As we saw in the last post, Felix Salmon is not a fan of Larry Summers. He's unequivocal regarding Summers: he's not the right man for the job.
No one seems to love Larry Summers for Fed http://diaryofarepublicanhater.blogspot.com/2013/07/why-everyone-doesnt-love-larry-for-fed.html
He also holds Summers billion dollar missed bet while President at Harvard.
http://blogs.reuters.com/felix-salmon/2009/07/24/larry-summerss-billion-dollar-harvard-gamble/
So does Matthew Klein:
"During the financial crisis, Harvard lost nearly $1 billion because of some unusual and ill-judged interest rate swaps that Summers implemented in the early 2000s during his troubled tenure as the university's president."
"Not only was Summers wrong in 2004 about where interest rates would be -- he was willing to bet a lot of other people's money that he knew better than everyone else. The damage at Harvard was bad enough. Imagine what that sort of thing could do to the U.S. economy."
http://www.bloomberg.com/news/2013-07-18/larry-summers-s-billion-dollar-bad-bet-at-harvard.html
I tend to be skeptical of this kind of reasoning. After all, the job is Fed Chairman. I don't know that to be eligible you have to be a flawless market forecaster who's never gotten anything wrong. Greg Mankiw says this-which makes this point:
"I don't know enough about Harvard's finances to judge whether the bet was sensible ex ante. But it sure isn't working out well ex post."
http://gregmankiw.blogspot.com/2009/07/how-harvard-lost-1-billion.html
Greenspan was a market forecaster years before he was Fed Chairman and his record was far from perfect. Speaking of Mankiw, he used this specious argument himself once about Keynes-that he wasn't a good investor because he once lost a lot of money and was bailed out by his father-therefore we can say definitely he wasn't.
On the other hand, to the extent that Summers was the one who made the decision-there's some difference here-Mankiw's email he received by someone apparently hey in the know it wasn't Summers himself who made the call-but Salmon isn't buying this-and this investment was in an 'exotic financial product' it again takes us back to the narrative that he's way too friendly with Wall Street to be the man we want for this job; his bet was that interest rates would rise in 2004 when they actually fell.
How can he be trusted to regulate exotic financial instruments when he uses them himself? You'd guess that's the reaction that folks like David Dayden would have.
http://www.salon.com/2013/07/24/sexist_larry_summers_will_destroy_the_economy/
It's also worried that he's so friendly to bondholders-like his mentor Bob Rubin-that he would be something of an inflationphobe.
"Summers worked in the Clinton administration as a protege of Treasury Secretary Bob Rubin, and helped lead the effort to deregulate Wall Street. Rubin, a long time Goldman Sachs trader and executive, moved to Citigroup after his time in the Clinton administration. Rubin has been a leading advocate of the bond-holding community, which favors a strong dollar, low inflation and a loose labor market, otherwise known as high joblessness. Rubin has been a critic of Bernanke's efforts to stimulate the economy, arguing that it could weaken the dollar and drive inflation, both of which would drive down bond prices. (Even this week, Rubin was making phone calls urging that Detroit's bondholders be fully repaid, one source familiar with his lobbying said.)"
http://www.huffingtonpost.com/2013/07/23/larry-summers-fed-chairman_n_3641737.html
No one seems to love Larry Summers for Fed http://diaryofarepublicanhater.blogspot.com/2013/07/why-everyone-doesnt-love-larry-for-fed.html
He also holds Summers billion dollar missed bet while President at Harvard.
http://blogs.reuters.com/felix-salmon/2009/07/24/larry-summerss-billion-dollar-harvard-gamble/
So does Matthew Klein:
"During the financial crisis, Harvard lost nearly $1 billion because of some unusual and ill-judged interest rate swaps that Summers implemented in the early 2000s during his troubled tenure as the university's president."
"Not only was Summers wrong in 2004 about where interest rates would be -- he was willing to bet a lot of other people's money that he knew better than everyone else. The damage at Harvard was bad enough. Imagine what that sort of thing could do to the U.S. economy."
http://www.bloomberg.com/news/2013-07-18/larry-summers-s-billion-dollar-bad-bet-at-harvard.html
I tend to be skeptical of this kind of reasoning. After all, the job is Fed Chairman. I don't know that to be eligible you have to be a flawless market forecaster who's never gotten anything wrong. Greg Mankiw says this-which makes this point:
"I don't know enough about Harvard's finances to judge whether the bet was sensible ex ante. But it sure isn't working out well ex post."
http://gregmankiw.blogspot.com/2009/07/how-harvard-lost-1-billion.html
Greenspan was a market forecaster years before he was Fed Chairman and his record was far from perfect. Speaking of Mankiw, he used this specious argument himself once about Keynes-that he wasn't a good investor because he once lost a lot of money and was bailed out by his father-therefore we can say definitely he wasn't.
On the other hand, to the extent that Summers was the one who made the decision-there's some difference here-Mankiw's email he received by someone apparently hey in the know it wasn't Summers himself who made the call-but Salmon isn't buying this-and this investment was in an 'exotic financial product' it again takes us back to the narrative that he's way too friendly with Wall Street to be the man we want for this job; his bet was that interest rates would rise in 2004 when they actually fell.
How can he be trusted to regulate exotic financial instruments when he uses them himself? You'd guess that's the reaction that folks like David Dayden would have.
http://www.salon.com/2013/07/24/sexist_larry_summers_will_destroy_the_economy/
It's also worried that he's so friendly to bondholders-like his mentor Bob Rubin-that he would be something of an inflationphobe.
"Summers worked in the Clinton administration as a protege of Treasury Secretary Bob Rubin, and helped lead the effort to deregulate Wall Street. Rubin, a long time Goldman Sachs trader and executive, moved to Citigroup after his time in the Clinton administration. Rubin has been a leading advocate of the bond-holding community, which favors a strong dollar, low inflation and a loose labor market, otherwise known as high joblessness. Rubin has been a critic of Bernanke's efforts to stimulate the economy, arguing that it could weaken the dollar and drive inflation, both of which would drive down bond prices. (Even this week, Rubin was making phone calls urging that Detroit's bondholders be fully repaid, one source familiar with his lobbying said.)"
http://www.huffingtonpost.com/2013/07/23/larry-summers-fed-chairman_n_3641737.html
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