Next Fed Chair: Not Larry Summers
Larry Summers is running hard to succeed Ben Bernanke as chairman of the Federal Reserve. This is a terrible idea, on several grounds (which I'll discuss in a moment.) Even so, I'd place the odds of President Obama giving Summers the job at 50-50 or better, unless progressive Democrats get mobilized, and fast.
Summers would be terrible because he is part of the Robert Rubin crowd that brought us the financial collapse and then worked to save Wall Street from the mess the bankers made. As Clinton's Treasury Secretary, Summers worked to repeal the Glass-Steagall Act, to promote global financial speculation, to block derivatives regulation, and to isolate the heroic Brooksley Born. In the summer and fall of 2008, working in the Obama campaign, he managed to shove aside Paul Volcker, an early Obama supporter, into a purely ceremonial position.
Once appointed chief of economic policy, Summers with Tim Geithner was a prime architect of propping up and bailing out the biggest banks, rather than cleaning them out and altering the conflicts of interest at the core of Wall Street's business model. Today, the banks are more highly concentrated, more profitable, and less in the business of financing the real economy than ever. This is Larry Summers' legacy.
The prime alternative to Summers is Fed Vice Chair Janet Yellen, who is very much like Bernanke, only better. She has gone even further in expressing concern for the economy's persistent unemployment and in criticizing the bipartisan obsession with deficit reduction. Iwrote about Yellen's stellar performance for the Huffington Post back in February.
Yellen deserves to be Fed chair purely on the merits. It pains me to write that if she gets the job, one other major contrast with Summers will weigh in her favor. She is female.
There has never been a woman chair of the Fed, and President Obama loves to break glass ceilings. Summers, by contrast, has an unfortunate history of being dismissive of women. It's too bad that the decision may come down to gender, but if Yellen does get the position we should be grateful whatever the president's calculations.