Report: ‘Trillions are at Stake’ in This Election
[Editor’s note: The following is a cross post that originally appeared on CNBC.com]:
Wall Street is beginning to game out what will happen to Federal Reserve policy and interest rates if Republican Mitt Romney is elected president.
With Romney drawing even in recent polls, markets are taking more seriously his vow to replace Fed Chairman Ben Bernanke as well as his criticism of Fed policy, creating the potential for what one fund manager calls “a monetary cliff.”
“The election may impact everything from mortgage costs to the cost of financing the U.S. debt. Trillions are at stake, as well as the fate of the U.S. dollar,” said fund manager Axel Merk.
Merk noted that Columbia Business School Dean Glenn Hubbard is a favorite of Romney’s to head the Fed when Bernanke’s term expires in January 2014, adding that Hubbard “will be leaning toward mopping up the liquidity sooner.”
Hubbard, for his part, has suggested that Bernanke might remain in the job. Other analysts have suggested that what Romney says as a candidate could change if he’s in office, especially if economic conditions change.
But Barclays noted in a recent report: “Any new Fed chairman after January 2014 in a Romney presidency is likely to be more hawkish than under an Obama presidency. Still, changes would likely be gradual, as a new chair will still need the support of the Federal Open Market Committee.”
In the event of a Romney victory, Barclays expects the market at some point to begin to pull forward higher short-term rates in the lead up to what it believes could be an announcement of Bernanke’s replacement no earlier than the summer.
Barclays predicts little effect on the long end of the market.
There’s also a question about whether Romney would begin to push for tighter policy even before the chairman’s term is up.
Economist Stephen Stanley wrote: “If President Romney tries to force an early departure from Bernanke, the Fed Chairman could resist, triggering a potentially ugly stand-off…. Clearly Bernanke would be holding the low card, and it seems doubtful that he would risk the ire of (Congress and the Administration) that can alter the fed’s institutional structure at any time.”
The president cannot force the fed chairman to resign. But —assuming no voluntary resignations from the Federal Reserve Board of Governors — the next president will have the ability to appoint the next fed chairman, vice chairman and at least one board member through 2014. Another board member’s term is up in 2016.
- Bernanke May Not Seek Third Term at Fed
- Wall Street ‘Gaming Out’ Election & the Fed?
- What Is the ‘Fiscal Cliff?’
© 2012 CNBC.com, Steve Liesman. Front page photo courtesy the AP.
Benghazi, IRS, AP...What's next? Only TheBlaze TV offers the truth from Glenn Beck, Andrew Wilkow, and Real News from TheBlaze. Get instant access and a free trial here.
- John McCain Lectures Tea Party Senator on How ‘Business’ Gets Done in Congress: ‘That’s What We’ve Been Doing for a Couple Hundred Years’ 528 Comments
- Boy Scouts of America Vote to Allow Gay Members 488 Comments
- Pope Francis’ Sermon Sparks Debate: ‘Even the Atheists’ Have Been Redeemed ‘With the Blood of Christ’ 469 Comments
- Piers Morgan Bans Dana Loesch From His Show Following Twitter Spat: ‘Show Some Bloody Respect’ 326 Comments
- ‘War in London Tonight’: Rioters Clash With Police Over ‘Cleaver’ Terror Attack (Plus: Read About Hero Mother Who Reportedly Confronted Killers) 294 Comments
- Game-Changing Bombshell? There’s a Major Twist in the Story About a High School Student’s Lesbian Relationship With a Minor Read More
- Is the Boy Scouts’ Gay Amendment the ‘Beginning of the End’ for the Group? (Plus: Tell Us Where You Stand) 133 Comments
- MSNBC Hosts Martin Bashir and Chris Hayes Claim London Machete Killers Aren’t Terrorists: ‘These Are Just Murderers’ 125 Comments
- Did You Catch the Possibly Policy-Changing Ft. Hood Reference in Obama’s Terror Speech? Read More
- Dem. Rep. Apologizes for Attending ‘Racist, Anti-Semitic and Homophobic’ Speech Read More
- Have You Had Scotch at a NJ TGI Friday’s Lately? You Might Have Been Drinking Rubbing Alcohol Read More
- Venezuelan President Blames Toilet Paper Shortage on the Rich Read More
- This Terrible Chart Shows the Change in Food Stamp Participation Over the Last 10 Years Read More
- Disney Makes Absolutely Mortifying Photoshop Mistake Read More
- Trey Gowdy at It Again — This Time with a Jack Bauer Reference! 116 Comments
- How 3D Printing Technology Created a Special Part for Baby’s Windpipe and Saved His Life Read More
- 6 Fascinating Spy Gadgets You’ll Probably Want (and Can Have) After Seeing Read More
- How Would a 3D-Printed Shotgun Slug Hold Up? Here’s the Test Read More
- The Incredible Role Facebook Played in the Aftermath of Devastating Okla. Tornado Read More
- Tech Company Demonstrates Remote Disabling of a ‘Smart Gun’ 131 Comments
- Teixeira expects to play in minors Wednesday
- UK-bound Pakistan plane diverted, 2 men arrested
- Afghan Taliban attack aid group, 2 guards killed
- Venezuela to create new workers militia
- Soldier's slaying prompts UK security review
- AP Source: Jets RB Goodson to practice Tuesday
- Schumer urges look at security in Sprint deal
- News Corp. OKs poison pill, buyback before split