Who Will Fill Bernanke’s Shoes When He Steps Down?
It will be an auspicious day — sad for some, joyous for others — when Federal Reserve Chairman Ben Bernanke’s current term expires in January 2014. Bernanke was appointed the 14th Chairman of the Federal Reserve by President George W. Bush in February 2006, and was re-nominated by President Barack Obama for a second term in January 2010.
The members of the Federal Reserve Board of Governors are chosen by the President and confirmed by the senate. This puts Bernanke’s fate — should he choose to pursue another term — in the hands of President Obama. The decision that either man will make is by no means clear. Bernanke has reportedly told close friends that he probably will not stand for a third term at the central bank.
The economy and, in particular, government involvement in the recovery has become the biggest issue facing President Obama in his second term. Accommodating monetary policy has defined post-crisis economics and financial markets have become addicted to federal purchases of bonds and mortgage-backed securities. The future of monetary policy is directly related to — and in many ways dictates — the ongoing narrative of the U.S. economic recovery. Whoever takes the chair after Bernanke will have considerable control over those policies.
While it’s impossible to predict what Bernanke or President Obama will decide come January, Bloomberg posed the question to a group of financial and economic decision makers to get the market consensus.
According to Bloomberg’s survey of 906 decision makers in finance and economics, the U.S. Federal Reserve is doing the best job of any central bank in the world of handling the problems facing its economy. The survey showed that 57 percent of respondents feel this way. The next-best bank, the Bank of Japan, earned just 13 percent of the vote, while the European Central Bank and the Bank of England tied with “have no idea” at 10 percent.
With that in mind, 34 percent of respondents believe that current Federal Reserve Vice-Chair Janet Yellen is most likely to take the top spot in 2014. This is perhaps unsurprising given Yellen’s decidedly level-headed and intelligent grasp on the current economic situation. With 27 percent of the vote, Bernanke is seen as the second-most likely person for the job. After that, 22 percent of respondents have no idea, suggesting that survey participants aren’t thinking too hard about this question just yet. Six percent think that former Treasury Secretary Timothy Geithner will get the job.
A separate but similar question about who would make the best Fed chair if Bernanke were to step down, yielded similar results. A majority of participants, 31 percent, have no idea, once again suggesting that they are not thinking too hard about the question. Whether or not this is because it is not important to them or because the event is still a year away is unclear. Vice-chair Janet Yellen earned 26 percent of the vote, while Geithner earned 11 percent.