Of all the legacies presidents leave behind, few are as important — yet as poorly understood in the moment — as their picks for chairman of the Federal Reserve.
Paul Volcker, credited with taming double-digit inflation through backbreaking high interest rates that contributed to the recession of the early 1980s, was among President Jimmy Carter's most consequential appointments.
Similarly, President Ronald Reagan's selection of Alan Greenspan, the economic "maestro" selected in 1987 — and who ran the Fed for nearly two decades — seemed mostly sage. Well, until after his 2006 retirement, when Greenspan's once nearly absolute faith in the self-correcting powers of markets was dashed against the rocks of the housing bubble and the worst recession since the Great Depression.
So whoever President Obama chooses to replace current Chairman Ben Bernanke, who is scheduled to step down in January, is likely to have an influence beyond the Obama presidency. The new chairman's four-year term would extend a year beyond Obama's second term. The choice, in short, is likely to be the gift that keeps giving.
And since Obama is unlikely to get many of his second-term economic priorities through the GOP-controlled House, the person he picks to lead the Fed may represent the president's best chance to accomplish his remaining economic agenda.
A Fed chairman might be able to accomplish some of what Obama seeks through monetary policy. Bernanke, for instance, used the technique called "quantitative easing," in which the central bank bought bonds to keep as much liquidity in the economy as possible. For Obama, it was akin to a second economic stimulus plan that the president could never have gotten through the "hell no" House.
All this helps to explain the great interest in Obama's choice, and why lobbying is in full gear by allies of the two candidates thought to top Obama's short list.
One is Lawrence Summers, the scary-smart economist and former Clinton-era Treasury secretary. Once Harvard University's president, he was a key member of Obama's first-term economic crisis team who remains close to Obama and to Wall Street. He has a reputation for challenging others to see the flaws in their thinking but also for not playing well with others. And he frequently gets blamed as one of the horsemen of the financial apocalypse for pushing the deregulation of financial derivatives during his service in the Clinton administration.
The other top candidate is Janet Yellen, an economist who's smart but not as scary as Summers to many. She's the Fed's current vice chairwoman and was president of the San Francisco Federal Reserve Bank. Like Summers, she worked in the Clinton administration; she was chairwoman of the Council of Economic Advisers. In the 1990s, she was also a Fed governor. She lacks Summers' close ties to Obama. And unlike the sharp-elbowed Summers, she is viewed as a collegial consensus builder who saw earlier than Summers — and many other economists — the dangerous economic instabilities that were building up before the 2008 bust.
Both Summers and Yellen, as well as the other possibilities being mentioned these days, have awe-inspiring credentials. So Obama's decision seems to come down to whose understanding of the economy most closely matches his own, and which candidate is likeliest to have people looking back years from now saying: "That was an inspired pick."
The politics around the decision makes it fascinating to watch how Obama resolves what seems a difficult choice.
Yellen would make history as the first woman to head the Federal Reserve. That would seem to have a certain appeal to a history-making president who has been criticized at times for not having enough women in senior positions or in his inner circle.
Adding irony to that possibility is the gender controversy Summers unleashed during his Harvard presidency, when a deliberately provocative speech he gave about the disproportionately low percentage of women in top science and engineering jobs was perceived as a display of sexism.
Even so, Summers is often the smartest guy in the room and exudes the confidence that brings, which isn't a bad thing in the top central banker — though it can turn off some of the people he may need to work with.
Raising the political pressure on Obama is a recent letter from a majority of Senate Democrats expressing doubts about Summers being the right person for the job.
Not surprisingly, the issue came up during Obama's visit with congressional Democrats on Capitol Hill Wednesday.
Rep. Ed Perlmutter of Colorado had a simple four-word message for Obama in his meeting with House Democrats: "Larry Summers. Bad Choice." That caused Obama to defend Summers, though members who witnessed the exchange said it was more in the vein of Obama asking lawmakers to be fair to Summers instead of signaling the former Treasury secretary was his choice.
At a later news conference, Rep. Nancy Pelosi, D-Calif., the House minority leader, said Obama spoke about "what he thought about Larry Summers. But it wasn't really about Larry Summers. It was about how important this decision is ... recognizing that there are differing views in our caucus on the subject and how we go forward, but understanding that whoever the president chooses will be received with great respect by our caucus."
At a similar session with journalists after the president's meeting, Sen. Harry Reid, D-Nev., acknowledged that Summers isn't the preferred choice of many Senate Democrats, but he agreed that Democrats will rally behind Obama's selection.
"Some of my senators have been involved publicly in directing the president's attention to someone else. Larry Summers is a longtime friend of mine. I like him a lot. I think he's a very competent man. But that decision is up to the president. Whoever the president selects, this caucus will be for that person, no matter who it is."
White House officials have indicated the president's decision won't come until after Labor Day. That means speculation will go on for weeks, as will the public and private lobbying.