Whoever is inaugurated as president Jan. 20 will, in the first year of his term, face a decision that will have a greater impact on the economy than any other single call he will make: Whom to select as chairman of the Federal Reserve.
Ben S. Bernanke’s term ends Jan. 31, 2014, about a year after the president takes office; if the past is a guide, and given the sluggishness of the Senate confirmation process, a nomination should happen by Labor Day.
That leaves a potential vacancy in a job that has become all the more difficult during Bernanke’s time in office. The Fed chairman has always been powerful, controlling the levers of the nation’s monetary policy. But now, since the Dodd-Frank legislation passed in 2010, the Fed and its leader have even more explicit power and responsibility to address risks in the financial system and try to lessen the damage from future crises.
And whereas in the past it has been a fine job for introverts, the addition of four annual news conferences to the central bank’s communications strategy, along with the occasional television interviews Bernanke has conducted, make it more important that the next chairman be skilled not just at setting policies but also at explaining them to the public.
Perhaps no one is truly qualified for a job that includes such wide-ranging responsibility, that calls for a brilliant economist, diplomat, politician and regulator. But fill it the next president must. Here are some of President Obama’s likely options should he win reelection; likely candidates in a Mitt Romney administration will be explored Tuesday.
Let’s divide the list into “above the line” (people who are almost certain to receive consideration) and “below the line” (people who are less obvious candidates or just interesting names for a second-term Obama team to think about). These are the top contenders:
He, of course, would be the safe, easy option; Bernanke is a proven quantity who steered the Fed through the financial crisis and has kept the pedal of monetary easing to the floor in its economically sluggish aftermath. Although Bernanke was originally a George W. Bush appointee, Obama appointed him to a second term in 2010. Friends of Bernanke say he seems inclined to step down after a long five years of crisis-fighting and eight years in one of the most pressure-filled jobs in the country. The former Princeton University professor is said to be eager to return to academic life. But a third four-year term cannot be ruled out. For Obama, he would be a safe, reliable option.
The former Treasury secretary and Obama White House economic chief is supremely qualified for the job on paper; the question is whether his personality stands in the way of an appointment. He is a first-rate academic economist with long experience at the highest levels of government. But Summers’s self-confident intellect has alienated many people he has worked with over the years. (It even cost him the presidency of Harvard.) In particular, the effectiveness of a Fed chairman depends on his ability to lead a committee of strong-willed central bankers, so the question for Obama is whether he thinks Summers would be able to adapt his style to the Fed. Senate confirmation could be tricky, too — he has enemies on both sides of the aisle.