●■The remaining candidates are below the line. Any could get a serious look for the job or even get the appointment, but they have significant disadvantages they would need to overcome.
He is the dean of the conservative-leaning economists but one who has been passed over for the Fed chief job by the past three Republican presidents. A Harvard professor who was chairman of the Council of Economic Advisers in the Reagan White House, he is as credible a thinker on macroeconomics as they come. His downsides: Feldstein was a longtime board member of American International Group, the insurance giant that received a massive and massively unpopular bailout in 2008. And he turns 73 next month, making him a bit old for the job (though by all appearances he remains in good health).
Chairman of Harvard’s economics department, he has advised Romney for years and was chairman of the Council of Economic Advisers in the George W. Bush White House. He has the economic smarts for the job, but the open question for Romney would be whether he has the political savvy. Also, Mankiw’s writing in recent years has seemed to advocate for Bernanke-style easy-money policies, which could put his views at odds with a new Republican administration.
He was among Bernanke’s closest advisers during the financial crisis but has distanced himself from the Fed’s unconventional steps to ease policy in the aftermath, putting his views on monetary policy more in line with Romney’s positions. Warsh knows financial markets, politics, the international aspects of the job and the Fed as an institution, though he would be a non-economist in the job of the United States’s economist in chief. At 42, he is young for the job and may be a better fit for the Treasury Department in either the Romney or a future Republican administration.
In last week’s analysis of who might serve as Romney’s Treasury secretary, we included the possibility of a “Mystery CEO,” a corporate executive who has Romney’s trust but is not on the radar as a potential political nominee. The same could be said for Fed chief. Call it “Mystery Financial Executive.” The challenge in appointing a Wall Street chieftain to the Fed chairmanship in this post-crisis era is that Senate confirmation would be tough for anyone from one of the banks that received a bailout. And really, anyone from the financial sector would face questions on whether he or she would be an adequately tough regulator of Wall Street. Fox, henhouse, etc.
If Romney wants to really send a message that he is committed to tight money and combating the too-big-to-fail problem in the banking system, he could consider an unconventional choice. Hoenig, the former president of the Kansas City Federal Reserve Bank and now a director of the Federal Deposit Insurance Corp., is among the most vigorous advocates of each: He dissented from all eight Fed policy meetings in 2010, preferring to raise interest rates, and has assailed the Wall Street banks that he sees as a receiving unfairly generous help from the government. Even if he makes Romney’s short list for consideration, the major banks (the executives of which have generally supported Romney) would scream bloody murder.