Pimco’s El-Erian says fight over next Fed chair could hurt economy
WASHINGTON -- The heated public debate over who should be the next head of the Federal Reserve risks hurting the nation’s economy and President Obama should make a decision soon to end the “circus-like atmosphere,” said Pimco chief executive Mohamed El-Erian.
The speculation around who would succeed Fed Chairman Ben S. Bernanke, whose term expires in January, started as an “insightful and important debate,” El-Erian wrote in an opinion article Monday in the Washington Post.
Speculation centered on the Fed’s “talented” Vice Chair Janet L. Yellen and former Treasury Secretary Lawrence H. Summers, “a brilliant economist,” El-Erian said.
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But the debate has become unusually public as “friends and foes of the two candidates rushed to op-ed pages and the blogosphere to express their opinions,” he said.
The battle led to editorials and website polls that make it “more reminiscent of a heated political race or a popularity contest than the technocratic appointment it is,” El-Erian said.
So El-Erian, who oversees about $2 trillion in investments at Pimco, the money management firm in Newport Beach, took to the op-ed pages himself to warn of the potential damage to the credibility of the next Fed chair as the central bank continues to play an out-sized role in the economy.
“If this continues, there is a material risk that exaggerations and tangents could undermine the country by raising unwarranted questions about leadership, particularly when the next Fed chair may need to calm panicky financial markets, take controversial steps, persuade foreign central banks to cooperate or suddenly lead the private sector in a new direction,” El-Erian said.
Obama needs to act soon to end the debate by making his choice, El-Erian said.
“It is time to move past the circus-like atmosphere around who will be selected to lead the Fed,” he said. “It is time for Obama to make his choice and move the process to Senate confirmation.”
Obama has said he would make a nomination in the next several months and no announcement is expected until at least September. In a meeting with lawmakers last week, he identified Yellen, Summers and former Fed Vice Chair Donald L. Kohn as candidates he is considering.
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