Washington Post columnist Neil Irwin stopped by to discuss his book, The Alchemists: Three Central Bankers and a World on Fire. It's a great read on the history of central banks, including how they responded to the financial crisis and the challenges they face in the future.
In this video segment, Neil reveals his thoughts on who could step into Ben Bernanke's shoes -- assuming he doesn't stay on for a third term -- including two strong possibilities and an intriguing long shot. A full transcript follows the video.
Morgan Housel: Bernanke's term is up in January -- January 2014. What are the odds that he's going to stick around, and, if not him, who's going to replace him?
Neil Irwin: I don't think he wants to stay. I think he's tired. I think he's ready to go back to a quieter life. Could the president talk him into that? Who knows? I think it's fairly low odds, though, that Ben Bernanke will still be Fed chair this time a year from now.
The candidates people talk about, the one who gets talked about the most and probably has the highest odds of any individual of ending up in the job, is Janet Yellen. She's the current vice chair, former Fed governor, former president of the San Francisco Fed. Obama appointed her to the vice chairmanship.
She's a very good economist; she has long experience in the Fed system. I think she is the most likely of any individual, but I don't think it's a slam-dunk. I don't think it's a sure thing, by any means, that she'll get the job.
If they don't go with her, if the president doesn't go with her, it'll be because he either worries that she's too doveish on inflation and might not be sufficiently attuned to, for example, risks building in the financial system. He may have worries on, does she have the right dynamic ability to handle all these different jobs -- the public-facing aspects of the job, the diplomatic aspects, the political aspects.
That said, she is a completely sound candidate, and very well may end up being the next Fed chair.
Some other possibilities: Roger Ferguson was the vice chair under Alan Greenspan. He's more experienced on the financial side of things. Janet Yellen is a little more experienced on the economics and monetary policy side.
There are some more unconventional names that you hear. One is Jeremy Stein. He's a Fed governor right now. He's given a few thoughtful speeches on the risks of financial bubbles building in asset markets. He's a Harvard economist. He might end up being -- if he were to get the job -- the Ben Bernanke of 2013, in the sense that he kind of came out of nowhere and was an intellectual force.
One name that I'm not sure if the president would give any serious consideration to, but I think is an interesting name to mention, a guy named Stan Fischer. He just stepped down as governor of the Bank of Israel.
He's been a U.S. citizen since 1976, though he has been a central banker in another country for the last few years. Very respected; he's actually kind of an intellectual godfather to a generation of central bankers. He was Ben Bernanke's thesis advisor at MIT. Also for Mario Draghi, the president of the ECB; he also advised Mario Draghi at MIT.
He's, I think, 76, but he's healthy, a brilliant guy, former No. 2 at the IMF. Will he get serious consideration? Would that be too much for Americans to handle, going with somebody with a foreign accent to be the Fed chair? We'll see.
I think some of the other candidates are more likely, for all those reasons -- Janet Yellen, Roger Ferguson, and the others I mentioned.