No presidential appointment, no Senate confirmation, matters more than the one that will soon come for the post of chairman of the Federal Reserve.
If ever there was a time to ask for more—and better—this is it.
Yet, for the most part, official Washington is on autopilot, preparing for the replacement of outgoing Federal Reserve chairman Ben Bernanke with another predictable insider—perhaps even a choice the ultimate predictable insider: former Treasury Secretary Larry Summers.
President Obama, who says he will make his selection this fall, has defended Summers. A number of prominent Democratic senators have suggested that the president consider a more appealing prospect: Janet Yellen, the vice chair of the board of governors of the Fed.
But not everyone is satisfied with predictable prospects, or politics as usual.
Senators Bernie Sanders, I-Vermont, and Elizabeth Warren, D-Massachusetts, keep making the right demands and asking the right questions.
Several weeks ago, Sanders suggested that, instead of narrowing the choice to Summers—and Yellen—Obama should be considering a wider range of contenders, including Nobel Prize–winning economist Joseph Stiglitz or former Labor Secretary Robert Reich.
There’s every reason to talk up Stiglitz and Reich.
But, no matter who the nominee is, Sanders and Warren argue this week in a Huffington Post column that “the next Fed chair will have an opportunity to get our economy back on track and to help rebuild America’s middle class. But that will require the right temperament and a willingness to take on Wall Street CEOs when necessary. It is critical that the next Fed chair make a genuine, long-term commitment to supporting those who don’t have armies of lobbyists and lawyers to advance their interests in Washington—working and middle-class families.”
To that end, the senators have developed a set of questions that need to be answered whoever is chosen to replace Bernanke.
1. Do you believe that the Fed’s top priority should be to fulfill its full employment mandate?
2. If you were to be confirmed as chair of the Fed, would you work to break up “too-big-to-fail” financial institutions so that they could no longer pose a catastrophic risk to the economy?
3. Do you believe that the deregulation of Wall Street, including the repeal of the Glass-Steagall Act and exempting derivatives from regulation, significantly contributed to the worst financial crisis since the Great Depression?
4. What would you do to divert the $2 trillion in excess reserves that financial institutions have parked at the Fed into more productive purposes, such as helping small- and medium-sized businesses create jobs?
These are telling questions, especially for Summers who, for instance, played a critical role in “the repeal of the Glass-Steagall Act” that is mentioned in Question 3.
So be it.
No one should head the Fed if they cannot provide the right answers—"yes” to the first three queries, and specifics for number 4—to all the questions being asked by the senators who have refused to bow to the bankers.