Over the last few weeks, Americans have been bombarded by a Summers-Summers-Summers drumbeat coming from the Obama administration, much of the mainstream media, and various Summers protégés. Sheryl Sandberg of Facebook, who served as Summers’ chief of staff when he was Treasury Secretary, and Ed Luce of the Financial Times, who used to write speeches for him and now writes pro-Summers columns in the FT are among those carrying the Summers banner.
The Fed chairman is often said to be the most powerful official the president appoints because that person directly affects each and every pocketbook in America. The perversity of the attempt to push a man who will expose American pocketbooks to another round of serial looting really can’t be overstated.
Apparently the Summers-pushers think We the People haven’t had quite enough looting, so they are trying to promote one of the very guys who gave the thieves the keys to the castle and forced us to bail out reckless banks as a thank you. Obama’s cravenness on this matter is epic, and the oozing sycophancy of Sandberg and her ilk is a wonder to behold.
In a nutshell, Larry Summers is part of the infamous Robert Rubin crew that deregulated the financial sector back in the 1990s and allowed Wall Street to haul in heaps of money at our expense, even as it set off a financial crisis that left millions of Americans without jobs, homes, and pensions — and then insisted we bail out the crooks.
Let’s be blunt: Summers sold out the American people, and lined his own pockets in the process. He has gotten rich off our misery, and even the New York Times story admits as much. The seat was still warm in his office as Obama’s top economic advisor when he rushed into a “money-making spree” of consulting jobs, six-figure speaking gigs, and corporate board positions. He has been raking in the dough from too-big-to-fail banks like Citigroup (bailed out on your dime!), giant hedge funds, and Silicon Valley financial firms.
And he had already pocketed plenty of Wall Street money even before joining Team Obama. Between his tenure at the Treasury Department in the 1990s and 2009, when he went back to Washington, the Times reports that his personal wealth skyrocketed from $400,000 to a whopping $31 million.
He has also thumbed his nose at conflicts of interest, most famously when he protected his Harvard colleague Andrei Schleifer from charges of looting in Russia pressed by the U.S. government. He played a disgusting role defending Enron in California's energy crisis, and his trashing of Brooksley Born, who, as head of the Commodities Futures Trading Commission, attempted to impose wise regulations on the financial sector, remains a testimony to his lack of judgment.
This man is fantastically unfit to lead the Fed, and yet the press campaign on his behalf is increasingly making him the frontrunner. Meanwhile, an excellent candidate, Janet Yellen, is available and sitting on the Fed Board of Governors right now, while her record is assailed with dismissals, sexism and distortions.
What the hell is going on? Let’s take a look at the position and the economics and politics surrounding this battle royale.
So what exactly does the Fed chairman do?
The Federal Reserve, the nation’s central bank, was created in 1913, and serves as one of the two great levers of our economy, the other being the Treasury. The Fed chair is responsible for setting interest rates that affect how much it costs everybody to borrow money. The Fed controls the nation's money supply by buying and selling U.S. treasury securities, and can use monetary policy to spur growth or diffuse inflationary pressures.
Monetary intervention in the economy is a tricky business, and should be left to someone who has both a strong economic background and a cool head. You can see in the recent sell-off of stocks in response to news that Bernanke and the Fed board might begin to back off on their policy of quantitative easing that markets can move on a mere word from the Federal Reserve. Part of the Fed’s mandate is to move the country toward full employment. The Fed plays a major role in writing of financial rules, like regulations from the Dodd-Frank financial reform bill, which is why you want someone who will be a strong regulatory watchdog as the chair.
Ben Bernanke, like other Fed chairs in recent decades, has prioritized holding down inflation over putting Americans back to work — that despite all the disingenuous criticism of his policies from the right. The rewards and penalties of this tradeoff can be felt on Wall Street, where profits are soaring at record rates, and on Main Street, where 7.6 percent of Americans remain unable to find a job.
If Americans are ever to fully recover from the Great Recession and decades of bad economic policy, we will need a Fed chair who puts their needs ahead of Wall Street.
Has there ever been anybody fighting for the 99 percent leading the Fed?
Yes. But it has been quite a while. Marriner S. Eccles, who served from 1934- '48 under Roosevelt, was an excellent Fed chair, proving that such a thing is actually possible. Eccles is often heralded for having saved capitalism from itself. Among other things, he fought for FDIC insurance on bank deposits, higher income and inheritance taxes on the 1 percent, and other policies to curb inequality. He backed federal regulation of child labor, unemployment insurance, financial reform, Social Security and policies that helped stabilize the economy and create the robust middle class that once thrived in America. If you want to see how this man rolled, check out his historic testimony to the Senate in 1933, just before he became Fed chair, where he laid out how the wealthy were ruining things for everyone:
“It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not 'soaking the rich,' it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.”
