Yellen Has the Right of First Refusal to Lead Fed, Meyer Says
Federal Reserve Vice Chairman Janet Yellen has the “right of first refusal” to become the next leader of the central bank when Ben S. Bernanke’s term ends in January, said former Fed governor Laurence Meyer.
Meyer, speaking on a Bloomberg Washington Economic Summit panel in Washington today, said it’s “a bit surprising” that Bernanke couldn’t manage his calendar to allow him to take part in this year’s Fed conference in Jackson Hole, Wyoming.
“It’s somewhat of a mystery,” Meyer said. “It’s a surprise.” He said that since the conference in August will be his “last Jackson Hole,” Bernanke may not have wanted the meeting to center on him and this would not be a good time for him to signal “future action,” since much of that will be up to his successor.
Speculation about the succession at the central bank intensified after the Fed said April 21 that Bernanke would skip the annual symposium in Jackson Hole because of a personal scheduling conflict. Yellen, a 66-year-old former professor at the University of California, Berkeley, is seen as a potential successor to Bernanke.
“I would say Janet Yellen has the right of first refusal,” said Meyer, co-founder and senior managing director of Macroeconomic Advisers LLC. He cited Yellen’s “extraordinary experience.”
Adam Posen, a former member of the Bank of England’s rate- setting Monetary Policy Committee, said Yellen’s apparent lack of a personal relationship with President Barack Obama could be an impediment to her appointment.
“It’s not a question of qualifications,” Posen said. “I’m sure President Obama has high regard for Vice Chair Yellen, but I don’t get the sense that they’re particularly close.”
“In general, presidents appoint Federal Reserve chair people who they have some personal relationship with,” Posen said.
He pointed out that vice chairmen historically haven’t been appointed to the No. 1 post. There have been 14 chairmen in the 100 years the Fed has existed, and none previously served as vice chairman, according to information on the central bank’s website.
Posen, asked about a possible alternative if Yellen doesn’t get the top spot, said it “has to be” former Treasury Secretary Timothy F. Geithner.
Geithner was quoted by Politico in January as saying that there is “not a chance” he will be the next Fed chief.
Federal Reserve policy makers are meeting in Washington today and tomorrow. They will probably vote to continue their $85 billion in monthly bond buying.
Posen, commenting on Bank of Canada Governor Mark Carney’s coming move to the top spot at the Bank of England, said he hopes Carney and his BOE colleagues can come up with “great innovations on the macroprudential side.”
Posen said Carney may or may not bring the idea of using forward guidance with him when he takes over the BOE, adding that the discussion is “much fuss about nothing.”
“I think in general it’s more what central banks do than what they say,” said Posen, who is now president of the Peterson Institute for International Economics in Washington.
As a lack of innovation holds back the U.S. economy, the new normal unemployment rate may hover around 6.5 percent to 7 percent, said Edmund S. Phelps, a 2006 Nobel Prize laureate in economics and director of the Center on Capitalism and Society at Columbia University. The rate was 7.6 percent in March.
“There’s not an awful lot of room for recovery remaining,” Phelps said at today’s Bloomberg event.
Posen, who said he’s more optimistic about the economic outlook, said any rise in natural unemployment is less attributable to a lack of innovation and more to long-term joblessness.
Posen said commerce with the rest of the world will provide only “small” help to the U.S. this year.
The economy will probably slow down in the second and third quarters as fiscal drag from cuts to planned federal spending take hold, Meyer said.
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