Who should be the next Federal Reserve chair?

Maryland financial and business leaders cast their votes

August 25, 2013|By Eileen Ambrose, The Baltimore Sun

Federal Reserve Chairman Ben Bernanke plans to step down when his term expires at the end of January — if not sooner — and President Barack Obama is expected to nominate a successor this fall.

Right now, the front-runners appear to be former Treasury Secretary Lawrence Summers, an economic adviser to the president during his first term; and Fed Vice Chair Janet Yellen, No. 2 at the Fed but without close ties to the president.

Some dark horses have emerged. Obama, for example, floated the name of Donald Kohn, Yellen's predecessor at the Fed before his retirement in 2010. And some economists are pushing Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp.

Whoever gets the nod has big shoes to fill. Bernanke is credited with shepherding the economy's slow emergence from the recent recession, thanks in part to his controversial policy of quantitative easing, in which the Fed buys Treasuries and other government-backed securities from financial institutions to keep long-term rates low and stimulate borrowing.

The Baltimore Sun asked financial and business leaders in Maryland who they think should fill Bernanke's shoes:

Mary Ann Scully, chairman and CEO of Howard Bank

Larry Summers and Janet Yellen are stellar economists and the country is lucky to have both of them. It's nice to have such an abundance of talent available. If I had to choose, then I would say Janet Yellen might be the better person for this particular moment in time. Janet Yellen brings to the table a more current view of both the regulatory environment as well as the economic environment that banks are operating under. She's been on the ground in the last few years, saw a lot of these problems. There are so many other things that Larry Summers can do for the country.

Bill Miller, portfolio manager of Legg Mason Opportunity Trust

I would tend to favor Janet Yellen. All three of those [Yellen, Summers and Kohn] would be fine. Summers would be very controversial, but obviously extraordinarily competent. Kohn, like Bernanke, is a very solid academic. The question is: Are your policies correct? And Janet Yellen, her forecasts so far have been the most accurate of any Fed governor. She was the first one in '07 to say that the crisis was far worse than people thought and that the Fed had to be far more proactive. So she's diagnosed this crisis as well as or better than anybody. ... She's got a great academic record. She has been on the Fed for a couple of decades. ... You need a chairperson who is strong, articulate and respected, and she has all those characteristics as well.

Barry B. Bannister, chief equity strategist, Stifel Financial Corp.

Though Larry Summers has a well-deserved reputation for cerebral abrasiveness, the next phase for the U.S. economy is more global and less internal, suiting his skills honed in the 1990s during multiple overseas financial crises. Though Ben Bernanke and Janet Yellen were the ideal players to successfully navigate a U.S. debt depression with deflation risk the past five years, it is Summers who is now best suited for European fiscal and banking integration and Chinese economic rebalancing in the next several years.

Joseph Haskins Jr., chairman and CEO of Harbor Bankshares Corp.

I would go with Lawrence Summers or Janet Yellen — with a slight preference for Yellen — to replace Fed Chairman Ben Bernanke, but I'm OK with either one, as they're not that far apart. It's just that I believe she'll follow through more closely to Bernanke, and I think he's done a good job. They both reportedly want to reduce this investing piece [quantitative easing].

John Hussman, president of Hussman Funds

My concern about Ms. Yellen is that she advocates intervening where the Fed should not, and abdicates the responsibility of intervening where the Fed should. Lawrence Summers has been a strong advocate of approaches to economic growth that emphasize real investment, productivity, education and infrastructure, instead of encouraging monetary distortions. While his advocacy of deregulation in the banking sector (particularly the repeal of Glass-Steagall) raises some reservations, his approach to monetary policy seems less interventionist than Yellen's. In my view, a better, if unlikely, candidate for Fed chair would be Thomas Hoenig, the former head of the Kansas City Fed, a former voting member of the [Fed's Federal Open Market Committee], and a director of the FDIC. In my view, Hoenig has been a far better advocate for policies that would, in hindsight, have reduced the risk of financial bubbles and improved the ability of the economy to withstand their collapse.

Sarah Bauder, assistant vice president for financial aid at the University of Maryland, College Park

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