Who Will Succeed Ben Bernanke?

Federal Reserve Chairman Ben Bernanke is scheduled to leave office in January 2014. For some industry experts, it's not too early to predict who will replace him and what that will mean for mortgage banking.

While there are several qualified candidates from academia, regional Federal Reserve Banks and business, there are other factors besides qualifications.

‘These are political appointments,’ says Bob Dorsa, president of the Las Vegas-based American Credit Union Mortgage Association. ‘It will obviously be a very partisan decision.’

Dorsa thinks the most likely pick is Erskine Bowles, the Democratic co-chairman of President Obama's National Commission on Fiscal Responsibility and Reform. Bowles also served as White House Chief of Staff under President Bill Clinton and, later, as president of the University of North Carolina.
‘Bowles works well with others,’ Dorsa says. ‘He doesn't seem too partisan.’

Another non-controversial choice would be Janet Yellen, the vice chairwoman of the Federal Reserve. Yellen, a professor emeritus of the University of California, Berkeley's Haas School of Business, was the president and CEO of the Federal Reserve Bank of San Francisco, and served as chairwoman of the White House Council of Economic Advisors under Clinton.

‘She is a very highly respected economist,’ says Dr. Linda Hooks, professor of economics at Washington and Lee University in Lexington, Va. ‘Her specialty is labor economics, and that gives her unique insights that others don't have.’

Chris Sorensen, founder of the Los Angeles-based Homeownership Education Learning Program, agrees that Yellen would be a qualified candidate.

‘What I don't know is how her thoughts on economic policy align with the next Treasury secretary and with Obama,’ Sorenson says.

Sorenson also concurs that Bowles would be a good choice. ‘If the president asked me, I would lean toward Erskine for political purposes,’ he says. ‘He earned the respect of all sides.’

The ability to earn respect is a trait that makes other candidates look attractive, even if they are unlikely to be picked.
Dorsa points to Larry Fink, chairman and CEO of Black Rock, as an outside choice, noting that being a Wall Street insider might be a positive feature.

‘Bernanke was a professor of the Great Depression, an academic,’ Dorsa says. ‘He didn't have the real on-the-streets business savvy.’

Dorsa also offers a pair of wild card choices if the president dares to reach across party lines: Mitt Romney, the former Republican presidential candidate, and New York City Mayor Michael Bloomberg, an Independent who endorsed Obama's re-election. Both men have extensive business backgrounds and histories of working with diverse segments, Dorsa says, but he adds that whether they could be confirmed by a Democrat-controlled Senate is another matter.

If Obama reaches across the political aisle, Hooks says one choice might be Greg Mankiw, an economics professor at Harvard University who chaired the Council of Economic Advisors under President George W. Bush. ‘He is fairly moderate in his economic views,’ she says.

But would the president choose someone with a history of disagreeing with him? Sorenson thinks Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, is qualified but will not be picked because he cast dissenting votes against keeping interest rates low, and against quantitative easing.

‘The president never met a stimulus package he didn't love,’ Sorenson says.

For a very outside pick, Hooks mentions Eric Rosengren, president of the Boston Federal Reserve and a specialist in housing market issues.

‘That would be a consideration: Can this person help to understand what's going on in the markets?’ Hooks says. ‘People in the industry can comment on what's happening on the front lines and have some influence on what's going on out there.’

As for Bernanke's work, Hooks sums it up this way: ‘Bernanke has done what he could to prop up the market. He clearly was handed a difficult situation, and I think he was very good to try to allow the market to find its own equilibrium.’

Nora Caley is a financial writer based in Denver. She can be reached at noracaley@comcast.net.


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