Summers is out. Yellen must be in, right? Wall Street traders think so. The Washington Post isn't so sure. They do have alternatives though to Yellen. Annie Lowrey at the New York Times still portrays Yellen as the frontrunner with only Don Kohn a throw in candidate (quick Annie, ask hubby Ezra to phone the White House). I expected Summers to be the next FED chair, and I am very happy to see him out of the running. Not just his history but his personality did not seem to be a good fit for what has become the prime position for control of our political economy. In one of my posts, I mentioned as a throw away thought that Summers may be a stalking horse for someone else. That might not be the case. This is all amateur conjecture, but what if Yellen is the stalking horse? She can be the contrast to the real contenders. My uninformed and wild prediction: Roger Ferguson will be the next FED chair.
Ferguson has a tremendous cathedral resume. The Wapo gives him tremendous praise in this article (he was so calm during 9/11 when he said lending would continue). Three separate degrees from Harvard, studied at Cambridge, and was a Clinton era (Rubin) former FED head who worked on international banking system initiatives. He is just the sort of jerk who helped create the crisis. Ferguson is a neo-Keynesian, a member of the Council on Foreign Relations (Rubin), a member of the Group of Thirty (Geithner), a former president of the Harvard Board of Overseers (Rubin, again), and wait for it, black. His wife was a commissioner of the SEC in the run up to the financial crisis, so we know turning a blind eye to the crooks on Wall Street is welcome in their home. The neo-Keynesian part is a key though as QE has grown long in the tooth and everyone has soured on it except Wall Street. There will be new policies pushed, and Ferguson's background makes him a more secure lackey for the boys in the executive branch. Sorry Janet, but just like HRC in 2008, victim coalition priorities show that the first black whatever means more than the first female whatever.
There is change in the wind though from a policy standpoint. The media shanked Occupy in time for Obama to calm his left flank, appear moderate and win re-election. The Wall Street boys got their bailouts and QE for years, but these were purely monetary policy levers. The left's collection of lower barbell and socially conscious voters are searching for their new champion. Like the right's grassroots looking for fresh faces to separate from the current corrupt Wall St.-DC structure, the left is desperate because that is all they have. Populist Democrats died somewhere in the late '90s. Google Elizabeth Warren, and the first four suggestions have two that say "for president" or "2016". She is a smart lady and understands the banking world very well, but I would never want her anywhere near the nuclear launch codes. The Democrat bench is that empty that she is in the mix and polling nearly even with Biden (well behind HRC). Populism is selling. The political class will pivot to throw a sop to the little people that make up the 99%. The ideas are already being floated out in the media for next steps, and Syrian intervention (MI complex juice) is still not out of the question.
These officials all have constant communication with different interest groups guiding policy. Yellen might have been the stalking horse all along. Yellen is the stand-in for Bernanke's policies in the crisis. I'm a bit confused why the president would not want Bernanke to say in office for one more term to unwind the mess he has created, but the heat is too high on Bernanke. Being his number two, Yellen is the Bernanke-status quo proxy. It is obvious Obama does not want her through White House leaks, which means the Rubin crew does not want her. Maybe it is her statements saying we need to confront TBTF or regulate Wall Street more, but it might just be personality and political loyalty. Summers may have been too much the old deregulation era hand. The person sitting in the FED chairmanship will have to react to whatever blow ups pop up from Bernanke's actions. The plans of mice and Washington men will bump into reality in the coming years. The debt to GDP ratio, foreign US Treasury holdings and overall dollar situation in 2014 will be far different than they were in 2006. Beyond dollars, the Syrian smackdown from the public and foreign powers must not have registered. Our political class still believes they make policy in a vacuum.