Two-Name Race Drops to One, but Guessing Continues

WASHINGTON - What if Janet L. Yellen doesn’t get the job?

That was the intriguing question swirling around the capital on Monday only hours after Lawrence H. Summers withdrew his name from consideration to succeed Ben S. Bernanke as chairman of the Federal Reserve when he steps down at the end of January.

While the conventional wisdom is that the vice chairwoman, Ms. Yellen, is now almost assured the job, some White House and Fed watchers are not-so-privately speculating that President Obama may still choose another candidate.

His name is Donald L. Kohn, a former Fed vice chairman. He has a big fan whispering in the ear of President Obama: Timothy F. Geithner, the former Treasury secretary, who has been informally consulted by the White House on the selection.

Mr. Kohn, 70, has remained largely overlooked in the last several months as the political parlor game “Summers vs. Yellen” played out in the halls of Congress and in the news media.

President Obama may have cracked the door in August, however, when he told members of Congress that Mr. Kohn was also on his list.

Mr. Kohn spent 40 years at the Fed, starting as a staff member at the Federal Reserve Bank of Kansas City and later joining the board in August 2002. He was long considered a centrist and a confidant of Alan Greenspan before becoming Mr. Bernanke’s top adviser during the financial crisis.

He was named vice chairman in June 2006. Larry Meyer, a former Fed governor, lauded Mr. Kohn in 2010 upon his retirement for his “extraordinary judgment, the institutional memory that comes from many years of dedicated service” and “a calm and steady hand in the Fed’s responses to threats to economic and financial stability.”

A slight, balding man with a wicked wit, Mr. Kohn somewhat famously â€" at least within economist circles â€" rode a bicycle to work for years and led a hike known as the Death March in Jackson Hole, Wyo., at the annual summer gathering of the world’s leading economists. Since retirement, he has kept himself busy by joining the Brookings Institution and the Bank of England’s Financial Policy Committee.

If President Obama had hoped to nominate Mr. Summers based on his experience handling crises, Mr. Kohn may fit the mold even better than Ms. Yellen, who succeeded Mr. Kohn when he retired. She was president of the Federal Reserve Bank of San Francisco during the financial crisis.

For better or worse, Mr. Kohn was smack dab in the middle of the Fed’s rescue efforts, including advising Mr. Bernanke and Mr. Geithner on the bailout of the American International Group, a fact that might add tension to a confirmation hearing. He also oversaw the stress tests of the banking system in the aftermath of the crisis.

How does he think about monetary policy and regulation? How would he govern?

Well, his views have evolved.

When he retired in 2010, he said in an interview with Sewell Chan in The New York Times: “It’s going to be a slower recovery. But acceptance of that reality is not a reason for the central bank not to do everything it can to help that recovery along.”

At the time, like Ms. Yellen, he professed that the Fed should do more to try to stimulate the economy and bring unemployment down. “I would want to see that there was the prospect of progress in the forecast toward achieving both much higher levels of employment and, eventually, higher inflation, closer to my 2 percent target.”

Now, he appears â€" like the rest of the Fed that may begin easing up on stimulus as soon as this week â€" to have modulated his stance. He warned on Monday during a talk at Brookings: “Very easy monetary policy often builds imbalances that may become so large they that can’t be countered by regulation.”

He also admitted, like so many other policy makers, including Ms. Yellen, that he had missed the buildup of the financial crisis. Before the crisis, in 2005, he said, “Government regulation risks undermining private regulation and financial stability.”

“I don’t think I appreciated the lack of diversification, the amount of leverage, the amount of maturity transformation that made the system so vulnerable to a decline in housing prices,” he said. “Everybody â€" but certainly the regulators and the markets â€" became complacent about the housing market and whether housing prices could ever decline across a broad front.”

Unlike Mr. Bernanke, who has pushed the Fed to become more transparent, holding news conferences and the like, Mr. Kohn has long worried about the Fed’s independence and has, at times, pushed back at efforts to be more public, anxious that the institution would become politicized.

He wasn’t wrong. The debate over the next Fed chairman has become exactly that. And it may be why Mr. Kohn ultimately may not get the job.

“Just can’t see Obama going for anyone other than Yellen â€" the pushback within his own party would be intense and it would revive all sorts of gender issues,” said Greg Valliere, chief political strategist at the Potomac Research Group, where, coincidentally, Mr. Kohn serves as a senior economic strategist. “He doesn’t need that, considering the other major battles that loom this fall.”

Andrew Ross Sorkin is the editor at large of DealBook. Twitter: @andrewrsorkin