Why Larry Summers as Fed Chair Would Be a Disaster
The scuttlebutt is that President Obama is predisposed to picking Larry Summers as the next Fed Reserve chair when Ben Bernanke’s term expires at the end of January. For the sake of all of us, let’s hope the rumor mill is wrong.
Ezra Klein in the Washington Post lists the reasons that Obama is inclined toward Summers, none of them convincing: They’re buddies; Summers is trusted by the financial sector; and he is a sound manager.
Now, let’s stack up the reasons not to pick Summers: He helped destroy the American economy; he contributed to the global economic crisis; he’s a sexist pig; and he’s arrogant beyond belief.
Let’s start with the U.S. economy. Summers bought into the deregulation-is-good-for-us myth and was, in fact, one of its prime architects during his stint as Treasury Secretary during the Clinton Administration. He helped repeal the Glass-Steagall Act, which had put a barrier between commercial banking and investment banking. He was also strongly in favor of exempting derivatives from effective supervision, derivatives that Warren Buffett called “financial weapons of mass destruction.” When Brooksley Born, the then-head of the Commodity Futures Trading Commission, pressed for stronger regulation, Summers, along with buddies Alan Greenspan and Robert Rubin, brushed her aside during the Clinton years. If only this old boys’ club had listened to her.
Summers’s harmful influence continued when he came back to public office as Obama’s chief economic adviser. Ron Suskind’s “Confidence Men” details how—to the detriment of the nation—Summers and Tim Geithner successfully imposed their preferences on Obama for cozying up to Wall Street and watering down the fiscal stimulus.
Summers also had a terrible effect on the global economy. As Clinton’s Deputy Secretary of Treasury and Treasury Secretary, he pushed financial deregulation upon the rest of the world to benefit Wall Street. This was a prime cause for, initially, the Asian economic crisis in the late 1990s and, later, the global cataclysm that has beset us in the recent past. When Joseph Stiglitz (the future Nobel laureate), publicly objected to such policies from his post at the World Bank, Summers reportedly got him thrown out.
Summers’s pernicious role on the global stage actually dates further back. When he was with the World Bank in the early 1990s, he infamously thought aloud in a memo (sarcastically, he claims) that "the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that … I've always thought that underpopulated countries in Africa are vastly underpolluted.”
His time as president of Harvard University lays rest to the claim that he is a sound manager. First, he managed to alienate African Americans by chewing out Professor Cornel West for supposedly not being academically rigorous enough. (West soon departed for Princeton.) Summer then estranged an even larger group when he mulled out loud in 2005 (this time in a speech) that women did not have a natural aptitude for science and engineering. His sexism and highhandedness caused a faculty revolt at Harvard, and he was forced to resign the following year.
There are few people in public life who epitomize arrogance better than Summers.
“Life sucks around here,” he reportedly complained in 2009 to Rahm Emanuel, the then White House chief of staff. “I waited thirty minutes outside the Capitol because you f-----s can’t get your motor pool to work right.”
And “Confidence Men” contains repeated instances of Summers ignoring Obama’s wishes on everything from winding down Citigroup to imposing a financial transaction tax.
Uh, why exactly is Obama inclined to choose Summers?
Fortunately, opposition to Summers is already emerging, and not just among progressives.
“I can think of no one, with the possible exceptions of Robert Rubin and Alan Greenspan, who are more closely identified than Summers and Geithner with the errors of financial leadership of the past fifteen years,” writes James Saft, a Reuters columnist. “And should either get the top job it would send a clear signal that efforts to properly regulate finance will come to very little, and that the chances of yet another in the long succession of crises are getting larger.”
Several members of Congress (including Nancy Pelosi) have also indicated their opposition to Summers.
Instead of Summers, many Democrats are urging the White House to pick Federal Reserve Vice Chair Janet Yellen as the next head of the institution. Approximately one-third of Senate Democrats sent a letter to Obama on July 26 asking for Yellen to be appointed the next chair of the Fed.
Let’s hope they’re able to save Obama from himself—and from Lawrence Summers.
Amitabh Pal, the managing editor of The Progressive and co-editor of the Progressive Media Project, is the author of “ ‘Islam’ Means Peace: Understanding the Muslim Principle of Nonviolence Today” (Praeger).
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