There is more pushing from the White House to make Obama’s golfing buddy Larry Summers the next Federal Reserve chair. Dean Baker wrote a very interesting article over at the Chinese content provider (sort of like the Associated Press, as far as I can tell) Caixin Online, Will Obama Rewrite History with Fed Pick? It all has to do with two new possible Fed chiefs that the White House has put forward: Roger Ferguson and Donald Kohn. Baker’s point is that these guys were major Fed players under Greenspan. So of the four people under consideration by Obama, three of them are directly implicated in the housing bubble and the resulting financial crisis.
Baker isn’t primarily concerned with what any of these three guys might do if they actually got the position. Rather, it is about what the whole thing says regarding what the Obama administration thinks about recent economic history. He wrote:
I’m not sure if the administration is effectively rewriting history. I think it is more that, as he also wrote, the economic debate is “distorted by deference to those in power.” And in this way, the Obama administration is no different from any other administration. Or for that matter, any other part of our culture. This is one of the things that’s so maddening about the idea of us having a meritocracy. People give jobs to their friends. Regardless of all the other stuff that the White House is saying, Obama appears to want Summers to head the Fed because they are buds. This really is how our whole society is run. It’s shocking that Nike manages to produce both left and right shoes.
What Baker didn’t discuss is that this is almost certainly an attempt by the White House to make Summers look better. It effectively lowers the curve. Instead of Summers being the bad choice, now he’s the middle choice. In fact, they might even say he’s the consensus choice. Sure, liberals want Yellen, but the politically viable choice is Summers. Plus, Obama seems to get off on offending liberals; I assume it makes him feel Serious and Centrist.
This is a very troubling notion. The last few months I’ve been amazed at just how much the White House has pressed the Summers nomination. It seems like they think that having him become Fed chair is really important to the future of United States. But that can’t really be true. My assumption is that it is just that Obama’s good bud deserves this job as the crown on his career. And I can see why that is. He stands a decent chance of being an okay Fed chair. But if he doesn’t get the job, what will people remember him for? The financial crisis and being a terrible Harvard president? I can see why his people are pushing so hard. But the White House is supposed to be doing the people’s business—not the president’s golfing buddies’ business.