Why is Obama So Keen to Appoint Larry Summers to the Fed?

Felix Salmon pointed out today that Larry Summers is now being touted as the odds-on favorite (65%, to be precise) to be Obama’s nominee as the next Fed chief. Felix stresses that Obama’s reason for favoring Summers is based on the sole criterion on which Summers could conceivably be depicted as preferable to the other widely-touted contender, Janet Yellen: he is believed to be better than Yellen would be in handling a crisis.

Felix kneecaps this argument:

That said, the chances of the next Fed chair encountering a financial crisis similar to 2008-9 are pretty slim: realistically, Obama’s appointee will not have to deal with such a crisis. In order for this argument to carry water, then, you need to believe either that the job of Fed chairman is essentially a firefighter role, which has very little importance when there isn’t a crisis, or else that it is so easy enough to do the right thing as Fed chair when there isn’t a crisis that it doesn’t really matter, most of the time, whom you appoint.

This is actually the exact opposite of the truth. The actions of the Fed chair during normal times are of paramount importance…

That said, however, there’s one time that it doesn’t really matter who the Fed chair is — and that’s when you’re in the midst of a fully-blown financial crisis…when there’s a crisis, it really doesn’t matter whether you’re Ben Bernanke or Mervyn King or Jean-Claude Trichet — or Janet Yellen or Larry Summers or pretty much anybody else bar Rand Paul. The central banker’s crisis playbook is a thin document, and easy enough for anyone to master. It’s what central bankers do when there isn’t a crisis that matters, since they’re all going to do exactly the same thing when there is one.

More importantly, financial crises aren’t things which just happen, like asteroids or earthquakes. They have causes — which means that they can also be prevented. Crisis management is an important skill, and it’s one where Larry Summers has a lot of experience. But crisis prevention is the thing which really matters. Summers has demonstrated essentially zero crisis-prevention skills: his deregulatory instincts helped make the financial crisis more likely and more severe when it happened.

Lynn Parramore reminded us that Yellen is a superb candidate on the merits. For instance:

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.

Of course, if you are a member of the financial services industry, all those factors are compelling reasons to fight tooth and nail to stymie Yellen.

So why has Obama gotten on the Summers bandwagon (we were told his candidacy was pushed by a faction in the White House and Obama was not initially on board)? One reason may be simply that he’s a Rubinite and that that faction has the right combination of pedigree, inducements (Obama is likely to follow the Clinton post-presidential playbook of forming a foundation plus giving speeches; no point in alienating a group of your loyal backers if you don’t need to) and 5×7 glossies to be persuasive.

But it is also possible that backing Summers is a no-lose proposition for Obama. Think about it. If Obama nominates Summers (and Wall Street is exceedingly eager to have Summers rather than Yellen in), he curries favor with all the right people. There is no personal upside for him to support Yellen. So the question really isn’t whether he nominates Summers; it is how hard he goes to the mat for him. There is considerable, well-justified opposition to Summers. Most critics, like Salmon, focus on his fealty to financial firms and the near-certainty that he’ll continue to strongly favor deregulation. We’ve highlighted his disastrous his tenure as Harvard president, where he insisted on gambling with the university’s operating funds, a strategy that ultimately produced over $2 billion in losses, as well as his lack of a basic ethical compass in refusing to discipline a colleague over egregious and politically damaging mismanagement of Harvard contract in Russia).

So whether Obama really has a strong preference for Summers or not, he has every reason to sponsor him. If the opposition beats Summers back, Obama can say he gave it a good try. Recall that the less controversial Bernanke reappointment elicited considerable pushback, with five holds plus a filibuster, and Obama had to whip personally the weekend before to get the nomination through. Even then, Bernanke passed with the thinnest margin of any Fed chair ever.

A secondary cynical reason for Obama to tout Summers is the Fed nomination has become a Larry versus Janet slugfest between each candidate’s backers. If Obama puts Summers forward, the calls for Yellen will continue. If he chose Yellen, who would clearly be approved without much controversy. Any resistance in the Senate would come over the larger questions of the Fed’s role, which was a major focus of the tough battle over Bernanke’s last term (funny how the media keeps parroting the “Fed did a great job in the crisis” line, when that was not received wisdom back in 2009). So having the Fed nomination be a fight over personalities is a way of drawing attention away from the Fed’s actions during the crisis and more important, during the tepid recovery (just for starters, Bernanke calling for deficit cutting as early as 2010, even as he was continuing ZIRP and QE. If the economy was weak enough to require extraordinary monetary policy, why oppose fiscal measures, which would be more effective and produce fewer distortions? Despite the central bank’s commitment to more transparency, it’s unlikely to want to have those issues probed).

