Most of the time, the media focuses on Republican disunity, so consider this a Friday treat. With Ben Bernanke’s tenure as Federal Reserve chair just about to end, Barack Obama has to decide who to appoint to run the nation’s monetary policy. Senate Democrats have split on the two leading candidates, and the infighting gives Senate Republicans a rare chance to act as kingmaker … or queenmaker:
Republicans won’t outright admit they are enjoying the Democratic infighting over the next Federal Reserve chairman, but they don’t mind sitting back and watching it unfold.
GOP senators know their leverage increases with each Democratic senator that opposes Larry Summers — President Barack Obama’s former economic adviser and a top candidate to replace Fed Chairman Ben Bernanke when his term ends in January. Several Democratic senators as well as progressive and women’s groups are pushing the president to pass on Summers and nominate current Fed Vice Chair Janet Yellen, another contender for the job. …
”There’s a little bit of spectator sport in this current circumstance,” Moran said. “It’s given me as a Republican the opportunity to take a step-back without the necessity of trying to form an opinion about any of the potential candidates.”
Crapo, Moran and the other Banking Committee Republicans know better than to tip their hand now on whether they would vote for Summers or Yellen.
“Why should they?” said one former Obama aide who works on economic issues. “One of the first rules of politics is when the opposition is harming themselves — step out of the way. By being divided, Banking Committee Democrats are yielding influence to Republicans who are now in the position to cast deciding votes.”
This is one of those wonky disputes that rarely generates this much passion or attention. Both candidates would likely pursue the kind of activist monetary policies that Obama wants as a way to bypass Congress, with Yellen perhaps more activist than Summers. It’s complicated by the dearth of other women among Obama’s second-term appointments, especially to Cabinet-level positions, which generated sharp criticism after the war-on-women theme of Obama’s re-election campaign. Summers’ track record with feminists is a complicating factor, too, after suggesting in 2005 that innate gender differences might account for disparity in outcomes for women in science and mathematics fields.
Summers has been a longtime adviser to Obama and knows him best, but Yellen is getting support from a larger swath of the economist community:
More than 300 economists have signed an open letter to President Obama urging him to nominate Janet L. Yellen to be the next head of the Federal Reserve, citing her “consistently good judgment” and her commitment to reducing unemployment.
“In our opinion, she is the best possible leader for the Federal Reserve Board at this critical time in our nation’s history,” the letter said.
“Her knowledge of how the Fed sets policy, her understanding of the relationship between monetary policy and economic growth, and her ability to see and propose solutions to emerging economic problems is second to none,” it said.
Picking Summers over Yellen after the controversy, and after the feedback from the economic community, will create a political headache that the White House hardly needs at this point. The same is true for Senate Democrats, some of whom have to run in the midterms. For all these reasons, the Fed appointment has become a hot potato — and the Obama’s procrastination on a decision (which looks like a pattern these days) has made it worse.
Republicans would probably like to avoid endorsing either one for as long as possible for those very reasons, and probably wouldn’t have minded staying out of the fight entirely. However, now that Obama’s dithering and the split on the other side of the aisle has handed them an opportunity to gain leverage, it will be interesting to see how they use it. What will Obama trade to get support for his eventual choice? That may be even more of a critical question if he picks Summers, as was the rumor this morning before the White House quashed it.
The newly-christened vacillation model of leadership certainly has worked out well for Obama, huh?