Berko: New fed head?
By Malcolm Berko Taking Stock September 1, 2013 9:20AM
Updated: October 2, 2013 6:41AM
Dear Mr. Berko: Why is Federal Reserve Chairman Ben Bernanke giving up his post this January? I know the economy is still weak, but he certainly saved the country from a terrible depression and seems to be very popular with Congress and Wall Street, and the public seems to like his honesty. Do you think the market will go into a big tailspin when he is replaced? I think the economy will continue to be very soft for a while.
SS, Waterloo, Iowa
Dear WH: Bernanke may give up his post in January because he wants to spend more time with his son, Joel, his daughter, Alyssa, and his wife, Anna. That’s the official version.
However, I’m told by a knowledgeable congressman that Bernanke and the Obama administration are at loggerheads regarding the financial problems of Chicago and Detroit. Unions want the administration to guarantee their underfunded pension plans so they can assure their members that their pension payments will continue as promised. And because Bernanke won’t allocate a portion of the $85 billion monthly stimulus to Chicago or Detroit, he may be axed out of his job next year.
I don’t know whether Janet Yellen or Lawrence Summers will get the nod, but I’m told that both would be amenable to using some of the $85 billion monthly stimulus to guarantee future payments. But no matter who takes over as Fed head (it could be someone other than Yellen or Summers), it’s doubtful that person will be as communicative and as transparent as Bernanke.
Yes, some folks believe that the market will boil with uncertainty for a period of time until that person establishes her or his bona fides with the Street, but most believe it will be a nonevent.
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