But it is likely that Paul Krugman has nailed the real reason for Obama preferring Summers: sexism. I don’t like touting gender bias as a major motivating factor in decisions on promotions and staffing. Enough are close calls that all sorts of biases come into play. Making gender a likely culprit, even when that probably played a role, is too easy to be misread as yet another out group crying “wolf”. But here, we have repeated examples of men noticing Obama’s sexism, including, ironically, Summers himself. As Dave Dayen wrote, referring to a passage in the Ron Suskind book Confidence Men:

Christina Romer, then the chair of the Council of Economic Advisers, was in a meeting with the President near the end of 2009, the time when the pivot to the deficit and away from jobs occurred. Romer argued in favor of at least a $100 billion program aimed at job creation. Peter Orszag’s view was that a small stimulus would be ineffective and that fiscal responsibility was a bigger priority. When Obama agreed with Orszag, Romer blurted out “that is oh so wrong.”

Obama snapped back, “It’s not just wrong, it’s oh so wrong?” And he launched into an uncharacteristic verbal tirade, saying that a new stimulus wasn’t going to happen. He was extremely dismissive. A few weeks later, Larry Summers brought up the exact same idea. Obama was more respectful, but still denied the pitch. Even Summers pointed out to Romer, “You know, he sure was a lot more generous to me than he was with you.”

I have the bad habit of interrupting people too freely (often to chime in) and it drives a small subset of men absolutely batshit (and it’s evident that it’s being interrupted by a woman, they seem to take it as an attack on their authority). It’s not clear exactly what Obama’s issue with women is, but there’s a lot of evidence that he has one. This section is from Confidence Men:

Friction about the roles of women in the Obama White House grew so intense during the first two years of the president’s tenure that he was forced to take steps to reassure senior women on his staff that he valued their presence and their input.

At a dinner in November 2009, several senior female aides complained directly to the president that men enjoyed greater access to him and often muscled them out of key policy discussions.

And Dayen pointed out:

Former White House communications director Anita Dunn told Suskind that the White House “actually fit all of the classic legal requirements for a genuinely hostile workplace to women.” She then denied the quote, but Suskind played the tape recording of the interview back for a reporter at WaPo, and she said exactly that.

Now Obama supposedly worked to improve how he dealt with women and showed some improvement. But Obama isn’t facing re-election, and he’s become a lot more open in his dismissiveness. Montanamaven flagged this priceless moment from Obama’s last press conference:

Q: Can you understand, though, why people might not — not trust what you’re saying right now about — (off mic) –

PRESIDENT OBAMA: No, I can’t.

And we’ve got this howler via Marcy Wheeler:

When Obama announced Friday the formation of a technical advisory group to review our SIGINT programs, I naively believed “outside” and “independent” meant “outside” and “independent.”…I also naively believed this was an effort to take up Ron Wyden and Mark Udall’s call to get an independent review of the program, which the rest of the Senate Intelligence Committee thwarted a year ago…

Nope!…

What on Friday was an outside and independent group is now branded by the Director of National Intelligence as the Director of National Intelligence Group…It took exactly 72 hours for that good idea to fizzle into a navel gaze directed by the guy who lies to Congress.

So Obama is exhibiting a lot less caution and finesses of late. That means we might have a decent shot at reading how keen he is about Summers, assuming Obama puts him forward for the Fed. The more pissy he gets when challenged, the more he probably really does want Summers in.

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109 comments

  1. Gerard Pierce

    How about the simple idea that Obama and his administration insiders are simply losing it. Maybe we are seeing the Peter Principle in action?

    Between Manning, Snowden, Putin, whatever is actually hapening to close embassies – and the oncoming Obamacare train wreck – it seems like the Democrats have exceeded their level of competence.

    They are keping a stiff upper lip over the Snowden revelations, but they can’t even come up with a good set of lies because they don’t know what documents are about to be realeased that will sink the ship.

    I suppose there is even the possibility that Snowden tapped the communications of some key players in our “leadership” when he had the opportunity.

    That’s pretty unlikely, but a man can dream, can’t he?

    1. Ben Johannson

      You’ve brought up something that’s puzzled me for some time, namely the Administration keeps lying agout what the NSA is doing only to have Greenwald reveal a document which demonstrates they are lying. Snowden’s superiors should know what documents he took with him, yet the pattern described above has occurred five or more times over the last two months. Either the intelligence community’s IT people are so incompetent they don’t know how to determine the last date on which a file was accessed, or Administration flunkies (as well as the President) believe their minds are so powerful they can alter the space-time continuum and stop Greenwald via wishing-well.

