Will New Fed Chairman Be Independent Or More Of The Same?

WSJ: 'Fed Needs New Independent Leadership'

Wednesday, 18 Sep 2013 07:48 AM

By Dan Weil

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What the Federal Reserve could really use in its next chairman is someone who will be non-political, according to a Wall Street Journal editorial.

So it's a good thing that former White House adviser Larry Summers won't get the nod, The Journal editors say. "He would have been an exceptionally political Fed chairman at a time when the institution needs the opposite," they write.

The editors aren't too happy with current Fed Chairman Ben Bernanke. "The Fed has already sacrificed so much of its political independence since 2008," the editorial states.


"Though a nominal Republican, current Chairman Ben Bernanke was former Treasury chief Timothy Geithner's political sidekick for most of the last five years. He became an advocate for Treasury's regulatory agenda, its tax and spending priorities and even its housing policy."

So what sort of central bank chief chairman do The Journal editors want?

"The Fed needs new independent leadership," they say. "Sooner or later the next Fed chairman will have to raise interest rates, and the pressure not to do so will be enormous from Democrats who want to elect Hillary Clinton in 2016."

The Fed needs a chairman who can change policy, the editorial says.

Meanwhile, Bill Gross, co-chief investment officer of Pimco, sees the move of Fed Vice Chairwoman Janet Yellen to the frontrunner position for the chairmanship as positive for stock and bond markets.

It makes a difference for markets "to the extent that markets prefer certainty over uncertainty, and that ratio shifted significant [Sunday] with the withdrawal of Larry Summers," Gross told CNBC.

There is more certainty about Yellen's policy approach than Summers', he says.

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