Picking a new chairman of the Federal Reserve may be the most important nomination a president can make. The next Fed chair will play an instrumental role in determining the future trajectory of America’s straggling recovery, and determining how financial regulation gets implemented. It remains to be seen who President Obama will officially nominate to fill current chairman Ben Bernanke’s role when his term expires in January, but early reports suggest he is leaning toward Larry Summers, a former Treasury Secretary and Harvard president, as well as first-term White House National Economic Council director.
Obama’s own base is livid at the idea.
“He provokes strong reactions in people,” economist Dean Baker told msnbc.com. Here’s why:
He once seemed to suggest that women are inherently worse at math and science. In 2006, when he was still president of Harvard University, Summers gave a speech in which he suggested that women might be underrepresented in the sciences in part because of “variability of a male and female population” when it comes to “overall IQ, mathematical ability, [and] scientific ability.” After a month of denunciations, he resigned from the presidency.
Obama would be passing up an opportunity to nominate the first-ever female Fed chair. The other top contender for the position is said to be Janet Yellen, the current vice chairwoman of the Fed’s Board of Governors. If Yellen became Fed Chair, she would be the first woman to ever hold the position. Obama has very few women at the top of his economic team, and many of the critics who prefer Summers have used charged, possibly sexist language like “toughness” or “gravitas.”
“Yellen is clearly the most qualified successor to follow Ben Bernanke,” writes former FDIC chair Sheila Bair. “There is no reason to pass her over for less-qualified males.”
Summers is a vigorous proponent of deregulation. As a member of President Bill Clinton’s economic team, Summers helped to shepherd much of the financial deregulation which progressive critics believe presaged the 2008 economic collapse. Notable accomplishments include helping to deregulate derivatives and presiding over the repeal of the federal regulation known as the Glass-Steagall Act, according to financial analyst Barry Ritholtz.
His perspective has not changed much since the 2008 crash. In 2011, he penned a Reuters column urging investigators not to dwell too much on the past when it comes to foreclosure fraud.
“As a matter of justice, as a matter of accountability, I think he’s radically wrong on that, and that’s the sort of regulatory framework he’d bring to the fed,” Roosevelt Institute fellow Mike Konczal told msnbc.
Summers fought a larger stimulus. As a member of Obama’s transition team, Summers’ fellow economic adviser Christina Romer over the appropriate size for a post-crash economic stimulus package. While Romer calculated that restarting the American economy would require more than $1 trillion in stimulus, Summers managed to bring the proposal down to around $800 billion. That wasn’t nearly enough, said Baker, who blamed President Obama for not trying to collect more stimulus during his first term.
“I consider Summers really crucial in sending him that way,” Baker told msnbc.
He doesn’t seem particularly interested in monetary policy. Monetary policy—controlling the country’s money supply—is the Fed’s key policy lever. But Summers, for all his notorious outspokenness, has given very few indications that feels strongly about it one way or the other. “Most indications suggest he doesn’t think it’s very important right now, so it’s kind of weird that he’d want the job [of Fed chair],” said Konczal. “He’s kind of poo-pooed the role of the Fed, at least seemingly,” said Baker. His leadership style might not work on the Fed. Summers is known for having a pugilistic style, and his critics say that doesn’t fit with how the Board of Governors does things. “There’s a sense that there’s sort of an Olympian image of the Fed, that truth comes from on high, and so the process has to be one where arguments, disagreements, take place in a controlled environment,” said Demos senior fellow Wally Turbeville. Tune into msnbc’s All in with Chris Hayes at 8 p.m. to hear why Chris Hayes doesn’t want Summers to chair the Fed.
Ned Resnikoff is an urban policy analyst, researcher, writer, and editor. His byline has appeared in a variety of publications, including the New York Times, San Francisco Chronicle, Dissent, and The Nation. He writes the newsletter Public Comment, which can be found at publiccomment.blog. Recommended
