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article imageOp-Ed: Obama considering Larry Summers for chair of Federal Reserve

By Ken Hanly     Jul 28, 2013 in Politics
Washington - Ben Bernanke, the present chair of the US Federal Reserve, has said the he has already stayed longer in his post than he wished, so it is quite unlikely he will seek another term when his present term runs out in January.
According to an article at Bloomberg along with many others, the two top runners are thought to be former Treasury Secretary Lawrence Summers and the present Vice Chairman of the Federal Reserve Janet Yellen. Treasury Secretary Jacob Lew claims both are extraordinarily talented people and he admires both of them although he would not comment on whether Obama would nominate either of them.
In a recent interview with the New York Times, Obama said he had not made a final decision as to whom he would nominate but said: “You can anticipate that over the next several months, an announcement will be made,"
Yellen is certainly the less controversial candidate. She is described in an article in Cyniconomics as follows: Soft-spoken, even-tempered, 100% mainstream academic economist who boils the world down to simplistic concepts such as aggregate demand shortfalls and wealth effects, justifies decisions with research papers that are steeped in dubious assumptions and enjoys strong support from liberal Democrats.
However, the authors say that they would describe Ben Bernanke the same way. This is not too surprising since Yellen is a strong backer of Bernanke. However, Yellen might be a bit harder on banks than Bernanke. This they claim would not be hard to do given that Bernanke in their opinion did much for the banking lobby. They conclude that the transition from Bernanke to Yellen would be as big an event as a rainy day in Seattle.
The appointment of Larry Summers would could cause considerable violent weather on the political scene. For some reason Summers seems to be an Obama favorite. Summers served as US Secretary of the Treasury from 1999 to 2001. Under Obama he was Director of the White House US National Economic Council until 2010. He is a professor at Harvard University's Kennedy School of Government.
Summers was also President of Harvard from 2001 to 2006 when the Harvard Faculty passed a non-confidence vote in his leadership. He was accused of conflict of interest and had conflicts with faculty. He also made statements about under-representation of women in the sciences that many thought inappropriate. Already some are campaigning to ensure he is not nominated for chair of the US Federal Reserve: News reports say Larry Summers is leading his short-list. But Summers would be a terrible pick. Summers has a long history of making sexist comments--like saying girls don't have the genetic gifts to do well in math and science. And the Federal Reserve has a lot of power over our economy--an economy that is hitting women and families especially hard right now.
There are numerous other reasons why Summers would be a bad choice. As Clinton's Treasury Secretary it was Summers who spearheaded the drive to ban any regulation of over-the-counter derivatives, a move that certainly paved the way for the 2008-2009 global financial crisis. He pushed aside and bullied people who tried to warn him about the possible consequences of his acts.
At a conference in 2005, economist Raghuran Ragan warned of the growing risks in the financial sector. Summers led the charge to discredit his ideas and isolate Rajan. While Summers reigned at Harvard the university suffered massive endowment losses in unregulated derivatives.
While Obama loves to talk about imposing tough regulations on the bank, Summers had cosy relationships with the financial sector. His estimated earnings from financial institutions from 2001 and his NEC appointment in 2008 are over $20 million. For one single speech at Goldman Sachs Summers was paid 135,000, several years earnings for many Americans I should imagine. The Cyniconomics article sums the issue by saying that the choice is between a yawn and a hiss. Let's hope it is a yawn.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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