      1. NotTimothyGeithner

        I’ve found middle management/MBA types don’t understand how computers work, and this might explain of the reaction to Snowden. Wikipedia noted a Senate IP address changed the Ed Snowden entry, and I’m positive some “genius” told a kid to make the change or some intern looking to make a name changed the entry to be clever without any idea the website owner could come up with a reasonable location for the change by looking at IP addresses.

      2. Larry Barber

        Someone with admin privileges can change the access times on a file to whatever they want, there’s a reason its sometimes called “god mode”. A properly setup high security system will not allow such changes, or at least will log them in some place where whoever is making the change won’t be able to modify. It doesn’t appear the NSA systems were set up that way (it makes computers a real PITA to work with, so its understandable, kind of), so its quite likely they don’t know what Snowden took, at best they know what he could have taken.

    2. NotTimothyGeithner

      I don’t think they are losing it as much as the Administration is not being given the benefit of the doubt anymore.

      Summers wouldn’t be the first bad personal Obama has made, and lets be honest, there were red flags about Summers, Holder, Bernanke, Geithner, Emmanuel, Daschle, Kaine, and so forth five years ago. Does anyone remember Obama wanted to name Kaine or Bayh as his VP pick? Obama was protected by the new car smell, and now Congressmen, Senators, and pundits have to realize Obama will never be popular again. He will not be on 2014 ballot. The Obots aren’t going to be there for other Democrats just like they weren’t in 2010, and Obama simply doesn’t have an army of cultists ready to charge any criticism as racist.

      1. Dan Kervick

        I’m sure Obama is wondering why Dems were willing to lay down for Summers first time around but not now.

        The thing is, most Democrats have actually been reading and learning and reflecting since 2008. But apparently Obama has not.

        1. JamesW

          I would also wish to add that saying Yellen would make a good candidate is the most bogus, atrocious remark I’ve yet heard!

          I mean, Yellen admitted publicly she had no idea that offshore financial structures like SPVs, along with securitization and endless credit derivatives and off balance sheet bookkeeping would pose any problems!

          I can only express infinite disbelief at this.

    3. Dan Kervick

      Yeah, I think the circle of people Obama actually listens too is very small, and they are not the sharpest tools in the shed. The man seems to be living in 1998. Perhaps when he is not president any more, he will have a chance to read the things that have been written and debated outside the David Brooks orbit of White House respectability.

      1. JamesW

        If Jamie Dimon, Robert Rubin and Lloyd Blankfein together constitute a circle, then I would agree.

  2. YankeeFrank

    My guess is that Obama does prefer Summers. He’s got every quality Obama loves in an economic policy maker: no sense of justice, honor, integrity, honesty or accountability.

    Yellen is simply too good at what she does to be listened to by Obama. Her ideas might actually help to turn our financial system back into a financial system instead of the largest criminal racket in history.

    Obama’s obvious and uncontrolled elitism and narcissism just can’t allow him to see anything he has done as a mistake. Nominating Summers confirms everything he has done “for” (to) the economy has been wonderful.

    1. Blunt

      “My guess is that Obama does prefer Summers. He’s got every quality Obama loves in an economic policy maker: no sense of justice, honor, integrity, honesty or accountability. …

      “Obama’s obvious and uncontrolled elitism and narcissism just can’t allow him to see anything he has done as a mistake. Nominating Summers confirms everything he has done “for” (to) the economy has been wonderful.”

      Concise and accurate. By George! Yankee Frank has summarized in full!

    2. JamesW

      And add to that description that Larry stood up to an intelligent, honest and correct Black-American lady, Iris Mack, and was proven wrong, of course!

  3. Conscience of a Conservative

    No fan of either Yellen or Summers here, but Summers less than Yellen for sure. I believe the Fed chairman role has been the dream of Summers for quite some time and what’s swayed his opinion is getting baraged with a well orchestrated campaign by Robert Rubin and his gang to lobby the President. What’s in it for Bob Rubin is probably what’s always been in it for him, influence an power. I don’t believe the Fed is something that Obama thinks about too much and he relies on the Rubin crew for his outsourced thinking on the matter. All those editorials coming out of the woodworks on Summers, are puff pieces written by sock puppets. Favors must have been called in. Summers is just not that well liked. I think Summers is a shoe in, I don’t see Yellen capable of matching the political muscle Summers has in getting his dream.

