There was so much to say about why Larry Summers would make a bad Federal Reserve chairman that I didn’t have room in my column Friday to mention who would make a good one.
Just as forcefully as folks are coming out against Summers, there is a campaign mounting to promote Janet Yellen, Ben Bernanke’s number two.
Unlike Summers, Yellen has significant monetary policy experience. She has been the vice chair of the Fed board of governors since 2010, and prior to that she ran the San Francisco Federal Reserve bank for six years. She has been involved in the Fed’s quantitative easing strategy, hatched during the Great Recession to keep money flowing and the US economy alive.
And unlike Summers, she is sufficiently boring, a key trait we want in someone running our central bank.
Just a quick recap: The scuttlebutt in Washington this week is that Summers, the former Harvard president, Treasury secretary, and chief White House economic adviser, is on the short list to replace Bernanke when his term expires in January. Summers, however, is a lightning rod given the brash management style he displayed while running Harvard and working at the White House.
If Yellen got the nod, she would break the glass ceiling at the Fed, becoming the first woman at the top. She already has some high profile endorsements from New York Times columnist Paul Krugman and former FDIC chair and UMass-Amherst professor Sheila Bair.
Bair, in a blog posted on Fortune earlier this week, argues that Yellen is the most qualified candidate, but the financial world’s old-boy network is trying to derail her candidacy:
“So why isn’t she a shoo-in? The ‘whispering’ campaign against her among industry types has been deafening. ‘Doesn’t understand markets.’ Translation: She may not bail us out if we get into trouble again. ‘Not assertive enough.’ Translation: She won’t stand up for us against the populists who want more regulation. ‘Lacks gravitas.’ Translation: She doesn’t show up very often in the financial media.”
Bair also takes a whack at Summers. “Unlike Larry Summers, Tim Geithner, and other Bob Rubin minions frequently mentioned in the financial press as potential Bernanke successors, she was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007.”
Others are also rallying behind Yellen. Senator Elizabeth Warren of Massachusetts on Friday confirmed that she has signed a letter Senate Democrats are circulating and plan to deliver to President Obama calling on him to nominate Yellen because “she is the best person for this job.” As early as Monday, activists, including women’s advocacy groups NOW and Ultraviolet plan to send a letter to Obama and Senate majority leader Harry Reid to support Yellen’s candidacy and oppose Summers’. When he ran Harvard, Summers set off a firestorm when he suggested women lacked the same “intrinsic aptitude” for science as men.
“For your administration to appoint a man who has publicly stated that women are not intellectually equal to men would send the wrong message to our country and to the world,” the activists’ letter says. “And the implications of a Summers nomination would be even more pronounced because the other front-runner for this position is an eminently qualified woman.”
Perhaps Obama is already getting the message. On Friday, the White House put out the word that the president hasn’t made up his mind and he won’t name a new chairman until the fall.