Economics, Monetary Policy, Pethokoukis, U.S. Economy

Is Larry Summers a lock to replace Bernanke as Fed chairman?

Image Credit: Wikimedia

Image Credit: Wikimedia

My CNBC colleague John Harwood says the bane of the Winklevii is the big favorite right now:

A source from Team Obama told CNBC that Larry Summers will likely be named chairman of the Federal Reserve in a few weeks though he is “still being vetted” so it might take a little longer.

It’s largely come down to a two-horse race between Summers, a former Treasury secretary, and Fed Vice Chairman Janet Yellen for the next Fed chief.

Several Fed officials, who spoke on condition of anonymity, told Reuters that they did think Summers was Obama’s clear favorite, though they had a few doubts.

“Has he devised a strategy to be effective within the institution?” one asked.

Some insiders also expressed concern about Summers’ close ties to Wall Street.

Earlier this summer, my sources said Summers was something close to a lock. Then came weeks of push-back, including a pro-Yellen letter from a bunch of Senate Democrats. And now, apparently, he’s still something close to a lock.

If Summers is the pick, I look forward to the confirmation hearings and his analysis of unconventional monetary policy, financial deregulation, and the role of 1990s housing policy planting the seeds of the housing bubble. And as far as his confirmation prospects go, BBW’s Joshua Green makes a good point that the lack of Democratic presidential contenders in the Senate is a lucky break for Summers:

Why does that matter? Because presidential candidates are almost always captive to the passions of their party’s base, and the liberal base of the Democratic Party loathes Summers. That would produce tremendous pressure to oppose him. … The fact that Summers doesn’t have three Democratic presidential hopefuls in the Senate probably means he’ll have three more votes than he would have otherwise—and that may wind up being the deciding factor if he’s nominated.

And long-time Washington analyst Peter Davis offers his two cents: “Summers will face difficult questioning before the Senate Banking Committee on his Wall Street ties, his role in bank bailouts, and his statements on women. Despite significant opposition from liberal Democrats and some Republicans, I expect Summers to be confirmed late this year.”

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