The Fed Race Heats Up

Albert R. Hunt is a Bloomberg View columnist. He was the executive editor of Bloomberg News, before which he was a reporter, bureau chief and executive Washington editor at the Wall Street Journal.
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Divisions are surfacing among leading advisers to President Barack Obama on who the next chairman of the Federal Reserve should be, though Larry Summers remains the front-runner according to persons familiar with the White House deliberations.

Top White House aide and Obama confidant Valerie Jarrett is quietly weighing in to support Fed vice chairman Janet Yellen. Jarrett is a strong advocate for women and Yellen would be the first female Fed chairman. Jarrett is outnumbered by the Summers camp which includes several top Obama economic advisers: director of the National Economic Council Gene Sperling, chairman of the president's Council of Economic Advisers Jason Furman, director of the White House Office of Management and Budget Sylvia Burwell and Treasury Secretary Jack Lew.

Supporters of Summers, Obama's former economic adviser, worry Jarrett might enlist her close friend, First Lady Michelle Obama to her cause. Jarrett currently is vacationing on Martha's Vineyard, as are president and Mrs. Obama.

Based on conversations with informed sources, they place the probabilities at: Summers: 60 percent; Yellen 35 percent; someone else 5 percent.

When Obama discusses the choice, in private as well as public, he stresses the importance of selecting a chairman who can handle a financial crisis similar to 2008-09. Insiders believe that's code for Summers, the brilliant, if abrasive, former Treasury secretary and president of Harvard University.

There are, however, other possible impediments: One is the money Summers made after leaving government service from his financial interests.

The other obstacle is how much Republican support Summers could muster in the Senate, where his nomination might well face a filibuster. With some liberal Democrats likely to oppose his nomination -- how would the populist freshman Senator from Massachusetts, Elizabeth Warren, vote? -- he'd probably need about 10 Republicans to support him.

Tennessee's Bob Corker would likely be one influential affirmative vote. Two other senators to watch would be Arizona's John McCain and Rob Portman of Ohio.

The president's awkwardness with the issue continues. At last Friday's press conference, during a lengthy response on a question regarding who the next chairman will be, he never mentioned the current chairman, Ben Bernanke.

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