They say timing is everything, and that surely was the case when Larry Summers took his name out of the running as Federal Reserve chairman. Even if unintended, his withdrawal came on the five-year anniversary of Lehman Brothers Holdings Inc.’s bankruptcy.
The timing serves as a useful reminder that the next Fed chairman should expect an economic crisis of some sort. If history is a guide, another recession may arrive in the next two to three years — before the economy has recovered from the last one. President Barack Obama should find someone who will look to Ben S. Bernanke, whose term ends in January, as a role model.
Bernanke’s post-crisis ingenuity helped transform the Fed from staid traditionalism to creative pragmatism — without sacrificing independence, credibility or accountability. Bernanke’s Fed redefined the role of the modern central bank. If Obama won’t or can’t persuade Bernanke to stay another five years — which seems unlikely — he should choose Janet Yellen, the Fed’s vice chairman.
In short, she would be a superior, even historic, choice as the first woman to lead the Fed. Were we somehow able to erase the memories of the last three months, the consensus would be overwhelming. Yellen has 15 years of experience at the Fed. What’s more, she has displayed enough independence to disabuse those who suggest she would be a tool of the 20 Senate Democrats who supported her over Summers.
Bloomberg News (Sept. 17)