    1. Susan

      I think Summers is the pick because he has a military mind set. He’s a pretty aggressive and abusive guy. Janet Yellen is simply an expert administrator and knows honest banking better than anyone. It is not honest banking Obama is looking for. It is something else. Probably “finance” is all tied in with empire so intrinsically it is inseparable from the Department of Defense.

      1. Susan the other

        And also the incident with Christina Romer, who was my fave and I was very sorry to see her leave. When Summers got shot down for the same idea, only more politely, he commented about Obama’s behavior. That is so telling. It was 2009 and Obama had already decided on a course of austerity which has crushed this country. Obama was hot off the 2008 election and he already was putting forward the very opposite agenda he had promised. Obama has some strange marching orders. It looks military to me.

        1. Massinissa

          Or, as some suggest, he may be playing to the tune of the intelligence agencies.

          Not my idea, but I thought it pertinent to mention.

        2. neo-realist

          Why be brusk with someone like Summers whose friends can do a hell of a lot for you when your Presidency ends? I don’t think Romer has such friends. That’s more the case than sexism IMO.

          1. Nathanael

            Romer has very significant friends, because she is an *extremely* well-respected academic. (Even more so now than before.)

            It may not be obvious to people like Obama because they aren’t greedhead moneymen, but being a sexist pig to Romer is something which can close a lot of doors for you.

      2. JamesW

        Susan said Yellen knows honest banking better than anyone

        http://www.zerohedge.com/news/2013-08-14/janet-yellen-financial-crisis-i-didn%E2%80%99t-see-any-coming-until-it-happened

        In Yellen’s testimony before the Financial Crisis Inquiry Commission:

        “For my own part,” Ms. Yellen said, “I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.” Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure.

      3. Dan Kervick

        It could be as simple as this: Summers is a ruthlessly ambitious and greedy man who has at every stage pursued the path to great personal wealth and tradable insider power. He is sort of like a Kissinger of the financial world. He knows everyone. He has scratched their backs multiple times, and his has been amply scratched in return

        These are the people who literally run the world. They have told the White House in no uncertain terms, “Pick our buddy Larry or we will pull the plug on the Democrats in 2013.”

      4. F. Beard

        Excuse me, but the only possible honest banks would be entirely PRIVATE ones, not the banks and credit unions we have now.

        Am I being extreme or as Winston Churchill remarked “Now we’re just haggling over the price”?

  4. middle seaman

    This is a rather lengthy post about a simple fact. First and foremost, Obama is the master of bad decisions. Why nominate Kerry to secretary of state; the guy showed in his 2004 campaign that there no one home. Hagel started as a terrible decision (unprepared, mumbling, no record of achievements), but he turned out to be a solid DoD head. Summers seems like both a person decision Obama makes because he know Summers well as well as a banking system decision. After all, Obama represents the banks and not us.

    1. Yves Smith Post author

      No, Obama’s decisions are all good decisions. You just have to understand what he is trying to optimize. You think it should be to have good appointees in various roles. Wrong! If that happens, it’s an accident or in some cases (Gary Gensler) the opposite of what was supposed to happen.

      1. JamesW

        No, Obama’s decisions are all good decisions

        How anyone can take Yves Smith, or her highly censored, vanilla site seriously after remarks like that, are beyond me?

        1. RalphR

          Your irony meter needs a serious overhaul. And your reading skills aren’t too hot either. Might helping looking at a post before mouthing off.

    2. chas

      right now the banks rule. The leaders are in cahoots with them . So the very thing that is killing the country cannot be mentioned. Sheer madness. No one has the money or guts to run against the banks. Liz Warren brings up some good stuff ,but her foreign policy stances do not jive with what saying. She is either naive or misinformed or under pressure. If you are going to change things you got speak out against the whole mess.

  5. William C

    I do not know how good Summers would be at dealing with a crisis but I would be prepared to wager a small sum on his ability to create one.

    1. ScottS

      I was going to say something along these lines. I suppose a fireman isn’t an arsonist just because he’s always around fires, but a background check to see if he’s been convicted as one before he starts isn’t a bad idea.

  6. Adam1

    “he is believed to be better than Yellen would be in handling a crisis.”

    Even if this was true I’d say he’s at least 10 x more likely to be the cause of a crisis than Yellen.

    1. Pete

      Isn’t this kinda like having a Tessio or Clemenza conversation? Goverment INC. and its appendages are proven organized crime syndicates at this juncture. Why parse over which criminal might be the taller midget revolving through the ‘public/private’ door? All rackets only promote willing participants.

      1. Jim Haygood

        Yep. Summers and Yellen BOTH would make ‘excellent’ Fed chairs because they would print like demons at the first sign of economic or financial market weakness.

