First, Bernanke actually has to leave.
Smart Money Is On Geithner To Replace Bernanke
William D. Cohan - Bloomberg
An important position in Washington that stands to be filled early in Obama’s second term -- but isn’t getting a whole lot of attention at the moment -- is the one currently held by Ben Bernanke, the chairman of the Federal Reserve. Bernanke’s second, probably final, four-year term ends on Jan. 31, 2014. Obama will have to make the nomination of a new Fed chairman a high priority soon after his Cabinet is assembled.
The usual list of highly qualified candidates to replace Bernanke -- including Lawrence Summers, the former Treasury secretary and Harvard University president; Janet Yellen, a current vice chairman of the Fed; and Alan Krueger, the precocious chairman of the White House Council of Economic Advisers -- misses the person who probably wants it the most and continues to have Obama’s ear on a regular basis: Geithner.
While many people -- understandably -- assume that Geithner worked at Goldman Sachs Group Inc. before he became Treasury secretary in 2009, actually he was president of the Federal Reserve Bank of New York from 2003 to 2009, the critical years leading up to and including the financial crisis. He has never worked on Wall Street. By design, the New York Fed has traditionally been the most powerful of the Federal Reserve banks, because of its proximity to the powerful Wall Street banks that it regulates. And Geithner played a major role, along with Bernanke and then Treasury Secretary Henry Paulson, in the bailouts of Bear Stearns Cos., Merrill Lynch, American International Group Inc. (AIG) and in the decision to allow Lehman Brothers Holdings Inc. to go bankrupt.
Last spring, Geithner told Obama he wanted to leave Treasury as soon as possible and return to New York so that he could rejoin his family, while his youngest child was still in high school. But Obama prevailed on Geithner to stick around until after the election.
Had Geithner been serious about wanting to leave town, he probably would have thrown his hat into the ring to become president of Dartmouth College, his alma mater. But that position went to Philip Hanlon, the provost of the University of Michigan, without Geithner’s name being mentioned. Expect Geithner to seek a short-term sinecure at a liberal think-tank, such as the Brookings Institution, or to return to the Council on Foreign Relations, or to cash in as an adviser to a hedge fund (as Summers did at D.E. Shaw & Co. after he left Treasury) while he awaits the possibility of getting nominated as Fed chairman. If he is serious about the Fed job, he won’t risk taking an appointment -- such as the president of Dartmouth job -- that would be hard to leave after nine months.
The prospect of Geithner and Summers -- two disciples of Robert Rubin, the former Treasury secretary and an architect of the Citigroup Inc. (C) debacle -- going head-to-head to replace Bernanke would be the firefight of the century, and could open the door wide enough for Yellen, the dark-horse candidate, to slip through and become the first woman to be Fed chairman. Obama is comfortable with making history, and appointing Yellen would be yet another way to do it. But for now, it’s Geithner who has the president’s ear.