On Sunday, one of the two putative front-runners to succeed Bernanke, former chief
Bernanke deserves credit for opening up the notoriously secretive body and preserving a strong consensus there in favor of extraordinary efforts to stimulate the economy. In recent years, it's seemed as if Bernanke's Fed was the only institution in Washington doing anything to combat the stubbornly high unemployment rate. As early as this week, however, the Fed is expected to start moving cautiously in the other direction, suspending its bond buying program and preparing to sell some of the assets it has accumulated.
As hard as Bernanke's job has been, whoever succeeds him faces a dicier task. It's much easier to sell the idea of stimulating the economy than tapping the brakes, especially when millions of Americans are still unemployed or underemployed. Investors have rebelled at even the hint that the Fed would back away from its easy-money policies, fearing that a premature move would flatten the recovery. But failing to do so in time can lead to the sort of debilitating inflation the U.S. suffered in the 1970s, or a boom-and-bust bubble like the one we just experienced in housing.
That's why the next chairman will need to be not just skilled enough to set the right pace for the Fed's pullback but tough-minded enough to withstand the protests that will surely come from elected officials and Wall Street. And Summers certainly is smart and tough-minded. But economists see little difference between him and Fed Vice Chair
What distinguishes Yellen (and several other reported candidates) from Summers may be her ability to build support among top Fed officials for the path she wants to take. Although the Fed's chair is its public face, the central bank is governed by a group. Financial markets respond poorly to signs of deep division on the Fed, and Summers' abrasiveness could have made it harder for him to preserve a reasonably united front.