Things could change again, but as of right now, Janet Yellen is likely to be the next Federal Reserve chair. At least, that’s what White House insiders are signaling, now that previous frontrunner Larry Summers has dropped out.
Yellen has deep Fed experience and endorsements from leading economists and Democrats. But she only seems to have risen to the top of President Obama’s list by process of elimination. How Yellen fell behind Summers in this contest critical to monetary policy had precious little to do with monetary policy -- and far more with the politics of proximity.
The president and his top advisers just didn’t know Yellen and felt comfortable with someone they did, Summers. But it wasn’t all a question of personal connections. The new Fed chair will have to unwind the stimulus effort. Summers's fans thought he’d do a better job than a Fed insider who played a key role in putting current policies in place.
“The more substantive point that people make about Yellen is this concern that she will not be quick enough to quote unquote, take the punch bowl from the party,” says ITG chief economist Steve Blitz. He believes Yellen could make a good Fed chair.
The White House wanted the guy they knew. The fact that that guy happened to be a guy played a role in how things got ugly as the nomination process played out in the media.
Summers’s supporters went after Yellen, questioning not so much her credentials, but whether she was aggressive or tough enough and whether she had enough gravitas. It’s a familiar line of attack against women in business and government.
“The word gravitas is a code word for male leader as opposed to female leader,” says Jill Flynn, a former bank executive who founded the leadership consulting firm Flynn Heath Holt.
The attacks on Yellen brought gender politics into the mix and took the debate even further from the actual work of the Fed chair. But if Janet Yellen does ultimately get the job, memories of the bizarre and public hiring process will fade.
“I absolutely believe none of it matters,” says Columbia Business School professor Katherine Phillips. “When she gets in there and she has the authority of the position that she will be in, she will be the only one in that position and people will have to live with it.”