It seems Larry Summers isn't the only Larry recycling an old idea.
CNBC commentator Larry Kudlow is promoting an old meme: that Summers
will replace Federal Reserve Chairman Ben Bernanke in January, notes Dealbreaker.
While the pundit class has been relatively quiet as of late about such
an idea, it isn't really new -- much like Summers' football metaphor in
the Obama white papers on regulatory reform, which pilfered a Hank
Paulson analogy of the Fed acting as a Free Safety in a regulatory
scheme.
Shortly after the election, the rumor of Obama seeking a
replacement for Bernanke in the guise of Summers first surfaced. At the
time, the scuttlebutt was that Summers wasn't getting the Treasury job
because Obama had plans to name him to the Fed when Bernanke's term
expires in January 2010. Obama thus supposedly named Summers to head
the national economic council to keep him abreast of economic policies
to insure that his transition to the Fed was a smooth one. The president's transition team swatted the rumor down at the time, but it
briefly caught fire in the blogosphere and the media, notably at U.S.
News & World Report's Washington Whisper blog and even in The Wall Street Journal.
Indeed, the president himself felt it necessary to address it again in a press conference
on Tuesday when he said Bernanke has done a "fine job." However, the
president stopped short of saying he would definitely reappoint
Bernanke. If Obama doesn't reappoint him, it would certainly be
surprisingly, not only because of the still-dicey economic climate, but
also because one-term Fed chairmen over the last 50 years are rare. (An
exception is G. William Miller, who held the post for a year before
President Carter appointed him Treasury secretary in 1979. It is also
worth noting that if this rumor comes true, then Summers would join
Miller as the only two to have ever been named both Treasury secretary
and Fed chairman.)
So what would it take to can Bernanke for Summers? A BusinessWeek article simply suggests a failure to reach recovery this year could be reason enough to show Bernanke the door.
Despite the babbling in the media, InTrade suggests that the odds are strong Obama will not replace Bernanke, but the odds are beginning to trend downward as the chatter heats up.
If Obama ultimately chooses to oust Bernanke, it won't be all bad
news for him. As a consolation prize, he'd likely receive a big cash
advance for his memoirs. And given all the chatter about what really
happened between Bernanke, Paulson and Bank of America Corp.'s (NYSE:BAC) Ken Lewis, it
likely will be a hit with the Wall Street crowd that watches Kudlow. - Matthew Wurtzel
See story about Obama press conference from CNNmoney
See story about Bernanke from BusinessWeek
See story about Summers and Bernanke from The Atlantic
See trading data from InTrade
See related story from The Wall Street Journal
See related story from Washington Whisper
See story about Kudlow from Dealbreaker
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