Based on this new piece by Evan Soltas and Ezra Klein Summers is the White House choice. They're just trying to see just how much opposition there is to Summers-it's level of both breadth and intensity. Basically, 'all else being equal' Summers is the man. What the White House is doing is floating a trial balloon to see just how unequal things are.
"On the merits, they think the preference many on the left have for Janet Yellen is a bit puzzling. Yellen and Summers are both strongly committed to reducing unemployment. They’re both committed to implementing Dodd-Frank — as much as the left mistrusts Summers on financial regulation for his actions in the 1990s, the White House believes that he, like many others, is strongly committed to regulating Wall Street now. They see a lot of the opposition to Summers is based on bad or outdated information."
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/25/wonkbook-the-white-house-wants-summers-for-the-fed-but-will-they-actually-choose-him/
However, what is this new information? I think that a lot of people aren't at all sure either that he is as committed to reducing unemployment as Yellen is or certainly as committed to implementing Dodd-Frank in a way that gives it real teeth. Yes a lot of 'outdated information' is bad. However, what about the fact that he-unlike even Bill Clinton-has never apologized or in any way had second thoughts about financial deregulation in the 90s?
"In the 1990s, Summers and then-Treasury Secretary Robert Rubin led the effort to stop Brooksley Born from regulating derivatives, precisely the financial instruments that magnified the housing bubble and accelerated the financial collapse. Under his watch as treasury secretary, Congress eliminated Glass-Steagall’s firewall between commercial and investment banks, legalizing the merger of Citigroup (where Rubin would later become CEO). He further oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, even from state anti-gambling laws. Even Bill Clinton has apologized for deregulation of the riskiest sector in finance; Summers has not. Even well after the crisis, in 2011, Summers pronounced himself “more cautious than many about constraining financial innovation,” a not-so-thinly veiled code for encouraging a return to casino activity on Wall Street."
http://diaryofarepublicanhater.blogspot.com/2013/07/clinton-admits-he-was-wrong-on.html?showComment=1374792632377#c4254059227191558196
That was just 2011-so it's not ancient history like when he suggested that women may lack the capacities for higher mathematics or his ties to Bob Rubin who's still rather hawkish on Fed policy today:
"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
"On the merits, they think the preference many on the left have for Janet Yellen is a bit puzzling. Yellen and Summers are both strongly committed to reducing unemployment. They’re both committed to implementing Dodd-Frank — as much as the left mistrusts Summers on financial regulation for his actions in the 1990s, the White House believes that he, like many others, is strongly committed to regulating Wall Street now. They see a lot of the opposition to Summers is based on bad or outdated information."
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/25/wonkbook-the-white-house-wants-summers-for-the-fed-but-will-they-actually-choose-him/
However, what is this new information? I think that a lot of people aren't at all sure either that he is as committed to reducing unemployment as Yellen is or certainly as committed to implementing Dodd-Frank in a way that gives it real teeth. Yes a lot of 'outdated information' is bad. However, what about the fact that he-unlike even Bill Clinton-has never apologized or in any way had second thoughts about financial deregulation in the 90s?
"In the 1990s, Summers and then-Treasury Secretary Robert Rubin led the effort to stop Brooksley Born from regulating derivatives, precisely the financial instruments that magnified the housing bubble and accelerated the financial collapse. Under his watch as treasury secretary, Congress eliminated Glass-Steagall’s firewall between commercial and investment banks, legalizing the merger of Citigroup (where Rubin would later become CEO). He further oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, even from state anti-gambling laws. Even Bill Clinton has apologized for deregulation of the riskiest sector in finance; Summers has not. Even well after the crisis, in 2011, Summers pronounced himself “more cautious than many about constraining financial innovation,” a not-so-thinly veiled code for encouraging a return to casino activity on Wall Street."
That was just 2011-so it's not ancient history like when he suggested that women may lack the capacities for higher mathematics or his ties to Bob Rubin who's still rather hawkish on Fed policy today:
"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
Basically, the White House wants to see whether opposition to Summers is 'soft' or 'hard.' As Klein and Soltas point out, while there has been a lot of pushback against Summers since the trial balloon Tuesday, we don't know how much pushback the White House expected. And Summers opponents tend to be overrepresented in the blogger sphere. But there are important supporters for him as well-Wall St. contacts and donors.
"This has had the side effect — probably anticipated, and perhaps even welcome — of mobilizing Summers’s critics. I don’t know if the blowback (see Noam Scheiber, Felix Salmon, Scott Sumner, Dave Dayen, Senator Jeff Merkley, etc) is more or less than the White House expected. But they’re getting to see it. And remember that they’re also getting positive feedback from fans of Summers, who are underrepresented in the econo-blogosphere, but very present in the ranks of economic and Wall Street heavyweights who’ve worked or fundraised at high levels in Democratic administrations.
The result is that the White House is getting to test the reaction to a Summers pick at a time when they can still choose Yellen, or even go back to the drawing board and look at Roger Ferguson or Donald Kohn or Alan Blinder or anyone else."
Sumner says he doesn't like those three names either.
Is it meaningful that they didn't mention Romer? Is she out of serious consideration?
This seems to bode well for Summers:
"One thing that’s really jumped out in my canvassing on this, though: The White House is running a very insular process. People I would’ve thought are being heavily consulted report that they’ve had little or no contact with the White House. People who have been consulted are surprised at the superficiality of the discussions. If the president is making any calls to ask for advice himself, he is making very, very few of them."
Summers modus operandi is to not have the time of day for those who he considers his inferiors, However, he's very good at charming and cultivating powerful people. If Klein is right he seems to have really charmed President Obama. Whether this is a good thing there is a nagging sense that it may not be.
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