ElCount
07-09-2009, 03:00 PM
JULY 9, 2009
White House Ponders Bernanke's Future
By JON HILSENRATH, SUDEEP REDDY and DAVID WESSEL
As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman's standing on Wall Street is on the rise while attacks on him from Congress mount.
Treasury Secretary Timothy Geithner is expected to play a key role in advising President Barack Obama on whether to reappoint Mr. Bernanke. Mr. Geithner has worked closely both with Mr. Bernanke and with the leading alternative for the powerful post -- Lawrence Summers, the former Treasury secretary, who is currently the president's top economic adviser.
Before making a decision later this year, the White House also is expected to look at other economists, including Roger Ferguson and Alan Blinder, former Fed vice chairmen; Janet Yellen, president of the San Francisco Federal Reserve Bank; and Christina Romer, chairman of Mr. Obama's Council of Economic Advisers.
Mr. Bernanke's reputation on Wall Street has ebbed and flowed. But a Wall Street Journal survey conducted this week of 46 private-sector economists found that 43 endorsed his reappointment. "Bernanke's leadership during this financial crisis was outstanding, but not flawless," said Scott Anderson of Wells Fargo & Co., one of those surveyed. "But given human limitations and the limitations of economic and financial knowledge he deserves another tour of duty."
Some saw benefits to continuity. "Don't change horses in midstream," said David Wyss of Standard & Poor's. Others cited the alternatives: "Stated differently: Don't appoint Summers," said Nicholas Perna of Perna Associates.
The White House isn't rushing to decide on reappointing Mr. Bernanke, who hasn't sent any signal that he wants to leave the post. The Intrade online wagering Web site puts 60% odds on reappointment. But a bad turn in the economy could prompt Mr. Obama to seek a new helmsman of his own choosing, or new embarrassing revelations about Mr. Bernanke's handling of the financial crisis could alter the picture before the president makes a decision.
For now, the White House is concentrating on finding new members for the Fed board. Two of the seven seats are vacant. Two sitting governors -- Kevin Warsh, 39 years old, and Donald Kohn, 66 -- are widely believed to be eyeing the exits. The White House is seeking at least one candidate with financial-market experience, a tough task at a time when likely choices are tainted by Wall Street ties.
Waiting to decide on Mr. Bernanke has its costs. "The uncertainty about Mr. Bernanke being reappointed has helped to stoke some of the inflation concerns because it does add to the risk that monetary policy gets politicized," said Michael Feroli, a J.P. Morgan Chase economist.
Mr. Bernanke has come under tough questioning on Capitol Hill, and new powers that the Obama administration proposes to give the Fed have intensified congressional scrutiny of the central bank.
"If these new powers are going to be granted to the Fed, then maybe a professor of economics will never again be the best choice for the Fed chairman," said Darrell Issa (R., Calif.). Rep. Brad Sherman (D., Calif.) accuses the Fed of "a Wall Street mentality." Regarding Mr. Bernanke, he said, "Of those who are infected...better than average," but he said he would prefer a Fed chairman with "populist Democratic values."
Still, Mr. Bernanke has influential admirers -- including Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, and Rep. Carolyn Maloney (D., N.Y.), chairman of the Joint Economic Committee. Ms. Maloney, who backs Mr. Bernanke's reappointment, said, "He's basically an academic working in a nonpartisan way to save the economy."
Mr. Bernanke would need to be confirmed by the Senate if reappointed for a second four-year term. Both the chairman of the Senate Banking Committee, Christopher Dodd (D., Conn.), and the panel's senior Republican, Richard Shelby of Alabama, have been critical of the Bernanke Fed.
Mr. Bernanke's chief rival, Mr. Summers, is widely regarded as one of the sharpest economists of their generation. But his blunt, domineering style makes some bristle and could be greeted with trepidation at the Fed.
Mr. Summers also could meet resistance on Capitol Hill. He was forced out of his job as president of Harvard University, in part because of tense relations with the faculty and comments about women. Antipathy toward Wall Street could also be a factor. Mr. Summers raked in $5.2 million from hedge fund D.E. Shaw in the year before he joined the White House and was an advocate of financial deregulation in the 1990s.
For those and other reasons, other names are surfacing. Among them is Ms. Yellen, who was an adviser in the Clinton White House and Fed governor during the tenure of former Chairman Alan Greenspan. She has strong academic credentials and fans inside the administration, but is in the dovish wing of the Fed. "I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said in a recent speech. That image could unsettle financial markets -- whose opinions matter to presidents picking a Fed chairman. Ms. Yellen declined to comment Wednesday.
Another candidate is Mr. Ferguson, who was Mr. Greenspan's loyal deputy and is now chief executive of financial-services firm TIAA-CREF and a member of the President's Economic Recovery Advisory Board. "Ben Bernanke has led the Fed well during this crisis and, in my view, well deserves to be renominated," he said in response to an inquiry. "I am eager to continue leading TIAA-CREF, but honored to be mentioned in this regard."
Mr. Blinder, now a Princeton economist, said, "I don't want to engage in rumors about myself or anybody else, except to say I didn't spread any of those rumors." Ms. Romer, who was a University of California at Berkeley professor, declined to comment.
