Janet Yellen Vs. Larry Summers. Who Will Be The Next Fed Chairman?

Within the next few months the Obama administration is expected to announce a nominee for Ben Bernanke's replacement. Two names have been bounced around recently: Janet Yellen and Larry Summers. According to Google Trends, here is what Google news searches look like over time for these two candidates.


Not surprisingly, researchers at Credit Suisse have recently picked up on this trend.
CS: Fed Vice Chair Janet Yellen was seen as the most likely successor to Bernanke. But within the past couple weeks, former Treasury Secretary Lawrence Summers’ name has come up as a serious contender for the post.

Yesterday Ezra Klein published a nice article on the topic, listing 5 different considerations that may drive this shift toward Larry Summers.

Ezra Klein, WP: The word among Federal Reserve watchers right now is that the choice is down to Janet Yellen or Larry Summers as Ben Bernanke’s replacement. I can’t find anyone who really thinks it’ll be Roger Ferguson, Tim Geithner, Alan Blinder, or some other dark horse.

People dismissed Summers’s chances a month or two ago, but he’s increasingly viewed as the leading candidate today — and opinions on this, for reasons I don’t fully understand (though I suspect have to do with a bunch of elite trial balloons going up at the same time), have really hardened in the last 72 hours.

According to Klein, Summers has a key advantage in the fact that Obama knows and likes him. The President also tends to surround himself with his ex colleagues and friends and he doesn't personally know Yellen. Another potential negative for Yellen, who is a highly accomplished economist, is her fairly dovish stance on monetary policy.

CS: Yellen’s rhetoric occasionally comes across as more dovish than Bernanke’s, and some wonder whether, as chair, she would advocate tolerating a higher rate of inflation in pursuit of job growth.

While her public stance has been consistent with the FOMC majority, some in the Obama administration may view her dovish statements of the past as a potential hurdle for what is sure to become a contentious confirmation process. Right now the bet is on Larry Summers.