Selection of new Fed chair mirrors beauty pageants in style, substance
And the President is not ready to name his finalists
Is it Larry Summers or Janet Yellen? The anticipation and speculation surrounding the appointment of the next Federal Reserve Chair is killing the financial services industry. They want to know now. After all, the king is ready to descend from his throne (Bernanke), and the fate of mortgage-backed securities purchases remains at stake.
But, unfortunately, all the hoopla surrounding the Fed Chair nomination has become eerily similar to watching a beauty pageant. Instead of Miss America, this is a beauty pageant for economists – minus the swimsuits and talent competition.
But it seems the president is getting a little sick of all the speculation and guessing games, according to a new report from Compass Point Research & Trading analysts.
The reason: the president is simply not ready to announce a new Fed chair – at least not until the fall, Compass Point notes. And he's not ready to pick a single candidate just yet. Still, Compass Point expects the announcement sometime in September.
But the speculation around Summers and Yellen have the two economists in the final five, and the questions are never ending; hence, the inevitable comparison to a beauty pageant for Washington monetary types.
Will Summers choose QE3 easing for his talent or coast by on his chummy relationship with the key judge, Obama? Is Yellen’s talent QE3 commitment and a Bernanke-style dance or will she develop a more hawkish approach once on stage?
But President Obama has had enough with all your speculation.
Citing a speech from this past week, Compass Point sums up the president’s frustrations and the market's ongoing uncertainty about where the president is going:
“And, frankly, I think both Larry Summers and Janet Yellen are highly qualified candidates," the president is cited as saying. "There are a couple of other candidates who are highly qualified as well. I’ll make the decision in the fall."
So who else could be in the top five? I thought Summers and Yellen were shoe-ins for winner and runner-up?
According to Compass Point, the top judge also is looking at former Fed Vice Chair Don Kohn, a professional who has been with the Fed for 40 years.
And Kohn, like Yellen, has a talent judges in the financial markets may like: he’s into Fed accommodation, at least for now.
“We believe that Kohn would not represent a major deviation from Ben Bernanke in terms of monetary policy guideposts (a view that was reinforced by commentary," Compass Point wrote.
Still the research firm is predicting a Yellen pick, but the waters seem murkier now.
"While we continue to believe that Yellen will be the pick, our biggest takeaway from the president’s commentary during this press conference was that it is becoming increasingly likely that the White House may opt to redefine the political dynamic by choosing someone other than Yellen or Summers," Compass Point concluded.
So it seems this parade of names, or ongoing pageant, is far from over.