Brad Delong — So Now the Federal Reserve Has a Triple Mandate: Good to Know

Janet Yellen: FRB: Press Release--Statement by Federal Reserve Board Vice Chair Yellen on her nomination by President Obama--October 9, 2013:

"...I pledge to do my utmost to keep that trust and meet the great responsibilities that Congress has entrusted to the Federal Reserve--to promote maximum employment, stable prices, and a strong and stable financial system."

Grasping Reality with Every Possible Tentacle
So Now the Federal Reserve Has a Triple Mandate: Good to Know
J. Bradford DeLong | Professor of Economics, UCAL Berkeley

Well, at least she is clear on who she is working for.

Reuters — Obama to name Yellen as next Fed chair on Wednesday

If you haven't heard.

Reuters
Obama to name Yellen as next Fed chair on Wednesday
Mark Felsenthal and Jeff Mason

James K. Galbraith — Obama's Fed drama

Galbraith endorses Yellin, sort of. The article is mostly about what happened to Summers.

Los Angeles Times

Obama's Fed drama

James K. Galbraith | Lloyd M. Bentsen, Jr. Chair of Government/Business Relations at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin

Randy Wray — Five Years After Lehman’s: Did We Learn Anything?

In a word, no.

Or, at least, not much. While it would be nice to believe that Larry Summers had to withdraw from the race to take over the Fed because of his substantial role in creating the global financial collapse, I think it had more to do with his outsized personality. Before you start celebrating his defeat remember that Goldman Sachs still must approve any choice and President Obama may yet choose one of its anointed candidates over Janet Yellin....

So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.

1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions....

2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis....

3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy....

So what needs to be done? 

Economonitor — Great Leap Forward

Five Years After Lehman’s: Did We Learn Anything?
L. Randall Wray | Professor of Economics, UMKC

Michael Stephens — Janet Yellen on Bubbles and Minsky Meltdowns

Back in 2009, Janet Yellen delivered a speech at the Levy Institute’s Minsky conference that explained how the financial crisis had changed her views about the role of central banks in handling financial instability. At the time she was the head of the San Francisco Fed.

The focus of her 2009 remarks was the question of how (or whether) central banks should try to counteract bubbles in asset markets. (Yellen also recalled the unfortunate topic of her 1996 conference speech: supposedly promising new innovations in the financial industry for better measurement and management of risk.) Bursting suspected bubbles has become the topic du jour in US monetary policy discussions, as it currently stands as the fashionable justification for tightening despite low inflation and high unemployment.

With the announcement that Larry Summers’ name has been withdrawn from consideration for the next Fed chair, the spotlight has turned to Yellen. Here (from the 2009 conference proceedings) is the text of her speech and a transcript of the brief Q&A that followed:

A Minsky Meltdown: Lessons for Central Bankers?

Multiplier Effect
Janet Yellen on Bubbles and Minsky Meltdowns
Michael Stephens

Bill Black — Larry Summers’ Take on Efficient Markets and Regulators: Brilliance v. Idiots

Bill cuts to the chase — conflict of interest.

Same can be said for the revolving door. How much has Summers received from the financial industry?

New Economic Perspectives
Larry Summers’ Take on Efficient Markets and Regulators: Brilliance v. Idiots

William K Black | Associate Professor of Economics and Law at the University of Missouri – Kansas City

Randy Wray — What Do You Want in a New Fed Chair? Hint: Larry Summers Doesn’t Have It

Blockbuster.

Economonitor — Great Leap Forward
What Do You Want in a New Fed Chair? Hint: Larry Summers Doesn’t Have It
L. Randall Wray | Professor of Economics, UMKC

J. Bradford DeLong — Paul Krugman: What Janet Yellen--And Everyone Else--Got Wrong

No, Professor Krugman, "everyone" did not get it wrong. Only the Very Serious People, whom you apparently regard as "everyone."

Grasping Reality...
Paul Krugman: What Janet Yellen--And Everyone Else--Got Wrong

J. Bradford DeLong | Professor of Economics, UCAL Berkeley

Barkley Rosser — The Don Kohn Shuffle

Given that Yellen is being labeled as a liberal dove who is backed by the liberal wing of Dem senators (with the WSJ whining about the danger of a "female-backed currency," eeeek!), this makes Summers the centrist, supposedly making him acceptable to liberals if Kohn appears to be the real alternative to Yellen.

So, there it is. I think that Gene Sperling has convinced Obama that bringing in Kohn will help the candidacy of Summer, and I think they may be right. The game is getting dirtier by the minute.

EconoSpeak
The Don Kohn Shuffle
Barkley Rosser

Obama is already finished with all progressives but the die-hards. Appointment of Summers would probably drive many if not most of them over the edge, too.

