Janet Yellen, is a well-respected academic economist and a much-admired member of the Federal Reserve System community. She would make a good Fed chairman. Larry Summers, by virtue of the breadth of his market, government, and academic experience, is more likely to make a great Fed chairman.

As I wrote four weeks ago, the Federal Reserve is trying to figure out when the recovery has become firm enough to reduce its purchases of Treasury bonds and government-backed mortgages made under the quantitative easing program known as QE3.

The next U.S. central bank boss must end the Fed as we know it. For more than five years, the bank has fumbled its dual mandate to stabilize prices and maximize employment.

Chairman Bernanke’s testimony yesterday was yet another attempt to calm financial markets, which have been spooked by the prospect of the wind-down of the QE program.

“Chairman Bernanke’s prepared testimony broke no new ground. The Fed’s next move continues to be entirely data-dependent. If the economy evolves as the Fed has forecast, look for the tapering of QE purchases to begin in September.” Steve Oliner, former senior Fed official.

Chairman Bernanke’s dovish written testimony for the Humphrey-Hawkins hearings on the economy and Fed policy aims to make three points: tapering (less bond purchases/QE by the Fed) is not tightening; when tapering occurs depends on the economy; and zero interest rate policy, ZIRP, will continue for an extended period, probably until late 2015.

Bernanke's efforts have failed to produce a robust recovery and they've underscored the need for lower government spending.

Last week's press conference was not among Mr. Bernanke's finer moments in his eight-year chairmanship of the Federal Reserve. For aside from making the egregious blunder of providing a more specific time frame as to when the Fed's quantitative easing program might be ended, Mr. Bernanke appeared to seriously underestimate the very real external risks to the US economic recovery.

It appears the Fed has now made its second significant error of the Bernanke era, a blunder that merits a thorough thrashing.

How shall we understand the big drop in stock and bond prices of the past two days?  Put simply, as a return to something more like market prices of assets than like the manipulated Bernanke prices to which we had become accustomed.