I do not ordinarily comment on political matters in this blog, but the highly unusual process that has been used to handle the selection of the next chairman of the Federal Reserve is likely to have lasting economic effects. It started last June when the President made comments in an interview that, in effect, Ben Bernanke had overstayed his welcome. Then we have seen the spectacle of Larry Summers and Janet Yellen being vetted for the job in the press. Endorsed by Senator Foghorn, unendorsed by Representative A far cry from the day when Jimmy Carter introduced Paul Volcker and everyone applauded.
David Gergen points out the peril of having a public competition for the post in this CNN Opinion piece. First, if you start disqualifying people who have taken strong stances on critical issues, you simultaneously discourage the best and the brightest from being considered for the job AND from saying what they really think in public forums. Second, you turn what has been a nonpartisan position (Reagan kept Volcker, both parties kept Alan Greenspan and Obama kept Bernanke) into a partisan one. The FRB chair is by far the most powerful economic position in government; do we want the best person or the person who has done the most to win favor with politicians.
Now that Summers has dropped out, the pressure is on the President to nominate someone with equal qualifications. Janet Yellen would be great. But will we get instead one of the lesser lights in the current administration who would do his masters' bidding?
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