Ezra Klein tips Summers

The typically well informed (especially on things Democratic) Ezra Klein reports that Summers is now the leading contender to replace Bernanke.

Here are his five reasons why —

1) President Obama really likes Summers. And he’s surrounded by Summers’s longtime colleagues and friends. Conversely, Obama doesn’t really know Yellen, and nor do any of the White House’s economic principals.

2) The Obama administration’s top concern is choosing someone who cares about the Federal Reserve’s mandate to maintain full employment as well as its mandate to keep inflation low. Yellen and Summers are both seen as clearing that bar. So the choice is defaulting to other considerations.

3) This White House, more so than any other in modern memory, knows in its bones that the economy can fall apart at any second. China could suffer a hard landing, Europe could fall apart again. Some London Whale-like trader could blow a hole in JP Morgan Chase. If that happens — particularly given Washington’s dysfunction — the Fed is really the first responder. This White House is very comfortable with how Summers handles a crisis.

4) There’s also a feeling that the chair of the Federal Reserve can do more if he or she is truly trusted by markets. Rightly or wrongly, there’s a sense that Summers has the market’s trust in a way Yellen doesn’t.

5) The big open question is Summers’s ability to manage the Federal Reserve’s Open Markets Committee. Here, Summers’s reputation for being difficult to work with is a big issue. But inside the White House, that reputation is considered overblown, or at least outdated — after all, they worked with him, and enjoyed working with him, and there’s some sense that maybe a more aggressive Fed chair wouldn’t be the worst thing in the world.

Summers is seen as more hawkish than Yellen, so he is the strong USD candidate.