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Bernanke Successor Mystery Fuels Political Circus

August 2, 2013
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In Iowa while campaigning in 2007, then-Senator Barack Obama refused to comment when asked about the Federal Reserve, citing the institution’s independence.

President Obama may be wishing he’d heeded that advice.

Since the president in an interview with Charlie Rose June 16 indicated he wouldn’t reappoint Federal Reserve Chairman Ben Bernanke, intrigue over his successor has grown to a level where Fed experts and former administration officials are concerned that the selection process is so political it could have long- lasting ramifications for the markets, the eventual nominee’s confirmation hearings and the Fed as an institution.

"What’s really unfortunate is how public and polarized this debate has gotten," Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., the world’s biggest mutual fund, said in an interview on Bloomberg Television. "This has an impact for the market going forward."

The president and White House officials have spent the last week trying to defuse an escalating public contest between Lawrence Summers, Obama’s former top economic adviser, and Janet Yellen, the Fed’s current Vice Chair.

Confronted by a chorus of concerns about Summers -- and letters from House and Senate Democrats voicing support for Yellen -- Obama on Capitol Hill told his party’s lawmakers on July 31 that he has interviewed "lots" of candidates. He threw a new name into the mix, former Fed Vice Chair Donald Kohn, as he and his aides tried to buy some time, saying the choice was weeks away and not until autumn.

 

Parlor Game

 

Instead of leaving it at that, Obama also contributed to the Summers versus Yellen parlor game.

When pressed by a lawmaker to defend Summers, Obama took the opportunity to praise the former director of his National Economic Council, who was by his side at the height of the financial crisis, in front of skeptics.

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