REUTERS/Price Chambers
What made a possible Summers pick so objectionable is that Janet Yellen exists. She's already the vice chairwoman of the Fed. She's a key architect and proponent of the Fed's appropriately accommodative monetary policies. Her selection would reassure financial markets that easing would continue as appropriate. And she doesn't have Summers' track record of undermining his initiatives by unnecessarily alienating people.
To capitalize on all those upsides, the president now has to actually pick Yellen. Other possible picks, like former Fed Vice-Chairmen Donald Kohn and Roger Ferguson, are qualified but would add unnecessary uncertainty about the direction of monetary policy.
Berkeley Prof. Brad DeLong, a frequent Summers collaborator who was one of his few high-profile boosters from outside the administration, was critical of Summers opponents on the grounds that they might be creating a monster. DeLong likes both Summers and Yellen. But with Summers out, DeLong figured the president was likely to pick not Yellen but someone like Kohn or Ferguson, and therefore get a monetary policy worse than he would expect from either Summers or Yellen.
I am more hopeful. At first, I interpreted the White House's prolonged Summers flirtation as a signal that the president had a problem with Yellen. But the flurry of anonymous quotes over the last month from senior officials and former senior officials suggested that the president is simply enamored of Summers and his crisis-management abilities. If the Summers gambit was about desperately wanting Summers, it doesn't have to have been about desperately trying to avoid Yellen.
In fact, Yellen is now the only widely discussed candidate for Fed Chair whom Barack Obama has already appointed to a senior position: He made her the Fed Vice-Chairwoman just three years ago. (That trumps Ferguson's service as a member of the President's Council on Jobs and Competitiveness.) Yellen was confirmed on a Senate voice vote, her nomination having been passed out of committee by 16-7.
So I think we have every reason to believe that President Obama likes Yellen (though not as much as he likes Summers) and that the Senate would confirm her (though some hard-money Republicans would likely vote no). Plus, unlike with Summers, Obama could count on the left to stick up for Yellen against Republican obstruction.
Obama should nominate Yellen, and I think it's likely that he will. The last remaining step is for him to do so.