BY DANIEL MASSARI
The hunt is on for the next chairman of the U.S. Federal Reserve Bank. Rumors began circulating in late 2012 that Federal Reserve Chairman Ben Bernanke would not seek reappointment to his position at the end of his term in 2013.
As we turn to the final quarter of 2013, it has become clear that Bernanke will leave his post at the Central Bank. Bernanke has held the position of chairman since first being appointed by President George Bush in February 2006. He was then reappointed by President Obama in 2010 to serve another four-year term, defeating a narrow vote in the Senate to retain his chairmanship. Prior to his time in public service, Bernanke was a professor at Princeton University and had chaired the department of economics since 1996.
During his tenure, Bernanke has staved off a near collapse of the financial sector and the U.S. economy, and he has been the leading force behind keeping interest rates low since 2007. Despite his tremendous work turning the stagnant U.S. economy around, the next chairman will certainly have work to do.
Two frontrunners have emerged for the chairmanship in recent months. Janet Yellen, the vice-chair of the Fed, and Larry Summers, the former Treasury secretary, are believed to be the two most likely candidates.
Yellen has been viewed as a frontrunner for months. Prior to her role on the board, Yellen was president and chief executive officer of the Federal Reserve Bank of San Francisco and has served in the public sector since being appointed chair of the White House Council of Economic Advisors under President Bill Clinton.
Unlike many other governmental organizations, the Fed is broken into separate Federal Reserve Districts. Each one of the 12 districts has its own separate and distinct operations and is responsible for implementing the monetary policy set by the Federal Open Market Committee, of which Bernanke is chairman.
Joseph Stiglitz, an economist and professor at Columbia University, had positive things to say in an opinion piece about Yellen for the New York Times.
“Ms. Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labor markets — which is essential at a time when unemployment and wage stagnation are primary concerns,” Stiglitz said.
The other leading candidate, Summers, has previously served in the public sector as the 71st Secretary of the Treasury from 1999 to 2001 under Clinton. Summers has served more recently as the 27th president of Harvard University from 2001 to 2006. He was also featured in the 2010 film “The Social Network” in a meeting with Cameron and Tyler Winklevoss to discuss their accusations against Mark Zuckerberg. As a Treasury Department official, Summers supported deregulation of the banking industry, which has come under scrutiny recently. Summers’ crowning achievement at the Treasury was the passage of a law that ensured that derivatives would not be regulated, which some detractors blame for causing the financial crisis of 2008.
Mike Dorning commented on this criticism in a Sept. 6 Bloomberg article.
“A backlash against Summers has developed within the Democratic Party based on his role in Clinton’s Treasury Department on financial deregulations, which some say helped precipitate the 2008 market crisis,” he said.
Not everything said about Summers is negative, though. Summers’ supporters are quick to point out that he can handle a crisis, citing his work during the Clinton administration to fight emerging market threats and as well as his help during the financial crisis in framing the bailout of the financial sector.
People close to Obama have already stated that the president will not make any announcements regarding his appointment for chairman of the Fed until after Congress votes on a resolution to conflicts in Syria and the outcome of a strike is clear. The reason the appointment is so important is because a change in management at the Fed could shift the course of the bank’s quantitative easing and other policy measures and have direct impacts on the U.S. economy.
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