May 28, 2018
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An unseemly Fed campaign

U.S. Federal Reserve Chairman Ben Bernanke delivers his semi-annual monetary policy report to Congress before the House Financial Services Committee in Washington, in this file photo from July 17, 2013.


Federal Reserve Chairman Ben S. Bernanke is widely reported to be uninterested in a third term after his current one expires Jan. 31, 2014. So speculation mounts about who President Barack Obama might pick to replace him — and not only speculation. Supporters of two top prospects, former Treasury secretary Lawrence H. Summers and current Federal Reserve Vice Chair Janet Yellen, have been aggressively kibitzing on behalf of their respective favorites.

The campaigning has included a letter to the president from 20 Democratic senators, touting Yellen as a fierce unemployment fighter who would also be a tough bank regulator, as well as a similar letter from 38 House Democratic women. As The Washington Post’s Zachary Goldfarb reported last Wednesday, Summers’ Washington friends have launched a counterattack on his behalf, aided by former senior Obama White House staffers.

We express no preference between Yellen and Summers, both of whom are amply qualified. What we are sure about, however, is that this mini-circus has been not only unseemly, and unsettling to financial markets, but also potentially destructive to the Federal Reserve’s most valuable institutional asset: political independence.

Obviously no presidential nomination can be completely divorced from considerations of partisanship or policy. But the chairmanship of the Federal Reserve is a unique position, both in terms of its tremendous power and of the importance that the chairman exercises that power — in perception and in fact — strictly according to objective economic criteria.

There’s a rough analogy here with the Supreme Court. Presidents nominate justices broadly sympathetic with their own views but also, ideally, because they’ll follow the law without fear or favor. If nominees make advance commitments, implicit or explicit, it undercuts their legitimacy and that of the institution.

By turning the Fed succession into a proxy battle over bank regulation, or between monetary policy “hawks” and “doves” — or even by casting it as a choice between a potential first woman chair and a famously mercurial male — the Summers and Yellen camps are dragging the Fed itself into Washington’s toxic political fray.

Unfortunately, the inappropriately open contest for the job may have already diminished the stature of the winner, whoever it turns out to be.

The Washington Post (Aug. 25)

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