What was thought of as unthinkable several months ago looks more likely every day. It is becoming more likely that Ben Bernanke may not be re-appointed as Chairman of the Federal Reserve. The Wall Street journal reported today that there is bi-partisan growing opposition to the reappointment of Ben Bernanke. Ten Republicans oppose his reappointment as well as several senior democrats. While I support Bernanke’s reappointment, if he is not reappointed I know the perfect person for the job.

My choice for the position would be Dr Robert Shiller. I am not sure he is willing to accept the job but I can think of no one more qualified than him to hold it. Shiller undoubtedly is one of the most respected economists in the country. Shiller foresaw both the tech bubble and the housing bubble. Greenspan not only did not foresee the housing bubble, but has been criticized by many for causing. Many prominent economists claim that Greenspan caused the housing bubble for keeping interest rates too low for too long.

Real Estate is vital to the US economy. Despite the large decline in real estate prices, real estate makes up over $20 trillion of household wealth. This number is much larger than equities, and for the economy to recover housing prices will have to rise or at least stabilize.

The Fed has large sway over housing prices and mortgage rates. Currently, the Fed has an even more important role than usual in this regard. With mortgage rates currently at zero, the next Fed chairman will clearly have to raise rates; the only question is by how much and how quickly. I have stated in a previous article that the normal fed funds rate is at least 4% and I expect we will eventually get to that level. Dr. Shiller understands housing prices better than almost anyone in the country. This understanding will be vital in deciding about rate increases.

I believe that the reason the Fed has kept rates at zero is almost entirely due to housing prices. If rates were at 1 or 2% it would make almost no difference to businesses issuing debt or many other aspects of the economy. However a 1 or 2% rise would affect mortgage originations significantly and therefore affect the housing market. I suspect the Fed will only raise rates when the Fed believes they can raise rates without adversely affecting housing rates. Under these circumstances, Dr Shiller would be an even more ideal choice for Fed Chairman.

In terms of political aspect I think Dr Shiller could win the confirmation. Although, Shiller identifies more with the Democratic party, I think he would be acceptable to Republicans. Shiller is not a polarizing figure like Paul Krugman or Joseph Stiglitz is. He seems to be concerned about economics and does not get involved with other political questions as many other economists due. I think despite being a Keynesian, Shiller could win significant Republican support due to his low key profile in the political arena and the esteem he is held in for his brilliance in economics.

On a personal note, for anyone following my columns I want them to know I might have to scale back a bit. I have promised several authors book reviews and I want to get them up in a timely fashion. In addition I am working on revamping my current site www.valuewalk.blogspot.com to a new website which will be much more user friendly and not on the blogger platform. However, I hope within a few weeks to be writing articles on almost a daily basis again.