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A Larry Summers Fed Head Nomination Comes With A Nightmare Scenario That No One Wants

Jul 26, 2013, 18:22 IST

REUTERS/Carlo AllegriInvestors and business leaders hate uncertainty more than anything else.

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When the year ends, Ben Bernanke's term as Federal Reserve Chairman ends. Most expect him to retire, and many expect that vacated seat to be filled by either current Vice Chair Janet Yellen.

However, former Treasury Secretary and controversial figure Larry Summers has recently emerged as another frontrunner.

Would Larry Summers-run Fed be so bad?

Well, that may not be the biggest impending concern.

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Politico's Ben White points to some interesting commentary from Pantheon's Ian Shepherdson:

Pantheon’s Ian Shepherdson on this point: “The danger for the market … is not that the next Chairman is likely to change the policy course dramatically, but that an attempt to appoint Mr. Summers backfires and his nomination is held up for an extended period. That means the Fed could find itself rudderless at the same time Congressional fighting over the debt ceiling reaches its peak. This is an uncomfortable prospect, to say the least.” … This does not mean the White House won’t still nominate Summers. But the prospect of a long and bruising fight hurting a fragile market has got to enter the calculus, especially as the noise ratchets up.

Uncomfortable indeed.

Read White's morning must-read Morning Money at Politico.com.

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