President Barack Obama has opened up the contest to become the next chairman of the Federal Reserve, adding former Fed Vice Chairman Donald Kohn to the list of names he’s considering.
At a closed-door meeting with Democrats in the U.S. House, Obama yesterday rejected the notion that it’s a two-person race between former Treasury Secretary Lawrence Summers and current Fed Vice Chairman Janet Yellen to succeed Ben S. Bernanke, whose term expires Jan. 31.
Then, in a separate meeting with Democratic senators, Obama said he has interviewed “lots” of candidates, including “many whose names have not been mentioned” in the press, said Senator Richard Durbin of Illinois, the chamber’s No. 2 Democrat.
By expanding the public list of potential nominees, Obama is seeking to defuse the tension of a perceived Summers-Yellen contest, which threatens to limit his options, according to a person familiar with the matter. Yesterday, 37 House members sent a letter to Obama urging Yellen’s appointment. Last week, 19 Senate Democrats and one independent did the same.
“The President’s advisers are doing what they should do,” giving him “several options to consider,” Laura Tyson, a former chairman of the Council of Economic Advisers, said in an interview. “It’s a very important choice, and to make the choice well, you need to consider the options available.”
Kohn, 70, now a senior fellow at the Brookings Institution in Washington, spent 40 years at the Fed. He was Bernanke’s most important supporter and adviser during the financial crisis. He became a Fed governor in August 2002 and served as vice chairman from June 2006 until June 2010.
1987 Crash
Earlier, Kohn was one of former Chairman Alan Greenspan’s closest advisers as director of the Division of Monetary Affairs from 1987 to 2001. He helped Greenspan manage the 1987 stock market crash and adopt the federal funds rate, the rate for overnight lending among banks, as the Fed’s main signal for monetary policy.
Unlike Yellen, a professor emeritus at the University of California at Berkeley, and Summers, former president of Harvard University and a professor there, Kohn doesn’t come from an academic environment.
“He is a central banker,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Yellen and Summers have “the policy making experience needed to do the job, but they come originally from a different background,” he said.