Last night, the Wall Street Journal reported, For Summers, Path to Fed Job Gets Bumpier. It is primarily about an announcement yesterday from Senator Jon Tester that he will not vote for Larry Summers if Obama nominates him to head the Federal Reserve. A spokeswoman said, “Senator Tester believes we need a consensus-builder to lead the Federal Reserve. He’s concerned about Mr. Summers’s history of helping to deregulate financial markets.” This is a big deal because it brings to 4 the number of Democrats on the Senate Banking Committee who are expected to vote against Summers. (The other three are: Sherrod Brown, Jeff Merkley, and Elizabeth Warren.)
There are many reasons that Summers should not be made Fed chair. The Tester statement mentions two in as many sentences. First, Summers is known for not getting along well with others. He made a mess of the job as president of Harvard. Second, his economic policies have been terrible. He was indeed a very big player in deregulating the financial markets. In addition, he has long pushed a strong dollar policy. That’s a policy that supports the rich at the cost of jobs for the poor. Just based upon this, I think he shouldn’t even be considered for the post. It is an outrage that he is one of the main people under consideration. Obama should be shamed out of the country for this.
But I think there is a more important reason for Summers to not be made chair of the Federal Reserve. I am sick to death of people in the upper echelons of power being rewarded for their incompetence. It seems that these people cannot screw up badly enough to cause them to be toxic. Imagine if after World War II, instead of being hanged, Hermann Goering had been put in charge of the West German government. That seems to be where we are today. “Oh, you were wrong about every major economic issue over the last 20 years? Well, why don’t you run the Fed?!”
By all accounts, Larry Summers is a great economist. He should just go back and be an economics professor. There’s no shame in that and he may even be able to make some contributions to science that way. But in government, he should be toxic. And the fact that he isn’t is an indictment of our current system.
The Wall Street Journal also noted that overwhelmingly, economists in academia and Wall Street think that Janet Yellen would be a better choice as Fed chair. But those on Wall Street are more fond of Summers than are those in academia. That alone should be reason enough to not pick Summers. But we will have to see how this all goes. If Obama is willing to fight for Summers, it will show that my very worst fears of Obama are true: he’s too conservative and too insular. He rarely surprises me in a good way.