Hilsenrath Confirms Summers Out Means Fed Business-As-Usual
UPDATE: *GEITHNER STILL DOESN'T WANT TO BE CONSIDERED FOR FED CHIEF: WSJ
The next chairman's main job is going to be deciding how soon and how aggressively to pull back on Fed programs; and as none other than Fed whisperer John Hilsenrath notes, Larry Summers' withdrawal increases the likelihood of continuity in central-bank policy for the next few years - meaning any Fed wind-down of its easy-money programs will be slow and gradual. Of course he posits Yellen and Kohn as potential front-runners but throws Tim Geithner and Roger Ferguson back into the mix. Business-as-usual is back and the doves are in control - all the Fed needs now is bigger deficits to enable it to keep the pumps primed...
"The range of uncertainty has narrowed," said Stephen Oliner, a former Fed economist and current senior fellow at the Ziman Center for Real Estate at the University of California, Los Angeles. "Summers was just a bit of an unknown because he hadn't really enunciated a lot of views on policy."
Ms. Yellen is seen by many investors as the most likely candidate to succeed Mr. Bernanke. She offers the most certainty of continuity because she has been at his side for the past three years and is a strong advocate of his policies. But she isn't a certainty to be nominated for the job, especially after a public campaign on her behalf by lawmakers appeared to have left Mr. Obama peeved about congressional interference in his decision.
It is possible Mr. Obama could turn to a dark-horse candidate, such as former Treasury Secretary Timothy Geithner, former Fed Vice Chairman Roger Ferguson, or a number of others.
The next chairman's main job is going to be deciding how soon and how aggressively to pull back on Fed programs.
Still, it will be a challenging task. If the next Fed chairman pulls back too soon or too aggressively, borrowing costs could soar, cutting off consumer and business spending, and sending the economy back into recession. But if the Fed doesn't move fast enough, inflation or a new financial bubble could emerge.
The Fed has already seen glimmers of both a boom in credit markets earlier this year and the worrying jump in long-term interest rates since Mr. Bernanke started talking about scaling back in May.
We can't help but wonder why Summers really stepped away - is it perhaps that he knows (deep in his cold bloodless heart) just what a disaster this is all going to be and prefers to keep his 'perceived' legacy in place?
Now we have Geithner clearly not wanting to be touched with the Fed shitty stick... seems like we will end up with the lowest common denominator Fed head - great stuff
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