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Maurice “Hank” Greenberg, former head of American International Group Inc., said the Federal Reserve could disrupt financial markets by curbing bond buying too quickly and that Janet Yellen would take a measured approach.
“It’s got to be done gradually,” Greenberg, 88, told Bloomberg Television’s Betty Liu in an interview last week on the “In the Loop” program. “My own sense is that Yellen would be the one to do it that way.”
President Barack Obama is preparing to nominate a new Fed leader to replace Chairman Ben S. Bernanke as central bankers debate how to pare $85 billion in monthly bond purchases, a plan known as quantitative easing. Yellen, the current Fed vice chairman, and former Treasury Secretary Lawrence Summers have been among the top candidates mentioned for the post. Summers, however, withdrew his name from consideration over the weekend.
“Larry’s a very bright guy and I think would do a good job, but my belief is that he would be more aggressive in pulling back from QE,” Greenberg said last Thursday. Selecting the next chairman is “not an easy choice, obviously. I think that the worry is that we pull back on the QE all at once, and that would play havoc with the economy.”
His analysis echoes results of a Bloomberg Global poll in which respondents said Summers would keep Fed policy tighter than Yellen. Greenberg also said Yellen works well with colleagues.
“She’s more likely to get a consensus among the board members, rather than acting more on her own,” Greenberg said.
Bernanke’s chairmanship ends in January.
Editors: Dan Kraut, Steve Dickson