Credit Suisse Says Larry Summers Appointment to Fed Chair Brings More Uncertainty Than Yellen

"A Summers chairmanship would bring with it more initial uncertainty; the markets know Yellen's views on monetary policy better than they know those of Summers," wrote Credit Suisse U.S. Economist Neal Soss this morning. For months, it was believed that current Vice-Chairwoman Janet Yellen would succeed here current boss but markets have begun to discount Summers as the front runner now. Recall, Larry Summers is most famous for his role is repealing Glass-Steagal and allowing for the build up of the nation's biggest banks.

Soss believes that Yellen would be an instant positive for markets as she is widely respected within the Fed. "Yellen, an academic with an impressive resume of government service, could be expected to largely continue Bernanke's efforts to boost growth and employment by utilizing a combination of Fed balance sheet and communication tools. She is widely respected within the Federal Reserve System."

Yellen is also an extremely dovish member of the FOMC, which is bullish for those who believe that continued easy policy is supportive of asset prices. "Yellen's rhetoric occasionally comes across as more dovish than Bernanke's, and some wonder whether, as chair, she would advocate tolerating a higher rate of inflation in pursuit of job growth. Her public statements to date, however, suggest she is as committed to the Fed's 2% inflation target as the consensus of the FOMC."

Meanwhile, he fears that Summers would bring some uncertainty to the Fed but could also serve as a positive in defending the Fed against Congressional political pressures. "Summers is also an academic economist who knows his way around Washington, DC. He was Treasury Secretary under President Clinton and Director of the National Economic Council under President Obama. He also served as President of Harvard University for five years."