chair Phil Angelides. Ex-FDIC chief Sheila Bair has about as much influence as Minority Leader Nancy Pelosi. All manner of outside voices -- including Bette Midler! -- are assumed to have some weight.

In reality, Altman has very little influence over the decision, Angelides has absolutely no influence over the decision, and the White House's relations with Bair are so tense that her endorsement probably counts against whichever candidate it goes to.

Missing from the graphic is pretty much everyone who is influencing the decision. Jason Furman, Obama's chief economist, is absent. So is Treasury Secretary Jack Lew. And ex-Treasury secretary Tim Geithner. And National Economics Council head Gene Sperling. And ex-CEA Chair Alan Krueger. The list goes on -- but it's almost entirely composed of people who served in this White House, and almost entirely composed of people leaning towards Summers.

This isn't just nitpicking. This fact is central to understanding the entire Fed Chair process. As of a few months ago, Summers' odds were considered remote -- even by professional gamblers. Janet Yellen was the clear favorite of the market and of the Fed world and of the financial regulation world - and, everyone assumed, of Obama world. But it turned out that Obama world was very different than all these other worlds and Summers was quietly and overwhelming their favorite -- which means he was quietly and overwhelmingly the favorite, because Obama world is where the decision will get made, and these other worlds have much less influence over Obama world than people thought.

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Jim Tankersley · August 19, 2013