        I could program a laptop to do the same thing, and more consistently, too.

        Abolish the freaking Fed, for Bog’s sake.

      2. Crazy Horse

        Maybe Jamie Dimon would agree to become a candidate for Fed Chairman if we the people would match his current salary. Then Obama would have the choice between three Headless Horsemen of the Apocalypse.

  7. run75441

    This is one political appointment I hope does not happen. With his direct and indirect involvement in some of the worst financial scenarios to ever have occurred for this country, he needs to be sidelined. His ego and attitude towards others leaves much to be desired.

  8. Skeptic

    Unfunny how in all this Disaster, words keep having the exact opposite meaning of what actually happens. Here again we have Summers when it really should be Winters. Cold, hard long Winters for Summers’ victims.

    And, in keeping with the USSTASI theme, could it not be possible that some of our esteemed Universities (like Harvard where Barry was educated as an unconstitutional lawyer) keep records on any indiscretions by their possibly future famous and powerful students?That those records can then be later used as needed. Oh, I know, just wild speculation like that about J. Edgar Hoover back in the good ole days. Never happen in a free country like the USA.

  9. MeckiMesser

    https://www.nsfwcorp.com/scribble/5658/2bffdd802304e61ea30b732efb10931a1ddcd512/

    And so, as Obama made clear, Summers is a front-runner for the Fed chair nomination. Actually that’s an understatement, hopeniks: Larry Summers is THE front-runner. As Ron Suskind put it: “first among equals to replace Bernanke.”

    That’s in reference to a deal Larry cut with Obama just before he took office in January 2009 . As crude and cronyist as this may sound — Obama basing his choice for Federal Reserve chief based on a backroom political “deal” he cut years ago — it’s worked for Summers in the past. It’s how he got the job as Treasury Secretary under President Clinton — at least, that’s according to Summers’ mentor and the man he replaced as Treasury Secretary, Robert Rubin.

  10. Patti S

    “he is believed to be better than Yellen in handling a crisis”…

    Any woman knows that “handling a crisis” = She’s likely to get all emotional and unstable and, well, hysterical.

    There was a primary here in NJ yesterday. Driving home from work I realized I hadn’t voted, and the polls were closing, and then I remembered I was no longer a registered Democrat.

    Thanks for reminding me why.

    1. Klassy!

      Well yes, there was the article in the NYT putatively about the three candidates (some othe dark horse– can’t remember the name) which used about 95% of the space puffing the legend of Larry. I learned absoulutely nothing about the third guy.
      What stood out for me was something about in ordinary times, Yellen’s consensus building skills would be useful, but we need “outside of the box thinkers” now. Because the economy stinks. Because of that “outside of the box” thinker.
      Anyway, here’s my translation. Yellen is good at the girly stuff (consensus) but Larry is the genius.

  11. glbrules

    As I have said in comments before (and with no claim to originality), for all his talk about “change” Obama is profoundly establishmentarian. To elaborate just a bit, it seems his whole claim to originality in politics, the whole transactional vs. ideological thing, boils down to “making the current system work”. So it never occurs to him to step out of this framework. He seems to equate ideas and principles with ideology and partisanship and imagines himself to be beyond that. (Full disclosure: I have not read his books and am relying on glosses.) Consequently his game is to hold to no principles or at least to commit to none, and that makes him unabashedly, flagrantly, shallow — in a manner that frankly puts me in mind of Nixon. And he seems oblivious to the fact that making any decision at all commits a person to some idea or principle. But he gets along because he does seem to believe, very strongly, in Barack Obama, or the image he imagines he projects.

    Just my impression — and believe me, I would welcome actions (as opposed to statements) that would persuade me otherwise. I do give him credit for the health care reform, such as it is, but even there he seemed to just turn it over to Pelosi and company with no apparent guidance as to ultimate goals.

    1. NotTimothyGeithner

      Whoa, you might want to check out Lambert Stretcher’s series on healthcare.

      -Pelosi had virtually nothing to do with healthcare policy, and I doubt it would have mattered if she had been the point person.
      -Max Baucus, one of the most vile creatures in the Senate, was Obama’s point person
      -Obama negotiated ACA with Big Pharma before the three month spectacle began. The basics of the bill from Obama’s meeting represented the final bill with a few tweeks to protect individual Senators.

      ACA was Obama’s bill, and ACA is largely to designed to protect existing healthcare profits and expand them. A few prizes were given out to con the rubes, but Obama-care is a fraud which underscores your original point about Obama’s establishment support. Obama’s personal story about healthcare was the time his daughter was sick and received excellent care from doctors (this is not unusual) and complaints about paperwork. From Obama’s perspective, healthcare is a paperwork problem.

