Sheila Bair, the former chair of the Federal Deposit Insurance Corporation and one of the few insider voices of sanity in the midst of the 2008 financial crisis, made the case for Federal Reserve vice chair Janet Yellen to replace Ben Bernanke as Fed chair when his term expires in January.
Her op-ed for Fortune magazine and CNN Money comes amid establishment cheerleading for Lawrence Summers, the former Clinton and Obama administration official who was a key architect of the policies that led to the 2008 crash. William Greider, Washington correspondent for The Nation, warned in a column this week that "[President] Obama’s senior economic advisers—still dominated by Clintonistas and aging acolytes of Robert Rubin—are pushing the president to choose Summers as the successor to Ben Bernanke, whose term ends in January. And they are urging Obama to make the announcement right now, before the opposition can get organized."
But the opposition is organizing. And Bair has joined it by throwing her support behind Yellen.
"Unlike Larry Summers, Tim Geithner, and [Robert] Rubin – minions frequently mentioned in the financial press as potential Bernanke successors – she was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007," she wrote.
She then takes on the "whispering campaign" against Yellen.
"Doesn't understand markets." Translation: She may not bail us out if we get into trouble again. "Not assertive enough." Translation: She won't stand up for us against the populists who want more regulation. "Lacks gravitas." Translation: She doesn't show up very often in the financial media. (Rest assured that if she were more vocal, they would accuse her of not being a "team player.") Perhaps the silliest argument of the "not-Yellen" crowd is that this well-qualified woman can't be elevated because no other Fed Vice-Chair has ever been promoted to Chairman. It's simply not done. Come again?
Bair does not like Yellen's support of Bernanke's efforts to keep the economy from falling back into recession in the face of what Bernanke calls the "fiscal drag" on the economy caused by obstructionist, austerity-driven conservatives in Congress. But she also argues that Yellen may be the best person to ease the Fed out of those policies, presuming an improving economy bolstered by better economic policies in Washington.
What is beyond dispute is that the choice of the next Federal Reserve chair is too consequential to be restricted to the same old-boy network that has worked in the service of Wall Street and helped set the stage for its recklessness. And, as Bair wryly notes, "Yellen already has a "Y" in her name; she doesn't need one in her chromosomes."