President Obama strongly suggested Monday that Federal Reserve Chairman Ben Bernanke will not be extending his stay as head of the U.S. central bank. During an interview with PBS’s Charlie Rose, President Obama remarked that Bernanke has done an “outstanding job,” but has “already stayed a lot longer than he wanted or he was supposed to.” This comment fueled the wide speculation that Fed chairman Bernanke will not be seeking a third term when his term expires at the start of 2014.
Furthermore, Charlie Rose asked Obama if he would reappoint Bernanke if he wished to, but the president deflected the question and started to highlight the accomplishments of Bernanke. Meanwhile, Bernanke has been mostly silent when asked about his plans for the next term, but this silence has done nothing to rebuke the notion that he is ready to let go of steering the nation’s monetary policy.
“He has been an outstanding partner along with the White House, in helping us recover — much stronger than, for example, our European partners — from what could have been an economic crisis of epic proportions,” he said, according to an interview transcript.
Bernanke was first nominated by President George W. Bush and then a second time right after Obama won in 2008. Bernanke’s time in the Fed put him in the midst of navigating the Fed and the nation’s economy through the global financial crisis and resulting recession. More recently, the Fed has embarked on extraordinary economic policies such as three rounds of massive bond purchases known as “quantitative easing” and novel communications strategies, such as regular press conferences and setting specific economic targets that will lead to policy changes. Due to strange actions from the Fed, the critics – particularly the Republicans – argue that the Fed is away from the core mission of the organization and is damaging inflation in the long run.
On Wednesday, Bernanke is set to face the press for a regular meeting to update on the Fed policy. Surely, questions regarding Obama’s remarks will be fielded by Bernanke himself. Meanwhile, the business world is on the edge and wondering what will happen to the markets when Bernanke finally confirms the widespread speculation. Latest action on quantitative easing is also awaited by the investors.
Obama also noted in his interview that with the crisis faded and the economy now on a seemingly stable recovery, he would like to focus on economic matters that originally drove his run for the White House, such as income inequality and other “structural problems” in the economy.
“The economy is not working for everybody,” he said. “We have recovered from the worst of the crisis, but the underlying problem, which is growing inequality, wages and income stagnant or even going down in some cases for middle class families, that trend line has continued.”
That said, who will succeed Bernanke?
It might be too early to predict but the likely choices for the position are:
Yellen, 66, has been Fed vice chair since 2010 and is viewed as a strong contender to be the next Fed chair. A Reuters poll on June 12 found that an overwhelming majority of economists predicted she would get the job. She has an impressive resume, having received her PhD in Economics from Yale University. She has served as chairperson of President Clinton’s Council of Economic Advisors from 1997 to 1999. In 2004, she became president and CEO of the Federal Reserve Bank of San Francisco. She was nominated and confirmed in 2010 to become vice-chairperson of the Federal Reserve.
If appointed, she will be the first female Fed chair in 100 years. She is known to be aggressive such as her stand to tolerate a bit more inflation to drive down unemployment that she deemed too high.
Summers, 58, is a Harvard economist who was Obama’s first National Economic Council director, a post within the president’s inner circle. Lawrence Summers was one of the youngest tenured Harvard professor by the age of 28 and later on, became the president of the university. After his PhD at Harvard University, Summers served as chief economist at the World Bank from 1991 to 1993. He left the World Bank for the Clinton administration and was prompted in 1995 to Deputy Treasury Secretary. In 1999, he became Secretary of the Treasury after Robert Rubin retired. He served as President of Harvard from 2001 to 2006. In 2009, he became the Director of the National Economics Council under Obama, a position he served in until 2010.
However, he is a controversial pick. In 2005, he made a sexist remark that there are fewer women in science and engineering due to lack in aptitude.
Alan Krueger is the current chairperson of President Obama’s Council of Economic Advisors. One of the most respected economists currently in the field, Krueger received his PhD from Harvard University. He was the chief economist for the Department of Labor from 1994 to 1995. His natural experiments on the effects of minimum wage increases made him famous within the economics profession.
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