September 16, 2013
Harvard Professor Larry Summers yesterday requested that his name be withdrawn from consideration for next chairman of the Federal Reserve. Let me outsource to a few others for comments.
I have reluctantly concluded than any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing economic recovery.
Let me just say that Janet Yellen is now clearly by far the best technocratic choice for Fed chair of those on the short list.
The market reaction stems from the belief that Summers is a hawk and Yellen is a dove. While I understand that this is a widely held belief, I think it is insulting to both candidates to paint them with such broad strokes. I think that either candidate would be hawkish or dovish as the situation required. I also think that if you believe Yellen is an unabashed dove, you are going to be surprised by her reaction if inflation rears its head in the slightest.
One leading candidate is Janet Yellen, the Fed's current vice chairwoman, who has garnered substantial support among Democrats in Congress and among economists. But the public lobbying on her behalf appears to have annoyed the president, say administration insiders, and may lead him to look elsewhere.
Posted by James Hamilton at September 16, 2013 07:37 AMdigg this | reddit
The whole thing has been fascinating. Summers and Yellen have been floating for months and months; twisting in the wind. Obama isn't a very good people manager you would think he would get some help with stuff like this. Now if he doesn't appoint Yellen there's going to be a whole nother round of outrage.
I am by no means an expert, but why not ask Bernanke to stay another term?
Posted by: randomworker at September 16, 2013 08:51 AM
"But the public lobbying on her behalf appears to have annoyed the president, say administration insiders, and may lead him to look elsewhere."
Look elsewhere? Let smart systems bots do the work of determining bank reserve supply and rates, but then do so with 100% reserving of deposits and implementation of Glass-Steagall II.
Central bank (and banking in general) activity should be transparent, boring, and highly predictable, not a source of mystery, intrigue, and drama for financial speculators levering up 100:1 to game one another to the point of bringing down civilization.
No longer is risk hedged but rather created from which to speculate profitably at increasing leverage, irrespective of systemic risk.
Fractional reserving and the resulting leverage is what creates the increasing point and systemic risk, increasing the fragility of the system and susceptibility to fat-tail meltdowns.
Posted by: Bruce Carman at September 16, 2013 08:58 AM
No mention of the damage done to Summers by political correctness? I don't have a dog in this hunt, but I think it is outrageous that he could be blocked by 4 Senators because of something he said about female engineering students in 2005. What does that have to do with the Federal Reserve? Talk about politics trumping policy.
Posted by: Buzzcut at September 16, 2013 09:54 AM
Buzzcut, I never heard of that. Really, being an unrepentant Democrat myself you think I would have stumbled upon that somewhere. I always thought the reasons were:
1. He had baggage from 2008.
2. He was too cozy with "Wall Street"
3. He was insufficiently concerned about employment (some call this hawkish but that is an extreme oversimplification).
Besides, I didn't think Republicans liked him that much either. Unless now he is a victim and all that has changed? So Obama would have had to fight the battle on two fronts. Just not possible at this time.
Posted by: randomworker at September 16, 2013 11:00 AM
Larry Summers - I refuse to have a sex change operation.
Brad DeLong - Thanks goodness, now we can see quadrillion dollar QE.
Tim Duy - You want quantitative easing? I'll give you quantitative easing. And you think it matters, Summers or Yellen?
WSJ - If the little people are for Yellen, Obama has to be against her. They never know what is best for themselves. They must be disciplined.
Posted by: Ricardo at September 16, 2013 11:36 AM
Buzzcut: Anyone who actually read what he said about female engineering students would be struck by his willingness to engage in such a topic with an open mind, not one set in stone by the present version of political correctness.
Posted by: don at September 16, 2013 01:01 PM
He should appoint the Rev Jeremiah Wright!
Posted by: Anonymous at September 16, 2013 04:06 PM
Yellen is a lock. Obama cannot afford to be part of the "war on women".
Posted by: Bruce Hall at September 16, 2013 04:09 PM
The comments here about sex are really childish and off the mark. Summers didn't lose this position because of remarks from ages ago, period, and it's not a case of political correctness.Nor his sex.
As for Yellen, remember, there was a campaign and comments on her gender - the 'female dollar' nonsense by the Sun, followed by the WSJ then claiming that appointing her would be akin to pandering.
Posted by: GA at September 16, 2013 05:47 PM
seriously ? He was condemned because:
1. he was disastrously WRONG about Enron, pushing California to regulate further while Enron was raping them after hours
2. he was disastrously WRONG when he pressed asian countries to open up their capital markets, leading directly to the Asian Crisis
3. he was disastrously WRONG in his part to repeal Glass-Steagall
4. he was disastrously WRONG when creating legislation preventing derivates from being regulated
5. he was disastrously WRONG when when arguing with Brooksley Born (sp?) ... oh hell, are you getting the picture ??
The guy is awesomely INCOMPETENT, and it matters not a whit how supposedly 'smart' he is. I've met a lot of insanely smart people who are idiots. Why he was even _considered_ says more about Obama and the White House that it does about Summers.
Good bye and good riddance. He'll get a nice fat consolation prize somewhere to get another chance to screw something up royally ..
Posted by: Marcello at September 17, 2013 11:09 AM