      1. Strangely Enough

        “From Obama’s perspective,” everything is an optics problem.

        “We could sell this ACA/war/murder racket/financial crime spree/limitless spying/turd if we just had a little better PR.”

  12. profoundlogic

    In the grand scheme of things, it won’t make a damn bit of difference who Obama picks. O’s obvious support of the biggest dick in the room does at least tell us that he’s perfectly comfortable with that hostile working environment for women.

  13. denim

    Portrait of lip service.

    Obama 2005 commencement address: “…Have we failed at times? Absolutely. Will you occasionally fail when you embark on your own American journey? You surely will. But the test is not perfection.
    The true test of the American ideal is whether we’re able to recognize our failings and then rise together to meet the challenges of our time. Whether we allow ourselves to be shaped by events and history, or whether we act to shape them. Whether chance of birth or circumstance decides life’s big winners and losers, or whether we build a community where, at the very least, everyone has a chance to work hard, get ahead, and reach their dreams.

    We have faced this choice before.

    At the end of the Civil War, when farmers and their families began moving into the cities to work in the big factories that were sprouting up all across America, we had to decide: Do we do nothing and allow captains of industry and robber barons to run roughshod over the economy and workers by competing to see who can pay the lowest wages at the worst working conditions? Or do we try to make the system work by setting up basic rules for the market, instituting the first public schools, busting up monopolies, letting workers organize into unions?

    We chose to act, and we rose together.

    When the irrational exuberance of the Roaring Twenties came crashing down with the stock market, we had to decide: do we follow the call of leaders who would do nothing, or the call of a leader who, perhaps because of his physical paralysis, refused to accept political paralysis?

    We chose to act—regulating the market, putting people back to work, expanding bargaining rights to include health care and a secure retirement-and together we rose.

    When World War II required the most massive homefront mobilization in history and we needed every single American to lend a hand, we had to decide: Do we listen to skeptics who told us it wasn’t possible to produce that many tanks and planes? Or, did we build Roosevelt’s Arsenal for Democracy and grow our economy even further by providing our returning heroes with a chance to go to college and own their own home?

    Again, we chose to act, and again, we rose together.

    Today, at the beginning of this young century, we have to decide again. But this time, it is your turn to choose.”

    http://departments.knox.edu/newsarchive/news_events/2005/obamaaddress.html

    Michael Hudson: Obama’s Master Class in Demagogy 101:
    “In a Clintonesque manner, he started his speech by saying, essentially, “I feel your pain.” “In the period after
    World War II,” he started out, “a growing middle class was the engine of our prosperity.” People had a sense that
    hard work would be rewarded with fair wages and benefits, the chance to buy a home, to save for retirement,
    and, above all, to hand down a better life for your kids. But over time, that engine began to stall. That bargain
    began to fray. Technology made some jobs obsolete. Global competition sent others overseas. It became harder
    for unions to fight for the middle class. Washington doled out bigger tax cuts to the rich and smaller minimum
    wage increases for the working poor. The link between higher productivity and people’s wages and salaries was
    severed – the income of the top 1% nearly quadrupled from 1979 to 2007, while the typical family’s barely
    budged.
    All true enough. The idea is that if a President can spell out how unfair the economy is, voters will imagine that
    he will take the next step and do something about it.”

    http://www.nakedcapitalism.com/2013/07/obamas-master-class-in-demagogy-101.html

    In all my years, I have never seen such adept lip service to be followed by total surrender and compromise to the selfish, conscience-free, opposition. Never.

    1. Nathanael

      Denim: for a historical point of comparsion, I suggest looking up the speeches and actions of William McKinley. The more I’ve learned about him the less I like him, and he is *very* comparable to Obama.

      Of course, McKinley was assassinated, and the country was betetr off for it, because Teddy Roosevelt became President. (Joe Biden is no Teddy Roosevelt.)

      1. Massinissa

        When you mentioned him having a sleep disorder, I first thought that maybe it was because of a guilty conscience.

        But then I realized: Its Larry Summers we are talking about here. There is NO way that could be the case.

    1. Klassy!

      It works if you think of Larry as a small child. When a child spills their milk, you don’t yell at them. You offer them praise when they try to clean up the mess even if their attempts aren’t quite up to snuff and the mess if of their own making.

      1. Klassy!

        Of course this analogy falls apart when you take into account that no matter how hapless the small child’s attempts to clean up their mess are, they are honest attempts.

