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Yellen Seen as Likely Fed Nominee in Survey After Summers Exit

Fed Vice Chairman Janet Yellen
Federal Reserve Vice Chairman Janet Yellen has won the endorsement of 20 senators in the Democratic caucus. Photographer: Sam Hodgson/Bloomberg

Sept. 17 (Bloomberg) -- Janet Yellen is overwhelmingly seen as likely to be nominated as chairman of the Federal Reserve to succeed Ben S. Bernanke, according to a Bloomberg survey of economists.

Fifty-six of 65 economists in the survey, or 86 percent, said President Barack Obama is likely to pick Yellen, the Fed’s vice chairman. The survey was taken yesterday and today, after former Treasury Secretary Lawrence Summers withdrew from contention. A Sept. 6 poll showed that 49 percent of economists expected Summers to be Obama’s pick, compared with 38 percent for Yellen.

“The smart political move is to find someone who will sail to confirmation,” said Sarah Binder, a senior fellow at the Brookings Institution who studies the relationship between the Fed and Congress. “Yellen clearly fits the bill.”

Summers, who served as Obama’s top economic adviser in the president’s first term, withdrew his name two days ago rather than face what he said would be an “acrimonious” confirmation process. Four Democrats on the Senate Banking Committee, which approves Fed nominees before they are considered by the full Senate, had signaled opposition to Summers.

Yellen was viewed as the best choice by 52 percent in the most recent survey. Former Fed Vice Chairman Donald Kohn was second, with 10 percent. Kohn, Yellen and Summers all were mentioned by Obama as possible candidates to replace Bernanke, whose term ends Jan. 31.

Asset Purchases

The transition comes as the Fed prepares to start cutting back on $85 billion in monthly purchases of bonds intended to spur growth and employment. Bernanke has said the so-called quantitative easing program is likely to end in the middle of next year if the economy performs as expected. Policy makers meet today and tomorrow in Washington.

Economists in the latest survey saw slim chances for other candidates, including Kohn and another former vice chairman, Roger Ferguson. Ferguson, now chief executive officer of TIAA-CREF, was seen as the likely choice by 5 percent of economists. Kohn was named by 3 percent.

Yellen is Obama’s top candidate to lead the central bank even after her supporters helped force the withdrawal of Summers, his initial favorite, according to people familiar with the process. White House Press Secretary Jay Carney said yesterday that Obama’s timetable for announcing a choice had not changed from his earlier statement that he’d do it “in the fall.”

‘High Hurdle’

“Given that the candidate will inevitably be compared to Yellen, it’s still a high hurdle for the White House” to nominate someone else, said Binder. “They’ll need to meet the ‘Why not Yellen?’ challenge as well.”

Yellen has won the endorsement of 20 senators in the Democratic caucus, led by Sherrod Brown of Ohio, who wrote a letter to the president saying that she is “the best person for this job.”

She has also won the public support of many of her fellow economists. More than 450 of them have signed a letter arguing that she is “superbly qualified” and “the best possible leader for the Federal Reserve Board at this critical time in our nation’s history.”

To contact the reporters on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net; Catarina Saraiva in Washington at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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