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Obama hedges on next Fed chief

Obama says Lawrence H. Summers and Janet L. Yellen are both highly qualified but notes other candidates, saying he won't make a choice until fall.

August 09, 2013|By Don Lee and Jim Puzzanghera
  • Sandra Pianalto is stepping down next year, creating another vacancy on the Fed.
Sandra Pianalto is stepping down next year, creating another vacancy on… (Andrew Harrer, Bloomberg )

WASHINGTON — President Obama praised Lawrence H. Summers and Janet L. Yellen as "highly qualified" to be the next Federal Reserve chief, but said he had a "range of outstanding candidates" and reiterated that he would not make a decision until the fall.

In a news conference Friday, Obama also suggested that his recent defense of Summers, a former Treasury secretary and his onetime chief economic advisor, should not be construed as Summers somehow having an inside track on the job. Yellen is the Fed's current vice chair.

The president repeated that his main criteria for picking the next Fed leader was someone who understands the institution's dual mandate — to control inflation and to maximize employment. And right now, he said, that means someone who can focus on jobs.

"If you look at the biggest challenges we have, the challenge is not inflation," Obama said during a news conference dominated by questions on national surveillance activities. "The challenge is, we've still got too many people out of work, too many long-term unemployed, too much slack in the economy."

The Fed's current chief, Ben S. Bernanke, is expected to step down when his second four-year term as chairman ends Jan. 31. Whomever Obama nominates, the Senate must confirm the choice.

"It is definitely one of the most important economic decisions that I'll make in the remainder of my presidency," Obama said, adding that it would be as significant as Supreme Court nominations.

Besides a likely new Fed chair, who typically has considerable sway over policy decisions, the central bank's monetary policymaking committee faces a broader makeover as some additional members are expected to leave, giving Obama more opportunities to put his stamp on the central bank.

Asked about Summers, Obama said he had stood up for him because Summers had come under "a bunch of attacks" in a way that the president described derisively as "sort of a standard Washington exercise."

"So, you know, I tend to defend folks who I think have done a good job and don't deserve attacks," Obama said.

He noted that he had felt the same way about Susan Rice, who came under fire from some lawmakers when she was mentioned as a possible replacement for Hillary Clinton as secretary of State. The furor prompted Rice to withdraw her name from consideration.

The question of whom Obama might name to succeed Bernanke has drawn unusually strong emotions and sharp lines in Washington and elsewhere, as many have come to see the race as between Summers and Yellen.

Obama has had a close relationship with Summers, but many have voiced opposition to the economist and onetime Harvard president, in part because of his widely perceived brusque style. The president is under pressure from many Democrats to choose Yellen, who would be the first woman to lead the Fed.

The Fed under Bernanke has taken unprecedented action to prop up the weak economy, at times sparking intense debate between those who fear that the central bank's easy-money policies will ignite inflation and asset bubbles and those who see more aggressive monetary stimulus as needed in the face of a slow-growing economy with high unemployment and constrained federal budgets.

Obama made it clear where he sees the emphasis today.

"A big part of my job right now is to make sure the economy's growing quickly and robustly and is sustained and durable so that people who work hard in this country are able to find a job," he said.

Earlier in the week, the president of the Federal Reserve Bank of Cleveland, Sandra Pianalto, said she would step down early next year, creating another vacancy among policymakers as they grapple with when to reduce their stimulus efforts.

The head of the Cleveland Fed is set to take one of four rotating positions as a voting member on the 12-member Federal Open Market Committee, which makes monetary policy decisions.

Pianalto, who has led the Cleveland Fed since 2003, is the third high-ranking woman at the Fed scheduled to depart in the coming months.

Fed Gov. Elizabeth Duke said in July that she would step down at the end of August. Another Fed governor, Sarah Bloom Raskin, has been nominated by Obama to be deputy Treasury secretary and probably would step down after her expected confirmation.

The seven Fed governors, including Bernanke, all are voting members of the Federal Open Market Committee.

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