  14. Lexington

    I can’t believe in 2013 people are still being taken in by the White House’s kabuki theatre. Back in 2008 America had endured eight years of Dumbya and a fresh face who talked a good game about “hope” and “change” got the benefit of the doubt. But five long years later cluelessness is no longer an excuse.

    Obama will nominate Summers. Wall Street wants Summers. Wall Street was Obama’s biggest campaign contributor. Therefore Wall Street will get what it wants. If anyone is not absolutely clear on this it can only because they’ve been living under a rock for the last five years. And besides, as Yves points out, Obama stands to become very wealthy after 2016, but in order for him to cash in he has to play nice with the big money boyz.

    Janet Yellen is a red herring. The only reason her name is being advanced is because the White House wants to create the impression that there is a horse race for the job and that there’s a chance a moderately progressive candidate could actually win it. The Democrats understand they need to engage in this bit of legerdemain to indulge their base -or at least the people who think they are the Democrats’ base. If the fact of their irrelevance to the party establishment becomes too stark some progressives might actually reconsider their support for the party. So like Lucy teeing up the football for Charlie Brown they’ll make a show of progressives having a real chance this time, but you know there is only one way this is going to end – “YONK! Oh, the centrist party establishment wins AGAIN! Better luck next time tools – oops, I mean valued Democratic supporters…”

    1. Klassy!

      How much more clear can Obama be with the F.U.s? Does he need to walk up to his non-1% supporters and smack them across the forehead with a two by four?

      1. FAITH CARR

        Nope. It’s safe to ignore everybody.
        Although I do appreciate knowing about just what I screwing I’m getting. Thanks for that N.C.

  15. docg

    As I see it, anyone with any qualifications at all and any reputation at all would be a fool to step into Bernanke’s shoes at this point. Bernanke has dug a huge hole for himself and is now, very wisely, planning to clamber out of it, not by solving the problem, but simply by leaving his post. Via helicopter, no doubt.

    If Obama has any sense at all, he won’t let him get off so easily. He created the mess he’s in (i.e., the mess we are all now in, thanks to QE 3 or 4 or whatever) and he now needs to face the consequences of his totally irresponsible actions.

    Platinum coin, anyone?

  16. Yancey Ward

    The truly sad thing is that neither one is a good candidate, and they are the only two being discussed.

  17. Anarcissie

    I have an odd feeling about this. Larry Summers is a truly reprehensible character. A person like that in a post like that — it seems like the beginning of the end, the crack of doom. For the ruling class, that is. Things must be spinning out of control: a vision of Mafia dons sitting around a table in a dirty hideout playing poker while the city burns.

    I am curious as to the suggestion that Summers has some connection with all the recent secret police stuff, however.

  18. gozounlimited

    Have arranged my life so neither Obama or Fed have much relevance in it…. don’t want to hang myself out there trusting phonies with ponies.

    1. Timothy Gawne

      “Have arranged my life so neither Obama or Fed have much relevance in it….” I admire the sentiment – I presume that means you are not making speculative investments in the stock market? – but while you may not be that interested in economics, economics is interested in you. Unless you have a billion dollars or are living in Switzerland, if the Untied States is driven down to Mexican-level poverty you will NOT escape…

    1. charles sereno

      Time for a break… to the Internet Cafe – some music, please:
      http://www.youtube.com/watch?v=ZWWEHAswpFI
      and lyrics too:

      Middle English
      Sumer is icumen in,
      Lhude sing cuccu!
      Groweþ sed and bloweþ med
      And springþ þe wode nu,
      Sing cuccu!
      Awe bleteþ after lomb,
      Lhouþ after calue cu.
      Bulluc sterteþ, bucke uerteþ,
      Murie sing cuccu!
      Cuccu, cuccu, wel singes þu cuccu;
      Ne swik þu nauer nu.
      Sing cuccu nu. Sing cuccu.
      Sing cuccu. Sing cuccu nu! (Wiki)

      Modern English
      Summer has come in,
      Loudly sing, Cuckoo!
      The seed grows and the meadow
      blooms
      And the wood springs anew,
      Sing, Cuckoo!
      The ewe bleats after the lamb
      The cow lows after the calf.
      The bullock stirs, the stag farts,
      Merrily sing, Cuckoo!
      Cuckoo, cuckoo, well you sing,
      cuckoo;
      Don’t ever you stop now,
      Sing cuckoo now. Sing, Cuckoo.
      Sing Cuckoo. Sing cuckoo now! (Wiki)
      A question for all you outdoorspeople: Have you ever heard a stag fart?

