Who Wants to Defend Larry Summers?

     If you've read me for any length of time, you know I like to play Devil's Advocate. I mean I'm like the only person left who still wishes Anthony Weiner had a prayer.

     http://diaryofarepublicanhater.blogspot.com/2013/07/is-there-difference-between-bill.html

     http://diaryofarepublicanhater.blogspot.com/2013/07/neither-anthony-weiner-nor-larry.html

       
     Still on Summers I have nothing as I said yesterday:

     "Sorry. If you're looking for a defense of Summers at this point, I got nothing. Brad Delong did mount a defense of him the other day-and I love Mr. Delong who just recently very kindly linked a post of mine to his blog."

      "However, I must say that while Delong is a very smart guy, he couldn't really come up with a very compelling case for Summers either. His argument was 'Well we're in desperate times so we need a guy who's not afraid to call his own plays and do something really unorthodox.' If that's the best Summers can get it's not looking fortuitous."

    http://diaryofarepublicanhater.blogspot.com/2013_07_01_archive.html

     This is unusual for a couple of reasons. For one thing, I am a confirmed Devil's Advocate and there's no cause like a lost cause. Secondly, the President is clearly a fan and usually I believe in supporting the President. Period. Full stop. However, here, the Summers bashers have gotten through to me. 

     Summers does have a defender-a female at that, the COO of Facebook in fact. 
  
     "He gave a speech that he apologized for but a lot of people took a lot of offense to," Facebook COO Sheryl Sandberg told The Huffington Post in an interview, referencing Summers' infamous remark that women were less capable of tackling advanced science and engineering work. "It wasn't his policy. It was a speech he gave and actually the rest of that speech was fine. A lot of that speech said things that ... all of us really agree with, that it is really hard for women in terms of work-life balance to catch up."

      "Sandberg, who served as Summers' chief of staff when he was Treasury Secretary under Bill Clinton, noted that he gave a speech as chief economist for the World Bank in which he argued girls' education was an economic imperative."

     "That speech put girls' education on the table as an economic issue, and economic issues are always taken more seriously than development issues by countries," she said. "Before that, girls' education was something education ministers worried about, which was good. But when it became something as the linchpin of economic growth, that obviously put many more forces behind it."

      Still, it's interesting as Huftington post notes, that this view of Summers-which Sandberg has told before-never breaks through into the overall perception of him.. He also had some bad experiences with some powerful women while on Obama's team:

      "Summers clashed with fellow members of the Obama team. Noam Scheiber, in his book The Escape Artists, reported that he sidelined Christina Romer, then the chair of the Council of Economic Advisers, when she tried to persuade the president to pursue a larger stimulus package. Meanwhile, Sheila Bair, the former Federal Deposit Insurance Corporation chair who had warned of trouble in the subprime lending market, was left out of most major financial policy decisions."

     "The attitude was that they already had all the answers and were talking to us only because the president wanted them to," Bair wrote in her recent book regarding Obama's top economic advisers. "Larry and [Treasury Secretary Tim Geithner] didn't seem to care about the political beating the president took on the hundreds of billions of dollars thrown at the big-banks bailouts and AIG bonuses, but ... I don't think helping homeowners was ever a priority for them."

     http://www.huffingtonpost.com/2013/08/01/larry-summers-janet-yellen_n_3691052.html

     Yet what really concerns me is monetary policy. I'm not at all sure that this is wrong by Jeff Madrick:

     "Contrary to some claims, there are no mysteries about Summers' view on monetary economics. Inflation is his big concern, as was Alan Greenspan's. If Summers is appointed, we will return to the era of bond trader dictatorship. Obama simply wants protection from 'inflationary expectations,' the bugaboo of the Clinton 1990s. Any sign that the bond traders will push up rates for fear a strengthening economy will generate inflation will provoke a quick reaction from Summers. He is far more likely to crack down on the economy than his competitor, the estimable Janet Yellen."

     "Indeed, Yellen is the one who recently made the much-needed case for resurrecting employment as a Fed goal, on equal footing with others. Wall Street regards her with danger. Greenspan practiced the opposite. He was worried workers would regain confidence and, heaven forbid, ask for a raise."

     "So, if Summers is Fed chairman, expect slower growth and higher unemployment than necessary in the future. Nothing would better serve the nation's economy than raising the inflation target right now, and Yellen would more vigorously pursue that than Summers. But under Summers, the stock market might rise because interest rates are more likely to remain low. He is a Wall Street man, not a Main Street man."

      http://www.huffingtonpost.com/2013/08/01/larry-summers-janet-yellen_n_3691052.html.

      Then there's the worry that he will provide the kind of regulation of the financial system called for by Dodd-Frank.

      "As for financial regulation, Summers has an implicit record there, too. It is a miserable one. He was one of the ringleaders who kept Brooksley Born from regulating derivatives, the only serious mistake President Clinton admitted to in his recent book, Back To Work. He persists in saying that ending Glass-Steagall did not cause the financial crisis eight years later. This is a naïve and narrow interpretation. Undoing it enabled banks to grow much larger through diversification and acquisition, and to take on far more risk. In some ways, this forced investment banks to take more risk in order to compete. Citigroup, while Rubin was there, bought trailers full of risky mortgage securities, becoming one of the Street's leading investors in them."

     I don't know for sure that he really would bring back the era of the bondholders: I'm just not confident enough that he won't. With Yellen there's no doubt. There's no doubt with her on anything. Why not go with the sure thing? There are Larry Summers advocates sure. There are Janet Yellen advocates as well. However, there are also an awful lot of Larry Summers detractors-who say not Larry, anyone but him. There is nobody saying the same thing about Janet Yellen. 

     I understand that Obama hates having his hand forced. Normally I'd be supporting the Administration's preference. However, I can't come up with any reason why you go with Summers here. I got nothing. 

    P.S. Scott Sumner is opposed to Summers of course. He explains why in new post. It's no surprise on his reasoning, though. Summers, he always argues, believes that Fed policy is out of ammo at the Zero Bound. 

    http://www.themoneyillusion.com/?p=22682

    Normally, I'd be chalking all the liberal qualms about Summers to 'liberal bedwetting.' However, not this time. I can't say that these concerns are not well-founded. They may not be right implausible. I don't know that Summers would really bring back the bondholder's era-but don't feel I know enough to definitively say he wouldn't. Jeff Madrick has also been something of an insider and bases his analysis on his experience of Summers. 

    P.S.S. I will clarify one thing. Summers himself had argued that a bigger stimulus would have been preferable in 2009 so I'm not sure about this narrative that you always hear that he squashed Romer on more stimulus. He didn't disagree with her on substance there. At least according to Michael Grunwald's The New New Deal.