Geithner as Next Fed Chief?

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Published January 17, 2013

| FOXBusiness

Perhaps the most intriguing thing about Timothy Geithner right now isn’t where he’s been, but where he’s going.

There’s been speculation that Geithner, whose last day as Treasury Secretary comes Friday, could be tapped as the next chairman of the Federal Reserve.

Current Fed Chairman Ben Bernanke’s term ends on Jan. 31, 2014, and tradition and history indicate Obama will nominate a successor candidate by the end of the summer to allow time for the confirmation process to play out.

Given the bad blood that exists between Obama and the Republican majority in the House of Representatives, whoever the president nominates as Fed Chief -- one of the most important economic posts in the world -- is certain to cause heated debate.

That’s especially true if the nominee turns out to be Geithner, a veteran of the recent budget skirmishes that have so polarized Washington and the nation. Geithner has emerged as one of the strongest and most effective advocates of Obama's economic policies.

Axel Merk, president of Merk Investments and a frequently prescient Fed watcher, said Geithner’s next move will likely be a tipoff as to his long-term future.

If Geithner announces that he’s taken a job as a university president or as a high-ranking official in a private company, he’s likely in it of the long haul because the folks who hired him weren’t looking for a temporary fill-in.

If, however, he joins a New York or Washington-based think tank, a position he can walk away from with relative ease, speculation will rise that he’s been tapped for another government role, likely at the Fed. (In an interview published in Politico on Friday, Geithner said "not a chance" when discussing the odds of him becoming the next Fed chief.) 

While the smart money remains on Fed Vice Chairman Janet L. Yellen to replace Bernanke (if Bernanke and Obama decide new blood is desirable), there is still a plausible case to be made for Geithner.

By all accounts, Geithner’s esteem grew exponentially within the Obama administration over the course his four-year term as Treasury Secretary.

Initially overshadowed by close Obama advisor Larry Summers (also named as a potential candidate for Fed chair), Geithner’s experience and intelligence combined with a no-drama, one-foot-in-front-of-the-other approach eventually won the president over.

Obama’s trust in Geithner grew such that the president is believed to have practically begged Geithner to remain at Treasury for the final 18-months of Obama's first term, long after Geithner had wanted out.

The case against Yellen for Fed chief is that she’s even less worried about inflation than Bernanke and would have trouble passing muster with some fiscally conservative elements of Congress, while the argument against the blustery Summers is that he’s too arrogant to work with others, a central role of the Fed chairman.

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