The world’s Fed-watchers continue to debate over who will become the next Chairman of the Federal Reserve, assuming Ben Bernanke retires at the end of this year.
“Vice Chair Yellen and former Treasury Secretary Summers appear to be the leading candidates,” said UBS’s Drew Matus. “At present, we expect that Yellen has a 45% chance of taking over for Bernanke, Summers has a 40% chance, with the remainder to a compromise candidate, perhaps Former Vice Chair Ferguson.”
The Fed-watchers, however, appear to be overlooking some of the consequences of having Summers at the helm.
“If Yellen is passed over for the Chairman position, there would seem to be little reason for her to stay on at the Board of Governors,” added Matus. “She could return to academia or perhaps, however unlikely, consider a role at the Bank of England.”
This comes as Fed members Elizabeth Duke, Sarah Raskin, and Sandra Pianalto are all expected to retire.
“Her departure would not just result in a dramatic change in the Board of Governors as four members depart in short order (likely resulting in a higher level of uncertainty — can you say leadership vacuum?), it would also leave the Fed with a dearth of women within the policymaking apparatus,” continued Matus. “Indeed, only Kansas City President George (non- voter in 2014) would be at the table as the Fed move towards an exit.”
“If he is chosen, Summers better be worth it.”
Below is a table from Matus. As you can see, many of the folks expected to leave are on the dovish side. That includes Bernanke himself.