Write to Jon Hilsenrath at jon.hilsenrath@wsj.com, Sudeep Reddy at sudeep.reddy@wsj.com and David Wessel at capital@wsj.com
http://online.wsj.com/article/SB124709730991015099.html#mod=testMod
White House Ponders Bernanke's Future
By JON HILSENRATH, SUDEEP REDDY and DAVID WESSEL
As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman's standing on Wall Street is on the rise while attacks on him from Congress mount.
Treasury Secretary Timothy Geithner is expected to play a key role in advising President Barack Obama on whether to reappoint Mr. Bernanke. Mr. Geithner has worked closely both with Mr. Bernanke and with the leading alternative for the powerful post -- Lawrence Summers, the former Treasury secretary, who is currently the president's top economic adviser.
Before making a decision later this year, the White House also is expected to look at other economists, including Roger Ferguson and Alan Blinder, former Fed vice chairmen; Janet Yellen, president of the San Francisco Federal Reserve Bank; and Christina Romer, chairman of Mr. Obama's Council of Economic Advisers.
Mr. Bernanke's reputation on Wall Street has ebbed and flowed. But a Wall Street Journal survey conducted this week of 46 private-sector economists found that 43 endorsed his reappointment. "Bernanke's leadership during this financial crisis was outstanding, but not flawless," said Scott Anderson of Wells Fargo & Co., one of those surveyed. "But given human limitations and the limitations of economic and financial knowledge he deserves another tour of duty."
Some saw benefits to continuity. "Don't change horses in midstream," said David Wyss of Standard & Poor's. Others cited the alternatives: "Stated differently: Don't appoint Summers," said Nicholas Perna of Perna Associates.
The White House isn't rushing to decide on reappointing Mr. Bernanke, who hasn't sent any signal that he wants to leave the post. The Intrade online wagering Web site puts 60% odds on reappointment. But a bad turn in the economy could prompt Mr. Obama to seek a new helmsman of his own choosing, or new embarrassing revelations about Mr. Bernanke's handling of the financial crisis could alter the picture before the president makes a decision.
For now, the White House is concentrating on finding new members for the Fed board. Two of the seven seats are vacant. Two sitting governors -- Kevin Warsh, 39 years old, and Donald Kohn, 66 -- are widely believed to be eyeing the exits. The White House is seeking at least one candidate with financial-market experience, a tough task at a time when likely choices are tainted by Wall Street ties.
Waiting to decide on Mr. Bernanke has its costs. "The uncertainty about Mr. Bernanke being reappointed has helped to stoke some of the inflation concerns because it does add to the risk that monetary policy gets politicized," said Michael Feroli, a J.P. Morgan Chase economist.
Mr. Bernanke has come under tough questioning on Capitol Hill, and new powers that the Obama administration proposes to give the Fed have intensified congressional scrutiny of the central bank.
"If these new powers are going to be granted to the Fed, then maybe a professor of economics will never again be the best choice for the Fed chairman," said Darrell Issa (R., Calif.). Rep. Brad Sherman (D., Calif.) accuses the Fed of "a Wall Street mentality." Regarding Mr. Bernanke, he said, "Of those who are infected...better than average," but he said he would prefer a Fed chairman with "populist Democratic values."
Still, Mr. Bernanke has influential admirers -- including Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, and Rep. Carolyn Maloney (D., N.Y.), chairman of the Joint Economic Committee. Ms. Maloney, who backs Mr. Bernanke's reappointment, said, "He's basically an academic working in a nonpartisan way to save the economy."
Mr. Bernanke would need to be confirmed by the Senate if reappointed for a second four-year term. Both the chairman of the Senate Banking Committee, Christopher Dodd (D., Conn.), and the panel's senior Republican, Richard Shelby of Alabama, have been critical of the Bernanke Fed.
Mr. Bernanke's chief rival, Mr. Summers, is widely regarded as one of the sharpest economists of their generation. But his blunt, domineering style makes some bristle and could be greeted with trepidation at the Fed.
Mr. Summers also could meet resistance on Capitol Hill. He was forced out of his job as president of Harvard University, in part because of tense relations with the faculty and comments about women. Antipathy toward Wall Street could also be a factor. Mr. Summers raked in $5.2 million from hedge fund D.E. Shaw in the year before he joined the White House and was an advocate of financial deregulation in the 1990s.
For those and other reasons, other names are surfacing. Among them is Ms. Yellen, who was an adviser in the Clinton White House and Fed governor during the tenure of former Chairman Alan Greenspan. She has strong academic credentials and fans inside the administration, but is in the dovish wing of the Fed. "I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said in a recent speech. That image could unsettle financial markets -- whose opinions matter to presidents picking a Fed chairman. Ms. Yellen declined to comment Wednesday.
Another candidate is Mr. Ferguson, who was Mr. Greenspan's loyal deputy and is now chief executive of financial-services firm TIAA-CREF and a member of the President's Economic Recovery Advisory Board. "Ben Bernanke has led the Fed well during this crisis and, in my view, well deserves to be renominated," he said in response to an inquiry. "I am eager to continue leading TIAA-CREF, but honored to be mentioned in this regard."
Mr. Blinder, now a Princeton economist, said, "I don't want to engage in rumors about myself or anybody else, except to say I didn't spread any of those rumors." Ms. Romer, who was a University of California at Berkeley professor, declined to comment.
Write to Jon Hilsenrath at jon.hilsenrath@wsj.com, Sudeep Reddy at sudeep.reddy@wsj.com and David Wessel at capital@wsj.com
http://online.wsj.com/article/SB124709730991015099.html#mod=testMod