Five years after the 2008 financial crisis, President Obama has a big decision looming: Who will assume chairmanship of the Federal Reserve after Ben Bernanke’s term expires in January?
Larry Summers is believed to be the president’s favorite. But there’s a hitch, Mother Jones reports. Obama’s own executive ethics rules bar presidential appointees from working on matters directly related to a former employer for two years after taking a government job. So, barring a waiver, Summers, who consulted for Citigroup since at least 2012 according to their spokeswoman, would have to recuse himself from any consultations on penalties and Fed board votes regarding the Wall Street megabank.
Senators from both parties—including Republican John Cornyn and Democrat Elizabeth Warren—have argued that Summers’ Wall Street ties could hamper his ability to effectively serve as chairman.
The most likely alternative to Summers is Janet Yellen, the Fed’s vice chair, who has emerged as the favored choice of many liberals.
“Yellen doesn’t have the baggage that Larry brings to this,” Tony Fratto, who served as a spokesman for President George W. Bush, told Chuck Todd on Friday’s The Daily Rundown.
Summers, a free market enthusiast, has also been criticized by Joseph Stiglitz in part paving the way for the 2008 financial crisis during his time as Treasury Secretary under President Bill Clinton.
Already 350 economists have signed a letter to President Obama calling on him to nominate Yellen as Bernanke’s successor and 20 senators sent a letter to the president in July supporting Yellen for the position.
“We believe that she is the best person for this job,” wrote the senators. She has the “independence, intellectual rigor and willingness to challenge conventional wisdom regarding deregulation.”
If Obama nominates Summers, it’s uncertain whether his nomination would be approved by Congress before Bernanke steps down—especially with Syria the focus of attention in Washington. In this case, Yellen would temporarily assume the position because of her role as vice president.
Check out Chuck Todd’s latest conversations with former Sen. Chris Dodd, former FDIC Chair Sheila Bair, former TARP pay czar Ken Feinberg, and members of our Gaggle who joined The Daily Rundown on Friday to discuss the Fed chair debate and financial crisis.
Alex Stambaugh