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Why Roger Ferguson May Be the Next Fed Chair

Roger Ferguson could be President Obama's Goldilocks candidate for Federal Reserve Board chairman.

Someone not too hot (Larry Summers) or too cold (Janet Yellen.) Someone just right.

Ferguson has been a Fed insider like Yellen, serving as vice chairman from 1999 to 2006, and, like Summers, holds a PhD from Harvard. As chief executive of TIAA-CREF since 2008, Ferguson has seen the financial markets up close and personal. Last year he led a tough Group of 30 analysis of corporate governance at financial companies.

(To see more posts from Barb Rehm's Blog, click here.)

Ferguson's name surfaced last spring when folks started focusing on the fact that Ben Bernanke's second, four-year term as Fed chairman would end on Jan. 31, 2014.

The New York Times floated Ferguson as a possible successor to Bernanke in late April. Even earlier, Neil Irwin of the Washington Post laid out the possible candidates and concluded Ferguson ranked third behind Yellen and Summers.

But Ferguson faded as the alternative candidate to Yellen and Summers, once Obama mentioned Don Kohn, another former Fed vice chair, in a private meeting with Democrats. The 40-year Fed veteran retired in 2010 and is now a senior fellow at the Brookings Institution and a member of the Bank of England's Financial Policy Committee.

But Kohn will turn 71 in November, which puts him on the old end of the spectrum of candidates. Ferguson is a decade younger. (Yellen just turned 68 and Summers is 58.)

Summers joined the Obama administration at its start and served as director of the National Economic Council for two years. The White House seems determined to nominate him, even taking the unusual step recently of telling his critics to back off.

The administration may want someone from "their team" at the Fed's helm for the last years of Obama's presidency - the period that's likely to form his legacy.

Economic growth is a key factor in any president's popularity and the White House is right to conclude that the Fed chair will play a crucial role as the central bank unwinds its easy-money policies.

But getting Summers confirmed will cost the White House. It's impossible to predict the deal's specifics, but it won't come cheap. Summers has enough adversaries on the Hill and Yellen has plenty of allies.

It could still happen, but it won't be easy.

Personally, I'm still pulling for Yellen. She's clearly qualified and the first female Fed chair would be a big deal. Many women in the Senate agree, and that's where this confirmation battle will take place.

But I have to admit Yellen hasn't done herself many favors since this contest heated up. She declined to talk to the Wall Street Journal when it profiled her and decisions like that create a vacuum that others' opinions then fill.

People are questioning whether she's a "real leader," whether she is "dynamic" enough. It's sad but true, like too many women, Yellen is not much of a self-promoter. Of course, this has little to do with how she'd do the job, but it does factor into landing it.

If Obama doesn't nominate the first female Fed chair, then he could nominate the first African-American one in Ferguson.

The Old Boys Club will never be disbanded if leaders like Obama don't seize opportunities like this one.


(2) Comments



Comments (2)
It's beginning to seem like discussions of "Someone Other Than Summers/Yellen" ("SOTSY") are close to trumping learned views on TBTF, Basel III, the Volcker Rule, etc. in the sheets of the financial press! So why not join the crowd sourcing.

My ideal candidate for Fed Chair, let's call him or her John (or Jeanne) Maynard Hayek, "J" for short, is a likable consensus builder. J is a distinguished PH.D economist, as well as an attorney, holding degrees from elite universities with hands on experience as counsel and executive for financial institutions, large and small, and significant important experience at the Fed itself or with the Treasury Department in previous administrations. J also has considerable experience working with foreign financial institutions and regulators in various fora, and, finally has some non-profit experience focusing on the financial betterment of the LMI population.

Unfortunately, this ideal candidate doesn't exist. However, of the current SOTSY who have surfaced to date, Don Kohn and Barbara's latest candidate, Roger Ferguson, each certainly have many, but not all, of these qualifications, as do, for that matter, the beleaguered and oft maligned pair, Summers and Yellen.

My bottom line for what it's worth (probably not much-I doubt these comments will reach the President's morning briefing book anytime soon!); Both Ferguson and Kohn would be excellent and confirmable choices, but I come out for Kohn, a close call.

Why? As for monetary policy considerations Kohn appears to have a bit of Hayek moderation qualities, needed, for example, to manage and articulate the inevitable-and needed- gradual exit from QE3 and then going forward for growth with controllable inflation. In addition, Kohn has hands on experience as a key player in managing the recent financial crisis which bodes well for his ability to avoid or abort one in the future, an import aspect of the Fed's remit, and a challenge that may come sooner than later; e.g., managing the QE3 exit without serious domestic and international market and macroeconomic disruptions.

As for financial institution regulatory policy skills it's pretty much a wash between Kohn and Ferguson, with maybe a slight edge to Ferguson. However, I would expect either of Kohn or Ferguson would rely to a considerable extent on Governor Tarullo's policy insights (as well as those of Governors Stein and Powell), assuming Tarullo sticks around (he has a long term remaining), especially if the President gets around to appointing him, per Dodd-Frank, as a Vice Chair for Supervision.

Disclosure: Don Kohn was a Fed colleague when I had the honor to serve as Fed General Counsel back in the late mid last century. I admired his work then as an up and coming young economist and obviously continue to do so. BTW: I don't think he has aged much despite now being age 70 (the "new 60"?) and I expect he could easily defeat all other Fed candidates in a triathalon.
Neal L. Petersen, Attorney at Law, former Fed General Counsel
Posted by Neal Petersen | Thursday, August 22 2013 at 1:42PM ET
This article came to me as a "TOP STORY" link. When I read it I thought, "Nice piece, except for the Op-Ed at the end." Diving deeper it seems this story is really from Barbara's blog. So is it the article or Barbara's blog that is the "TOP STORY"?
Posted by garydfaulkner | Thursday, August 22 2013 at 8:45AM ET
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