A piece by Ezra Klein makes the best case for Summers yet-not that this was the expressed goal of the post. However, how it does it is very subtle. As Klein does talk to the White House I wonder if Summers' supporters there had anything to do with it.
Again, the beauty of the piece is that defending Summers is not the expressed aim of it. However, it does a lot to level the playing field between Summers and Yellen and Brad Delong-the one highly prominent liberal economist who has some nice things to say about Summers, and who has even said he has a 'slight preference for Summers' linked to this.
The post quotes Michael Barr, who was the White House's point person on reform that, yes, despite Summers reputation as a deregulator from the 90s-exacerbated by his opposition to the Volcker Rule in 2010-and not helped by how much he's cashed in with the banks over the years both after the Clinton White House and after serving Obama-Summers does care about regulation of the banks and would execute Dodd-Frank.
"I wouldn’t have gone to work for Larry if he didn’t believe in financial regulation,” Barr said. “He cares about this stuff. I know he’d implement Dodd-Frank. And I think his impatience, which some people don’t like, would serve us well in this implementation phase.”
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/02/do-you-trust-larry-summers-or-janet-yellen-to-police-wall-street/?wprss=rss_ezra-klein
To be sure, some see his 'blunt style' as a glitch not a feature.
"In one sense, though, that’s exactly what Summers’s critics are afraid of: That as Fed chairman, his reflexive skepticism will cause him to back away from some of their favored regulations, including the Volcker rule and efforts to limit executive compensation."
However, this is the linchpin. I mean many people will shrug these comments by Barr and other Larry fans in the Administration off. For the first time, seeds of doubt are planted about Janet Yellen as a regulator.
"Testimonials from Summers’s colleagues in the Obama administration don’t impress these critics much; in their view, the Obama administration has always been too friendly with the banks. It had to be forced to support the Volcker rule in the first place, and it never even considered breaking up the big banks."
Again, the beauty of the piece is that defending Summers is not the expressed aim of it. However, it does a lot to level the playing field between Summers and Yellen and Brad Delong-the one highly prominent liberal economist who has some nice things to say about Summers, and who has even said he has a 'slight preference for Summers' linked to this.
The post quotes Michael Barr, who was the White House's point person on reform that, yes, despite Summers reputation as a deregulator from the 90s-exacerbated by his opposition to the Volcker Rule in 2010-and not helped by how much he's cashed in with the banks over the years both after the Clinton White House and after serving Obama-Summers does care about regulation of the banks and would execute Dodd-Frank.
"I wouldn’t have gone to work for Larry if he didn’t believe in financial regulation,” Barr said. “He cares about this stuff. I know he’d implement Dodd-Frank. And I think his impatience, which some people don’t like, would serve us well in this implementation phase.”
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/02/do-you-trust-larry-summers-or-janet-yellen-to-police-wall-street/?wprss=rss_ezra-klein
To be sure, some see his 'blunt style' as a glitch not a feature.
"In one sense, though, that’s exactly what Summers’s critics are afraid of: That as Fed chairman, his reflexive skepticism will cause him to back away from some of their favored regulations, including the Volcker rule and efforts to limit executive compensation."
However, this is the linchpin. I mean many people will shrug these comments by Barr and other Larry fans in the Administration off. For the first time, seeds of doubt are planted about Janet Yellen as a regulator.
"Testimonials from Summers’s colleagues in the Obama administration don’t impress these critics much; in their view, the Obama administration has always been too friendly with the banks. It had to be forced to support the Volcker rule in the first place, and it never even considered breaking up the big banks."
"Yellen, meanwhile, has little record on these issues. Her supporters seem to prefer her mostly because she’s not Summers. “The question is whether you are prepared to beat up on the banks, yes or no,” said Dean Baker, president of the liberal Center for Economic and Policy Research. “If no, then everything else doesn’t matter. With Summers you’re picking someone you know is not. I don’t know that Yellen is prepared to, either. But there’s reason for hope that Yellen would be stronger on regulating finance.”
"The criticism of Yellen is that — like Bernanke and Alan Greenspan before her — regulating banks simply isn’t something she’s terribly interested in. She’s at the Federal Reserve because she’s an excellent monetary economist. There’s little evidence she wants to spend her time watching over hedge funds. Her heart may be in the right place; her priorities might not be."
Note the subtle shift: the criticism of Yellen. Prior to this post there really hasn't been any criticism of Yellen-or what there has been hasn't been widely heard. So that's the real strike for Summers: planting seeds of doubt that Yellen would be such a great regulator.
So maybe the Summers advocates in the White House have planted the seeds. To question her makes him him more plausible as then she has questions too-so it's not such a slam dunk. I'm not sure that I buy this. While she hasn't had a regulatory role previously, her public statements have suggested that she takes it seriously and she-unlike Summers-was already warning of a coming crisis in the financial markets; at the same time Summers was ridiculing comments of people like Raghuran Rajan who were issuing warnings.
Again, I think this is a very clever flourish-after all, it's true that for many people it's about Anyone but Larry so this questions her in her own right. Yet it seems to me that there is more than simply hoping that she'll be ok-'at least she's not Larry.' You have her public statements that certainly give us more confidence than anything Summers has said.
Still, it's certainly a good idea for the Senate Dems to question whoever the nominee is extensively about their feelings on financial regulation and their thoughts about Dodd-Frank. The Chairman of the Federal Reserve has a huge role to play in how the financial markets are regulated. It did so before Dodd-Frank, it's even more true now post Dodd-Frank.
