Federal Reserve Vice Chairman Janet Yellen is seen by a third of international investors as the most likely to take the helm of the central bank when Ben S. Bernanke’s term ends in January.
The second-most probable choice is Bernanke himself, according to a quarterly poll of investors, analysts and traders who are Bloomberg subscribers — even though the Fed chairman has said he feels no personal responsibility to remain for another term.
Speculation about the succession at the central bank intensified after the Fed said April 21 that Bernanke would skip an annual symposium in Jackson Hole, Wyoming, because of a personal scheduling conflict. Yellen, a 66-year-old former professor at the University of California-Berkeley, has been identified by Fed watchers as a favorite, with former governor Laurence Meyer saying she has “right of first refusal.”
Yellen “has a strong record of monetary policy experience, to state the obvious, but she is also perhaps too dovish,” or overly concerned by unemployment, said David Schimizzi, senior economist at Ally Financial Inc. in Charlotte, North Carolina. “While turning off the spigots of monetary policy support immediately may not be a good idea, Yellen may push the Federal Reserve to undertake policies that could increase the risk that inflation could accelerate too quickly in the intermediate term.”
The Bloomberg poll showed 34 percent expect President Barack Obama to choose Yellen, while 27 percent predicted Bernanke and 17 percent named another candidate from a list of four other names.
The survey findings suggest a lack of familiarity with the candidates, with 22 percent saying they have no idea who Obama will choose to lead the Fed and 31 percent saying they don’t know who the best candidate would be if Bernanke steps down.
Should Yellen succeed Bernanke, she would be the first woman to run the Fed in its 100-year history.
That could make the choice appealing to Obama and “would address some of the president’s critics who assert a lack of diversity in his appointees,” said Uzi Zimmerman, a portfolio manager at Ventura Capital Management LLC in Los Angeles.
Investors were more divided over who would be the best choice for the job if Bernanke were to step down. Asked who would make the best Fed chairman, Yellen was named by 26 percent, followed by former Treasury Secretary Timothy F. Geithner, favored by 11 percent, and Bank of Israel Governor Stanley Fischer, a Bernanke mentor, with 7 percent. Former White House adviser and ex-Treasury Secretary Lawrence Summers was selected by 6 percent, and 3 percent named former Fed Vice Chairman Roger Ferguson.
Zimmerman said “no one is more qualified” than Fischer, who was thesis adviser to Bernanke at the Massachusetts Institute of Technology. “If the student is qualified to be chairman, logically the teacher would be too.” Fischer’s “experience managing financial crises” at the International Monetary Fund and handling the economy in Israel “make for a stellar resume.”
Yellen’s writings and speeches show confidence in government’s ability to offset calamities, especially in labor markets. In 2004, as president of the San Francisco Fed, she argued in a paper written with her Nobel Prize-winning husband, George Akerlof, that central bankers couldn’t ignore the high costs of long-term joblessness.
“Policy makers should be compelled to take action given the serious costs of long-term unemployment,” they wrote.
Bernanke’s tenure was rated as among the most successful among leaders of global central banks. Fifty-seven percent of respondents to the poll said U.S policy makers were doing the best job among four major central banks, followed by 13 percent who said they favored the Bank of Japan. The Bank of England and European Central Bank each received 10 percent. Ten percent said they didn’t know.
The Fed chairman’s approval rating was the highest in Bloomberg polls going back as far as July 2009. In the most recent poll, 76 percent of respondents said they have a favorable opinion of Bernanke, while 20 percent said they viewed him unfavorably.
Bernanke “kept a steady hand through the crisis,” said David Jaderlund, who manages $500 million in municipal bonds as owner of Jaderlund Investments LLC in Santa Fe, New Mexico.
Nonetheless, investors are concerned that Bernanke’s successor will have difficulty unwinding record stimulus in an orderly way.
“History knows no examples” similar to today, said Gregory Klumov, portfolio manager with SBD Global Fund in Cyprus. Whoever takes over “will be solving the case of poor growth in a deleveraging environment.”
The results of the Bloomberg poll compare with an April survey by International Strategy & Investment Group in which 65 percent of those polled at a conference said Yellen is likely to be nominated for the top Fed job.
Bernanke said at a March 20 press conference he’s “spoken to the president a bit” about his future and that he feels no personal responsibility to keep the post and lead the winding down of the central bank’s unprecedented bond buying. The Fed said May 1 it will maintain $85 billion in monthly purchases until the job-market outlook improves substantially.
More generally, poll respondents disagreed on whether government officials have done enough to stimulate global economies.
After Harvard University economists Carmen Reinhart and Kenneth Rogoff acknowledged flaws in their paper that’s been used to justify fiscal consolidation in the U.S. and Europe, respondents were almost evenly divided between those who want policy makers to pull back from further austerity and those who want immediate action to reduce budget deficits.
Forty-five percent said pulling back was appropriate while 47 percent favored pressing on with budget cuts and 8 percent didn’t know. Reinhart and Rogoff in April acknowledged mistakes in their 2010 paper “Growth in a Time of Debt,” which concluded countries with public debt in excess of 90 percent of gross domestic product suffered measurably slower economic growth. They stood by the basic findings of their research.
The Bloomberg Global Poll was conducted May 14 by Selzer & Co., based in Des Moines, Iowa. It has a margin of error of plus or minus 3.3 percentage points.
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