An Urban's Rural View

Exit, Ben Bernanke. Enter...who?

The stage directions for the next act of the Federal Reserve Board drama are still incomplete, but they won't be for long. Bernanke's second four-year term as chairman of the central bank expires next January 31. President Obama is making a list of successors. Any month now the stage directions will be complete.

Enter...who? The answer matters to farmers. Interest rates, land values, export competitiveness -- all hinge on Fed policy, which hinges on the chair's leadership. Bernanke's loose-money policies have been a boon to farmers, keeping interest rates low, land values high and ag exports affordable to our customers in Asia.

Until recently the odds-on favorite to succeed Bernanke was Fed vice chair Janet Yellen. Now some say former treasury secretary Larry Summers is the front runner (http://tiny.cc/…). That view is by no means unanimous (http://tiny.cc/…) but there does seem to be a consensus that it's down to a two-horse race (http://tiny.cc/…).

Should farmers care? In some ways Yellen and Summers differ little. Both are liberal Democrats trained as Keynesian economists with long and varied experience in government and academia. Yellen has a reputation as a monetary "dove" who supports Bernanke's policies. Summers' monetary views are less well known but with unemployment at 7.6% he's likely a dove, too.

But maybe not as dovish as Yellen, if you believe the bond markets. They sold off on reports of Summers' rising star, reflecting anxieties that a rise in interest rates would be more likely with Summers as chair.

Yellen is a "known dove," according to one strategist quoted on a Wall Street Journal blog (http://tiny.cc/…), while Summers is "probably a dove." The difference is subtle, but bond investors, at least, think the Fed's massive bond purchases and low-interest rate policy will end sooner under Summers.

Other differences: Summers is close both to the president, whom he served as chief economic advisor in 2009 and 2010, and to financial-community Democrats like Robert Rubin and Tim Geithner. Yellen is respected by other Fed governors and the Fed staff.

Summers has a reputation for being intelligent and abrasive, something I can attest to having interviewed him a couple of decades ago. Yellen has fans among senatorial Democrats, who think she'd be tougher on Wall Street than Summers, who favored bank deregulation as treasury secretary.

Put a gun to my head and I still predict Yellen will get the nod. The president may personally prefer Summers but he knows Summers faces a tougher confirmation fight. Neither candidate would be popular with Republican senators, but a Summers nomination would be unpopular with many Democratic senators, too.

In addition to his pro-deregulation stance in the 1990s, some Democrats will never forget or forgive his having suggested, while as Harvard University's president, that there are fewer female tenured professors in science and engineering because women have less aptitude for the subjects.

Many Democrats have criticized the president for naming too few women to top posts. With a highly qualified woman available to run the Fed, they'll push him hard to choose her.

Want to know more about Fed policy and what the president's choice will mean for agriculture? Sign up for Ag's New Playbook: Tactics to Tame Volatility, the DTN/Progressive Farmer 2013 Ag Summit (http://tiny.cc/…). One of the Fed's most influential officials, Dallas Federal Reserve President Richard Fisher, has tentatively accepted our invitation to speak.

Urban Lehner can be reached at urbanity@hotmail.com

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