There has not been a principled visionary like Eccles at the Fed since. We endured his exact opposite in the form of Alan Greenspan, who served from 1987-2006 and made a career of pushing quack economic theory, exposing Americans to rampant fraud, and turning Wall Street into a casino, with a lot of help from Summers, when the latter served in the Clinton administration. The subprime mortgage disaster came right after Greenspan left office. The documentary Inside Job highlighted his responsibility for the meltdown, and Time magazine named him as one of the "25 People to Blame for the Financial Crisis.”
It’s no wonder that Americans are distrustful of the Federal Reserve, despite its vital role in responding to financial crises.
Who is Janet Yellen and why would she be a good Fed chair?
Janet Yellen’s resume shines with impressive achievements. She has been a tenured professor at Berkeley and a member of the President’s Council of Economic Advisors, and she also served for six years as president of the San Francisco Fed. She became vice chairman of the Federal Reserve Board in 2010.
Yellen would make an excellent Fed chair because she will think about Main Street, whereas Summers is committed to Wall Street. Yellen would be much more concerned than recent Fed chairs about policies that can help put Americans back to work. Plus, unlike Summers, Yellen has shown exceptional foresight on the direction of the economy and she was never part of Team Deregulation. In fact, the Wall Street Journal recently scored 14 Fed policymakers on 700 economic predictions they made on growth, jobs and inflation during 2009 to 2012 and concluded that "most accurate forecasts overall came from Ms. Yellen." She is also widely considered to be a person who would be tough on banks as Fed chair, which, naturally, the banks and their allies do not like one bit.
If elected, Yellen would be the first woman to occupy the chairmanship of the Fed. Obama has repeatedly said that he wants diversity in his administration, but he has not prioritized admitting qualified women into his inner circle. Many, including Paul Krugman, have noticed the sexism evident in efforts to torpedo Yellen, such as bizarre ramblings on a “gender-backed dollar” from quacks who keep screaming about runaway inflation despite the present historically low rate, and murmurings that she lacks sufficient “gravitas”—sexist code for “not male.”
If we were to read “gravitas” in its dictionary sense, meaning an air of dignity, there could be little argument that Summers’ hot-headedness, not to mention his “money-making spree” since leaving office, are strikingly at odds with a dignified public persona. Summers is a notorious sexist who was forced to resign his position as president of Harvard University partly based on remarkably stupid comments he made about the female aptitude for mathematics. Not very dignified.
Yellen, on the other hand, is known for her sound judgment and her steadiness on the job. She has also had less involvement in partisan politics than Summers, which lends her a sense of independence. Very dignified.
Can Summers be stopped?
In the Obama administration, White House aide Valerie Jarrett is said to be quietly backing Yellen, while Summers draws support from Gene Sperling, director of the National Economic Council; Jason Furman, chairman of the president's Council of Economic Advisers (and passionate fan of Walmart’s business practices), Treasury Secretary Jack Lew; and Sylvia Burwell, director of the White House Office of Management and Budget. Not good odds.
Over in the Senate, Elizabeth Warren has long understood the bank-centric worldview of Larry Summers, who did everything in his power to block her from chairing the Consumer Financial Protection Bureau which she conceived to protect you and me from people who want to rip us off. Along with 19 other senators, Warren signed a letter to Obama outlining reasons why Janet Yellen should be the next Fed chair. Some senators, such as Jeff Merkley, Democrat from Oregon, have spoken out publicly against Summers.
Letters and comments are one thing. Voting is another. Elizabeth Warren seems likely to vote no on a Summers appointment, but it remains to be seen if other senators have the backbone to join her. Right now, the betting in Washington is that many of the senators who signed the letter in favor of Yellen will roll over if Obama insists on appointing Summers.
Bottom line: Presidents come and go. Members of Congress come and go. But the noxious Rubinite crew that has cost Americans so much over the past two decades still clamors for another shot at looting the public—that is, unless Larry Summers can be stopped. The identity of the new Fed chair will determine much about America’s future economic path, whether it will be paved with Wall Street fool’s gold or a higher road where ordinary people can get back to work and share in the country’s economic success.