"The chairman of the Federal Reserve is by far the single most powerful financial regulator in the world. That was true when Chairman Ben Bernanke took the job in 2006, and it’s truer today, as the Dodd-Frank reforms need to be implemented and, in many cases, defined."
"In addition to the elements of the law on which the Fed takes the lead regulatory responsibility, there are many others on which it works in concert with other regulators. Even in those cases, the Fed more or less takes the lead, too. “What the Fed has is this enormous intellectual machinery,” said former Rep. Barney Frank, one of the drafters of the law. “The head of Federal Deposit Insurance Corp. and the comptroller of the currency can’t remotely match the Fed in resources, and this is a place where data and analysis are real currency.”
Klein thinks that the regulatory role of the Fed might be better delegated as is provided for in Dodd-Frank:
“One thing we created in the bill is a vice chair of the Federal Reserve for regulation,” Frank said. The seat is unfilled, though it’s widely believed that Daniel Tarullo, an Obama appointee to the Fed’s board of governors, is filling the position de facto."
"But the bottom line is that if the job was just bank regulation, neither Summers nor Yellen would get the nod. Which makes sense. These are highly specialized skills. There just isn’t a perfect candidate to be both the nation’s top central banker and the top financial regulator. And because the Fed chairman’s central banker role is preeminent, the regulatory aspects of the job tend to be discounted.
It would be better to elevate the power and visibility of the vice chairman for supervision so that the president and the Senate could just choose the best financial regulator on offer. Right now, the position’s powers aren’t clearly defined, and the Obama administration hasn’t even bothered to name an official candidate."
In any case, if this leads to more scrutiny to the question of the next Chairman's regulatory role, it's a good thing. It does seem to me that the friends in the White House played it's best defense of Summers yet-leave some doubt about Yellen.
While the main point of Klein's piece is that both are somewhat question marks on regulation-thereby relatively improving Summers' position by bringing questions about her as well, he led off by claiming that there's not much to choose between them as to their monetary role at the Fed: here Klein presumes it's a wash.
"The two leading candidates for the job are Janet Yellen, the current vice chairman of the Fed, and Larry Summers, the former Treasury secretary and an economics adviser to President Obama. When it comes to monetary policy, they don’t differ drastically. Both support the Fed policy to maintain low interest rates and continue asset purchases — no premature “tapering” — until unemployment falls significantly."
I'm not sure I buy that either. Listen to what Summers most prominent liberal supporter is saying about his difference with Yellen on monetary policy:
"May I point out to Paul Krugman that Larry Summers and Janet Yellen are, in my experience, equally unwilling and unlikely to "to prove their seriousness by doing what doesn’t need to be done, at the public’s expense" and "talks a lot about the need to make tough decisions, which somehow always involves demanding sacrifices on the part of ordinary families while treating the wealthy with kid gloves"?
"Maybe Larry believes slightly, slightly more in labor-force upgrading in a high-pressure economy than Janet; and maybe Janet believes slightly, slightly more in the power of quantitative easing than Larry; and maybe Larry is slightly, slightly more worried about the distortions and systemic risks created when you try to compensate for lack of demand caused by a blocked credit channel by pumping-up demand for long-duration assets."
Yet this 'slightly, slightly more' concern about "distortions and systemic risks created when you try to compensate for lack of demand caused by a blocked credit channel by pumping-up demand for long-duration assets." sounds an awful lot like a Fed hawk. Emphasizing the 'slightness' of the difference doesn't make me feel any better here.
I love Delong-I have to especially after he linked to my post recently.
Even if I just left a comment last night and it didn't get posted-where I disagreed with him on this. I always hear that he erases comments; I don;t know that this is it, I think that what happens is that he screens comments and decides which ones he'll post-mine didn't make the cut this time; he posts only a few every day.
Still, I can't say his advocacy is doing much to change my mind and I doubt it's working at all for most Summers bashers. I mean this slight difference could mean that he could be something a higher risk-call it a slightly higher risk-to taper off prematurely.
Meanwhile the regulatory question may come down to this: which one will work better with Daniel Tarullo?
UPDATE: Wow. According to a new Talking Points Memo piece, the White House first approached Tim Geithner for Fed Chairman.
http://livewire.talkingpointsmemo.com/entry/report-obama-approached-geithner-to-be-fed-chairman?ref=fpb
If Obama is as off base in what he seeks in a Fed Chairman as this Robin Harding makes it sound, I guess you can guess how Geithner was the top nominee.
http://www.ft.com/intl/cms/s/0/e78adffc-f87e-11e2-b4c4-00144feabdc0.html#axzz2aZEwQ3pp
In reading his actual interview with the NY Times, however, I don't necessarily think he sounds as bad as Harding thinks.
UPDATE: Wow. According to a new Talking Points Memo piece, the White House first approached Tim Geithner for Fed Chairman.
http://livewire.talkingpointsmemo.com/entry/report-obama-approached-geithner-to-be-fed-chairman?ref=fpb
If Obama is as off base in what he seeks in a Fed Chairman as this Robin Harding makes it sound, I guess you can guess how Geithner was the top nominee.
http://www.ft.com/intl/cms/s/0/e78adffc-f87e-11e2-b4c4-00144feabdc0.html#axzz2aZEwQ3pp
In reading his actual interview with the NY Times, however, I don't necessarily think he sounds as bad as Harding thinks.
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