This would also be bad for a HRC or an other New Democrat candidacy in 2016. I think it will be very difficult of most progressives to back a Clinton-Obama Third Way aka "triangulation" clone, and many will either not actively work for the Democratic Party, sit out the election, or vote third party in protest. 

It is becoming apparent that change cannot come from within the system from the left and that radical change is likely to merge from the far right if the GOP candidate prevails in 2016 and the GOP wins Congress, too. If the GOP were not so disorganized, I think this would be a highly likely outcome at this point. But it is much too early to tell.

Robert E. Prasch — The Next Chair of the Federal Reserve Must be a Regulator

If we go by the rumors circulating in the financial press, the Obama Administration is on the verge of selecting a proven failure – Lawrence Summers – to be the next Chair of the Federal Reserve System. This is the man, let us recall, whose greatest success in office was to work for the repeal of Glass-Steagall in 1999 and the nudge along the passage of the Commodity Futures Modernization Act of 2000 (which forbade any agency from regulating Credit Default Swaps). These profoundly mistaken decisions provided the nation’s largest and most irresponsible financial institutions with the bulk of the permission they needed to leverage up their balance sheets, hide the risks inherent in the mortgage-backed securities they were pushing onto unsuspecting investors, all while enabling them to become Too Big To Fail (and, as no less than the Attorney General of the United States has affirmed, Too Big To Prosecute)....

New Economic Perspectives

The Next Chair of the Federal Reserve Must be a Regulator

Robert E. Prasch | Professor of Economics at Middlebury College

Of course, Wall Street will get the Fed chairperson that it wants, since Wall Street provides a large share of campaign finance for the Democratic Party. The GOP is somewhat less beholden to Wall Street since they are also heavily funded by other wealthy donors. So count on President Obama caving to the financial sector.

From what I have been reading, Larry Summers is well-known to the White House and Democratic insiders, while they hardly know Janet Yellin at all. This gives Summers a big leg up politically.

And if Obama chooses Summers, Wall Street is not going to say no. The only big issue with Summers is his approval by the Senate, where he would likely run into more GOP opposition that Yellin due to his support of the President's "Keynesian" policies while serving in the administration. Of course the progressive base would be livid, but that has never bothered the president before and he seems to see that as positive, proving his bipartisan centrist credentials and showing him to be a Very Serious Person.

See also Bill McBride at Calculated Risk, Comments on Janet Yellen, and Brad DeLong at Grasping Reality With Both Invisible Hands, Ezra Klein And Evan Soltas: "If The President Is Making Any Calls Himself, He Is Making Very Few Of Them" and Illegitimate And Unfair Larry Summers Bashing: The Smart And Thoughtful Matthew Klein Gets One Wrong

Looks like the choice is going to be made chiefly politically by White House political operatives weighing the pros and cons against a political calculus of donations and votes.

Brian Lucking and Daniel Wilson — Fiscal Headwinds: Is the Other Shoe About to Drop?

Federal fiscal policy during the recession was abnormally expansionary by historical standards. However, over the past 2½ years it has become unusually contractionary as a result of several deficit reduction measures passed by Congress. During the next three years, we estimate that federal budgetary policy could restrain economic growth by as much as 1 percentage point annually beyond the normal fiscal drag that occurs during recoveries....

The current recovery has been disappointingly weak compared with past U.S. economic recoveries. Researchers and policymakers have pointed to a number of potential causes for this unusual weakness, including contractionary fiscal policy. For example, Federal Reserve Vice Chair Janet Yellen (2013) argues that three tailwinds that typically help drive strong recoveries—investment in housing, consumer confidence, and discretionary fiscal policy—have been absent or turned into headwinds this time....

In this Economic Letter, we examine these questions by estimating what fiscal policy would be if it followed historical patterns in the relationship between fiscal policy and the business cycle. We then compare this historically based estimate with actual fiscal policy during the recession and recovery to date. We also look at government projections of fiscal policy over the next three years to see how these compare with estimates based on the historical norm. Finally, we discuss what these trends in federal fiscal policy imply for economic growth. 

FRBSF Economic Letter
Fiscal Headwinds: Is the Other Shoe About to Drop?
Brian Lucking and Daniel Wilson

(h/t Mark Thoma at Economist's View)

Fiscalists unite! You have nothing to lose but drains.

Bye-Bye Ben?

Obama is said to be considering a number of monetary experts for the job, including Fed Vice Chair Janet Yellen, former U.S. Treasury Secretary Lawrence Summers, and former Treasury Secretary Timothy Geithner.

An announcement could come as early as this fall, to give the Fed nominee time to get through Senate confirmation by the time Bernanke's term ends.

The Huffington Post
Obama Says Bernanke Has 'Stayed A Lot Longer' Than He Wanted
Reuters

Summers? Geithner? Say it isn't so.