It depends what you want in a Chairman. There are two things a Fed Chairman must do:
1 Navigate the country's monetary policy
2. The Chairman is now-more than ever with the passage of Dodd-Frank-also the country's leading regulator.
Sumner doesn't think the regulatory role is so important. However, if you think it is then it's hard to think of a worse man for the job than: the Maestro himself. Alan Greenspan. This is someone who while in the job from 1987 to 2005 basically had a philosophical problem with regulating the financial sector as a matter of principle.
When he was chosen for Fed Chairman he said that while he doesn't believe in a government regulator, as he believed the market could better police itself-he would nevertheless uphold and respect the very laws that required him to do so as part of his job. However, he mostly delegated it out-nor did he encourage those on whose shoulders it fell to regulate finance under a Greenspan Fed-talk about a thankless job!
In regulation at least he was the worst choice as no one believed in regulating markets less than him. On the question of Larry Summers and regulation Scott Sumner doesn't see this as the main objection.
"There’s been a lot of discussion of the relative advantages of Yellen and Summers, but most of it has missed the point. Here’s one commonly expressed view:
http://www.themoneyillusion.com/?p=22682
In principle it may be true that we'd be better off with a vice chairman to handle it-effectively it's believed that the current vice chairman handles the bulk of the regulatory work for the Fed now, and that current vice chair is: Janet Yellen. Yet another reason she is the right choice.
http://www.bloomberg.com/news/2013-08-14/yellen-beats-summers-as-most-likely-fed-chair-in-economists-poll.html
Still, we need someone as the chairman who isn't downright hostile to regulatory oversight of the financial system. Greenspan literally didn't believe in it. He thought that the markets would be better served policing themselves. When he became chairman he basically said that while he doesn't really believe in regulation he was sworn as chairman to uphold the laws of the land and he therefore would uphold the regulatory laws even though he didn't believe in them. However, he went on, he would leave this for others do. So by his own premise he was wholly uninvolved in regulation of the markets.
Nor did those who were delegated to do it very committed. For this reason, if any one person can be blamed for the 2008 crisis and subsequent Great Recession it would have to be him. Now don't get me wrong-for the most part what caused the crisis wasn't a matter of evil individuals. Even the bank CEO's-Jamie Dimon, Dick Fuld, Lloyd Blankfein-were not on an individual evil, heinous men. They're decent, hardworking people like anyone else who honestly believed they were doing the right thing, that the best way to do good is to do well.
If there is any 'evil' involved it was a social evil. Even that is probably not the right term-more social irrationality. What we had was the classic rational irrationality where individuals behave in ways individually that are rational but which are irrational for the system as a whole. So I'm not a believer in evil bogey men.
Still, if you had to name one individual personally responsible it would have to be Greenspan. Not so much for the low interest rates and the boom-bust. I do think it's easy to second guess now but tougher to say what he really should have done. After all, maybe you could argue that he shouldn't have dropped rates to 1% in 2003. However, we were in the throes of a very weak-jobless-recovery. It's tough to argue at the time that something more didn't need to be done.
On regulation however, he simply abrogated his role. The problem was that he was one of the most ideologically opposed persons among the powers that be in the nation. Few others at the Fed were so radical. Beranke on the other hand has a decent appreciation at least for the need for bank regulation.
So Greenspan was on the question of regulation close to being the most ill suited in the country for the job. So, it's tough to see why you want to take a chance with someone else who's track record doesn't show much support of regulation either. Now I don't think he's anywhere as extreme in an absolute belief in laissez-faire as Greenspan. Still not much in his history gives you much reason to think he'd be very strong and a good deal that suggests it could be a problem.
At best even his supporters seem to think that what could make him strong is his belief in 'smart regulation'-but even this suggests he'd likely kind of cherrypick what regulations in Dodd-Frank are truly needed and what can be safely set aside. Yellen then is clearly the right choice-her current position as vice chairman making her even more attractive on the question of regulation-then you have her positive affirmative comments in support of it.
Summers may not be as wrong for the job of top regulator in the country as Greenspan was but he still doesn't seem like the right choice.
1 Navigate the country's monetary policy
2. The Chairman is now-more than ever with the passage of Dodd-Frank-also the country's leading regulator.
Sumner doesn't think the regulatory role is so important. However, if you think it is then it's hard to think of a worse man for the job than: the Maestro himself. Alan Greenspan. This is someone who while in the job from 1987 to 2005 basically had a philosophical problem with regulating the financial sector as a matter of principle.
