We express no preference between Ms. Yellen and Mr. Summers, both of whom are amply qualified. What we are sure about, however, is that this mini-circus has been not only unseemly, and unsettling to financial markets, but also potentially destructive to the Federal Reserve’s most valuable institutional asset: political independence.
Obviously no presidential nomination can be completely divorced from considerations of partisanship or policy. But the chairmanship of the Federal Reserve is a unique position, both in terms of its tremendous power and of the importance that the chairman exercises that power — in perception and in fact — strictly according to objective economic criteria.
There’s a rough analogy here with the Supreme Court. Presidents nominate justices broadly sympathetic with their own views but also, ideally, because they’ll follow the law without fear or favor. If nominees make advance commitments, implicit or explicit, it undercuts their legitimacy and that of the institution.
By turning the Fed succession into a proxy battle over bank regulation, or between monetary policy “hawks” and “doves” — or even by casting it as a choice between a potential first woman chair and a famously mercurial male — the Summers and Yellen camps are dragging the Fed itself into Washington’s toxic political fray.
White House officials let it be known that the Senate Democrats’ letter was inappropriate, and quite properly urged the contending factions to cool it. But it was Mr. Obama who let slip, in a June TV interview, that Mr. Bernanke “has already stayed a lot longer than he wanted or he was supposed to.” He has subsequently mused aloud at unwise length about the nomination, and the leading candidates, both at a July meeting with Capitol Hill Democrats, in which he defended Mr. Summers from liberal critics, and at his Aug. 9 news conference.
On the latter occasion, Mr. Obama directly linked his choice to his own needs as president: “I want a Fed chairman,” he said, who can fight inflation and asset bubbles “but also recognizes a big part of my job right now is making sure the economy is growing quickly and robustly and is sustained and durable so that people who work hard in this country are able to find a job.” (Our italics.)
What the most important central bank in the world really needs is a leader to make monetary policy in the public interest, without regard for the short-term needs of politicians. Unfortunately, the inappropriately open contest for the job may have already diminished the stature of the winner, whoever it turns out to be.