In an era of unprecedented efforts by the Federal Reserve to bolster the economy, add another first: a highly public campaign to influence the selection of the central bank’s next chief.
Supporters of Fed Vice Chair Janet Yellen have been outspoken recently in boosting her candidacy to replace Chairman Ben Bernanke, whose second four-year term expires in January.
About a third of the 54-member Senate Democratic caucus signed a letter urging President Obama to appoint the former University of California, Berkeley, economist and onetime president of the Federal Reserve Bank of San Francisco to the job.
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Lawmakers such as House Minority Leader Nancy Pelosi, D-Calif., have offered support as if they were weighing in on a presidential primary. And some influential figures in finance, including former Fed Gov. Alan Blinder and former Federal Deposit Insurance Corp. Chairwoman Sheila Bair, have touted Yellen’s candidacy.
“It’s rare to have this much public discussion about who the president should appoint,” said Allan Meltzer, a Fed historian at Carnegie Mellon University.
Bernanke has raised the Fed’s profile, dramatically expanding its operations and role in the economy. He also has opened up the decision-making process, holding the Fed’s first regular news conferences and reaching out to the public through such events as a televised town-hall meeting and an interview on CBS’ “60 Minutes.”
Partly as a result, the interest in who will succeed him is high.
Yellen supporters have gone public to try to counter the growing impression that the other leading candidate for the job, former Treasury Secretary Larry Summers, is the favorite to succeed Bernanke.
Summers developed a close relationship with Obama while serving as his top economic adviser in 2009-10, and several Summers protégés populate the White House inner circle. He carries some baggage.
Some Yellen backers also are concerned that certain criticisms of her, such as that she’s soft-spoken, have sexist undertones.
The Fed hasn’t had a female chairwoman in its 100-year history.
“Yellen is clearly the most qualified successor to follow Ben Bernanke. There is no reason to pass her over for less-qualified males,” Bair wrote in a recent column on the Fortune magazine website. “Yellen already has a ‘Y’ in her name; she doesn’t need one in her chromosomes.”
The nomination of a Fed chair normally is closely followed only by economists, high-level investors and a small cadre of lawmakers with oversight of the central bank.
The chairman’s role gained more public awareness when Paul Volcker fought runaway inflation in the early 1980s and Alan Greenspan, nicknamed “the Oracle” for his well-parsed comments, guided the nation through the economic booms and busts during his long tenure under four presidents from 1987 to 2006.
But the Fed’s actions to battle the Great Recession and financial crisis have greatly raised the stakes for its top job.
The next Fed chief will have the difficult task of starting to reduce some of the steps it has taken to stimulate economic growth and lower unemployment, including tapering the $85 billion in bonds the central bank has been buying each month since September to push down long-term interest rates.
“There seems to be an exceptional amount of interest in who the next Fed chairman is going to be, and I think a big reason is, this has been an exceptional time for our central bank,” said James Pethokoukis, who blogs about money and politics for the American Enterprise Institute, a conservative-leaning think tank.
Administration officials have said Yellen and Summers are the front-runners to replace Bernanke, who is not expected to seek another four-year term.
Further fueling the push for Yellen is a distaste by many liberals for Summers.
He was a key player in the Clinton administration when it agreed to tear down the wall between federally insured commercial banks and uninsured investment banks, allowing them to own each other, and to avoid regulating complicated derivative securities.
Coupled with loose enforcement of remaining financial rules under President George W. Bush, those changes have been blamed for helping trigger the 2008 worldwide financial crisis.
Summers also angered people when, as president of Harvard in 2005, he suggested women were underrepresented in science and engineering because they lacked the aptitude of men. Controversy over the comments led to his resignation from the post a year later.
He also has a reputation as being brilliant, but difficult to deal with.
Some liberal websites, such as Huffington Post and the Nation, have run anti-Summers columns recently, and the Daily Kos site launched an online petition urging Obama not to choose Summers and “consider instead appointing a more qualified woman, such as … Janet Yellen.”
The message to pick Yellen was more direct from Democratic senators and one independent who signed a letter circulated by Sen. Sherrod Brown, D-Ohio.
The letter touted Yellen’s “impeccable résumé,” which includes extensive monetary-policy experience and a stint as chairwoman of the White House Council of Economic Advisers under Clinton.
Some prominent Democrats, including Sen. Patty Murray of Washington, Sens. Barbara Boxer and Dianne Feinstein of California and Sen. Elizabeth Warren of Massachusetts, were among the senators who signed.
“The president has an incredible opportunity here to make history by choosing someone who has the right experience, has consistently made the right calls and has the right perspective and judgment to continue our economic recovery,” Boxer said about her support for Yellen.
Obama, in a closed-door session Wednesday with House Democrats, offered what meeting participants described as a keen defense of Summers after being pressed by Rep. Ed Perlmutter of Colorado about considering Summers for the Fed job.
Obama said he believed Summers had been maligned in the liberal media, according to Rep. Gerald Connolly, of Virginia.
According to Connolly’s account, the president described Summers as a rock of stability who deserved credit for helping steer the U.S. economy back from the financial crisis of 2008 and the ensuing recession.
The president, Connolly said, did not address the criticism of Summers over his record on women’s issues, which have dogged him throughout his career.
The defense continued at the White House, where press secretary Jay Carney said Summers had “stood shoulder to shoulder”with Obama during the economic crisis.
“He made decisions and put forth the policies that helped reverse the tragic economic decline that this country faced in the beginning of 2009,” Carney said, adding that Obama’s kind words about his former aide shouldn’t be misconstrued as an omen about whether Obama would pick him for the top Fed post.
Seeking to lower expectations about an imminent announcement, the White House said Obama will not name a new Fed chair until fall. Obama has said he’s looking for a chairman who will take ordinary people’s needs into account when setting monetary policy.