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Considering a New Head for the US Fed

  • Jim Randle

The economist who guided the world's largest economy through the worst financial crisis in decades is expected to step down early next year. The financial press is filled with speculation about who will take over from Ben Bernanke, the current chairman of the Federal Reserve, as the U.S central bank is known. There are many possible candidates, but most of the speculation focuses on just two.

President Obama appointed Ben Bernanke to a second term as head of the Federal Reserve in 2009.

To fight the recession, Bernanke took unprecedented steps to cut interest rates in a bid to boost economic growth, which came slowly.

Now, as his term ends, an online Irish betting site "Paddy Power" is taking wagers on who might replace Bernanke.

One contender is the Fed’s current vice chairman, Janet Yellen, a former economics professor at Berkeley who headed the Federal Reserve Bank of San Francisco, and was an economic adviser to the White House.

Bets are also being placed on former U.S. Treasury Secretary, one-time presidential economic adviser and former president of Harvard University, Larry Summers.

Critics say Summers is too abrasive to win consensus among top fed officials.

But LaSalle University finance professor Walter Schubert says Summers' toughness might help get economic and budget decisions out of the bickering Congress.

"Well, the best argument for Larry Summers, I think, is his personality. He’s driven, he wants to have an impact and I think he would put a lot of pressure on Congress. I think he’d be excellent at pressuring Congress to move in the proper direction," said Schubert.

Rival Janet Yellen is seen by some experts as doing less to push Congress, but more to regulate the economy.

Abby McCloskey researches economic issues at the American Enterprise Institute and says Yellen’s long experience at the fed would reassure investors.

“She is predictable. The markets know what she thinks. When she gets in there, no surprises, no wild cards. We have enough wild cards in the rest of the economy,” says McCloskey.

Michael Cox, a former chief economist at the Federal Reserve Bank of Dallas, who is now at Southern Methodist University, says Yellen is a strong candidate.

"She is a very good economist in my opinion, more seasoned and more reasoned and more experienced in the fed," says Cox.

But Cox adds that both Yellen and Summers are too quick to meddle in the economy.

Said Dawlabani, author of a book that advocates a new approach to economics, says it's time to put more women in charge of large companies and major financial institutions.

“Because women see the bottom line through the lens of care and responsibility, their leadership style is different than men. Men have to learn to use emotional intelligence; women are naturally equipped with these soft skills," says Dawlabani.

Dawlabani adds that companies and countries would be more prosperous if they focused less on next quarter’s profits and more on the impact that a company has on society, the environment, suppliers, customers and employees.

Choosing the right approach and the right candidate is up to the president, and the candidate must be confirmed by the Senate.

While most news stories focus on just two candidates, Obama has made appointments in the past that were a surprise to most economists.