When he was chosen for Fed Chairman he said that while he doesn't believe in a government regulator, as he believed the market could better police itself-he would nevertheless uphold and respect the very laws that required him to do so as part of his job. However, he mostly delegated it out-nor did he encourage those on whose shoulders it fell to regulate finance under a Greenspan Fed-talk about a thankless job!
In regulation at least he was the worst choice as no one believed in regulating markets less than him. On the question of Larry Summers and regulation Scott Sumner doesn't see this as the main objection.
"There’s been a lot of discussion of the relative advantages of Yellen and Summers, but most of it has missed the point. Here’s one commonly expressed view:
While Summers’s views on monetary policy aren’t “totally clear,” he would probably be “somewhat less dovish than Yellen,” putting more emphasis on containing inflation than the current Fed vice chairman, said Michael Feroli, a former Fed staff member who is now chief U.S. economist for JPMorgan Chase & Co. in New York.
"In fact, inflation will run at about 2%, or a bit lower, regardless of which person is picked. That’s not the issue.
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 Barack 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.
"Klein goes on to argue that the most important differences are likely to occur in the area of regulation. But in my view the regulatory role is of trivial importance compared to the money policy role. Indeed the two should be separated. Klein seems to agree on the separation point:
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 pre-eminent, 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.
http://www.themoneyillusion.com/?p=22682
In principle it may be true that we'd be better off with a vice chairman to handle it-effectively it's believed that the current vice chairman handles the bulk of the regulatory work for the Fed now, and that current vice chair is: Janet Yellen. Yet another reason she is the right choice.
http://www.bloomberg.com/news/2013-08-14/yellen-beats-summers-as-most-likely-fed-chair-in-economists-poll.html
Still, we need someone as the chairman who isn't downright hostile to regulatory oversight of the financial system. Greenspan literally didn't believe in it. He thought that the markets would be better served policing themselves. When he became chairman he basically said that while he doesn't really believe in regulation he was sworn as chairman to uphold the laws of the land and he therefore would uphold the regulatory laws even though he didn't believe in them. However, he went on, he would leave this for others do. So by his own premise he was wholly uninvolved in regulation of the markets.
Nor did those who were delegated to do it very committed. For this reason, if any one person can be blamed for the 2008 crisis and subsequent Great Recession it would have to be him. Now don't get me wrong-for the most part what caused the crisis wasn't a matter of evil individuals. Even the bank CEO's-Jamie Dimon, Dick Fuld, Lloyd Blankfein-were not on an individual evil, heinous men. They're decent, hardworking people like anyone else who honestly believed they were doing the right thing, that the best way to do good is to do well.
If there is any 'evil' involved it was a social evil. Even that is probably not the right term-more social irrationality. What we had was the classic rational irrationality where individuals behave in ways individually that are rational but which are irrational for the system as a whole. So I'm not a believer in evil bogey men.
Still, if you had to name one individual personally responsible it would have to be Greenspan. Not so much for the low interest rates and the boom-bust. I do think it's easy to second guess now but tougher to say what he really should have done. After all, maybe you could argue that he shouldn't have dropped rates to 1% in 2003. However, we were in the throes of a very weak-jobless-recovery. It's tough to argue at the time that something more didn't need to be done.
On regulation however, he simply abrogated his role. The problem was that he was one of the most ideologically opposed persons among the powers that be in the nation. Few others at the Fed were so radical. Beranke on the other hand has a decent appreciation at least for the need for bank regulation.
So Greenspan was on the question of regulation close to being the most ill suited in the country for the job. So, it's tough to see why you want to take a chance with someone else who's track record doesn't show much support of regulation either. Now I don't think he's anywhere as extreme in an absolute belief in laissez-faire as Greenspan. Still not much in his history gives you much reason to think he'd be very strong and a good deal that suggests it could be a problem.
At best even his supporters seem to think that what could make him strong is his belief in 'smart regulation'-but even this suggests he'd likely kind of cherrypick what regulations in Dodd-Frank are truly needed and what can be safely set aside. Yellen then is clearly the right choice-her current position as vice chairman making her even more attractive on the question of regulation-then you have her positive affirmative comments in support of it.
Summers may not be as wrong for the job of top regulator in the country as Greenspan was but he still doesn't seem like the right choice.
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