On Sunday, September 15, 2013 Larry Summers withdrew his name as a candidate for the Chairmanship of the Fed. ?His stepping down, due mostly to four Democratic Senators on the Senate Banking Committee who would have to approve the nominee saying publicly they would not vote for him. The Senators who blocked the nomination were led by Elizabeth Warren (D-Mass), Sherrod Brown (D-Ohio), ?Jeff Merkley (D- Oregon), and John Tester (D-Mont). ?This withdrawal cleared the path, maybe, for the Fed to have it’s first female chair, Janet Yellen.
When Elizabeth Warren was first nominated to Chair the Consumer Protection Bureau it was Larry Summers who led the campaign against her. I think there is some justice in Senator Warren returning the favor to a man that she, by her own admission, ?shares ?”different world views about the economy and about regulation.”?So it seems a fair analysis that if Larry Summers had instead given progressives a little power and allowed Warren the, up to now, powerless job of “Consumer Protector” there is a very good chance that he would have had his dream job as Chairman of the Fed. ?However looking at how many Democrats joined Senator Warren in drawing out the knives against him I think it is fairly clear that he was not the right person for the job. The upside is that he will be free to continue “advising President Obama” on our jobless recovery while still getting paid big bucks for giving talks to CITI bank and appearing at events for the bank and it’s investors.
The choice of the progressives in the Senate seems to be Janet Yellen, who would be the most experienced Fed Chair in it’s history. The famed Alan Greenspan had never even worked at the Fed when he was appointed its chair and she has almost twice the experience as the current chair has. But that is not the only reason to support this nominee.
Dr. Yellen is married to Nobel Prize in Economics winner Dr. George Akerlof. Dr. Akerlof had done some great work with Christina Romer’s husband, Dr. Paul Romer, also an economist, about the economics behind looting companies for profit by the executives of a company. From?Looting : The Economic Underworld Of Bankruptcy For Profit:
“Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm’s debt obligations.”
Now there is no way to assume that Ms. Yellen will share the same economic theories or principles as her husband. There is no reason to assume that she will be able to repair the forty years of damage done by bad trade policy, lax regulation and bad monetary policy. However, there is hope, that she will return the Fed back to it’s dual job of fighting inflation AND unemployment because she has consistently mentioned that this is the Feds job. ?It would be a huge signal to Wall Street to stop using accounting tricks to pile up massive amounts of offshore profits and to begin to invest back here at home. She would be in a position to make the current way of doing business not as profitable, or easy, or even legal.
From what we do know of recent Fed history Janet Yellen has made most of the unpopular, and correct, predictions concerning the economy. When everyone else in 2007 was saying the “fundamentals of the economy are strong” and that bad mortgages could be contained Ms. Yellen had this to say:
??The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real.”
And she said on the record at the Fed meeting in 2007. So she has ?a history of being right more often than the current people who run the Fed.
Finally, ?even though Dr. Yellen may not be the “progressive dream” of a Joseph Stiglitz or Richard Wolff she doesn’t have the baggage or appearance of corruption that Larry Summers has. Dr. Yellen would break one of the most powerful “glass ceilings” ?in the world and she is the most qualified person to do so. Larry Summers on the other hand is famously on record for saying stupid things about women, mistreating coworkers, bullying underlings into agreeing with him and telling those above him whatever they want to hear.
President ?Obama has a simple choice to make. Choose the person that the Senate, and the people, and Wall Street all agree is the best person for the job OR try to force someone else upon us.
Let’s hope this time that change wins the day!
Edited/Published by: SB