  19. MikeNY

    Wrt Lynne Parramore: what more, exactly, can the Fed do at this point to create jobs? Can monetary policy fix the jobs problem? I think not, and, IMO, more QE in the absence of fiscal action is nothing but more “trickle down”, and defense of the status quo.

    Summers may be very objectionable on a variety of grounds, but to his credit, he has explicitly argued that what we need is FISCAL action, not more monetary action, and that the adverse consequences of the Fed’s QE include: 1) increasing wealth inequality, 2) resource mis-allocation, and 3) potential asset bubbles (see the return of PIK-toggle notes in the HY credit markets as evidence). I would add that the Fed’s messiah complex is giving Congress cover to do precisely NOTHING, and to accept an environment of mediocre job creation, and mediocre jobs.

    Where does Yellen stand on these issues? What I’ve read is that she is potentially more “dovish” on monetary policy than Bernanke. Does she acknowledge the Fed’s — and QE’s — limitations, or does she believe like Bernanke that the Fed’s mission is to solve all our economic problems? IMO that belief is misguided and has become functionally reactionary.

    I’d love to hear some indication that Yellen hasn’t drunk the QE Kool-Aid.

  20. albrt

    Obama is likely to follow the Clinton post-presidential playbook of forming a foundation plus giving speeches; no point in alienating a group of your loyal backers if you don’t need to

    I think this vastly underestimates the directness of the corruption that is going on. I don’t think Obama will need to engage in any “foundation” kabuki. I think he already has explicit understandings with specific Wall Street players that he and members of his family will be paid large amounts of money to do little or nothing going forward. It is in the interest of the Wall Streeters to keep their end of the bargain if they want to have similar influence on the next administration.

  21. Jim A.

    –Conversation with an old boss..
    Boss: “Do you always interrupt us because we’re women?”
    Me: *pause while I figure out what to say* “No, you NOTICE because you’re women.”

  22. OfA anarchist outreach

    You should be ashamed. In your rigid leftist purity you are unfair to both Professor Summers and President Obama, two compassionate men of profound integrity and depth. As President Obama knows, Summers is the man we need for the challenges we face.

    No one has mentioned Summers’ most prescient innovation: the underpolluted countries memo at IBRD. The USA is the biggest underpolluted country in the world. Now that we’re in a position to secure eternal energy independence by injecting irremediable toxins into the groundwater, we need a man to manage lifespans downward so that Americans don’t live too long and die horrible deaths from kidney or bladder cancer.

    Thanks to Professor Summers’ economic stewardship, US lifespans are getting shorter. Let him finish his work, and the masses won’t have to worry about cancer from industrial poisoning. Summers is the man we need to starve the population back down to the robust and disease-resistant youthfulness of a third-world country. He did it for Russia, shielding Shleifer and his colleagues from uninformed criticism. The result: Russian lifespans declined to hearty middle age, and Russians were spared the scourge of cancer.

    Larry Summers: optimizing the balance of mortality and morbidity for competitiveness and national security. Forward to youth and health!

  23. kaj

    If the 20 or so Democrats who opposed Summers in their letter to Obama hold–Merkley/Oregon was extremely dismissive– go on the mat for Yellen, most Republicans will likely cast their lot against Summers. Obama, not terribly smart and as arrogant as he is, will be very angry and fold. He will then try to nominate Donald Kohn, Greenspan’s water carrier and house-boy and likely fail again. This contemptible, petty man (Obama) will get back at us on the pipeline and many other issues, especially the designation of the vast Federal lands that can easily be converted into national monuments and be exempted from energy exploration. Obama has trodden his boots on the progressive community so frequently and so often, on reversion to pre-Bush tax schedule (now $500,00 is the new “Middle Class”), raising the ceiling on social security tax-ceiling, domestic spying and the national-security state, Medicare for all, fracking for gas, awful appointments, past and present to Energy, Interior and now even the UN (double-crossing Samantha Power), that it is time that he gets his come-uppance. It is time to fight back against this horrible man by stopping him in his tracks on the Summers appointment.

    I have a hunch that Reid, the majority leader does not like Obama (pretty boy) too much and likely will not help him out on the Summers nomination;;; Reid seems outwardly at least to be a closet progressive. George Bush you might remeber, could not get his secretary on the Supreme Court because of Republican opposition;;;; unfortunately, we got Alito instead. It is amazing how easily Obama folds in the face of Republican opposition (he is one of them), but hopefully they will rescue us this time, however much, I hate to put my fate in their bloody hands.

    1. NotTimothyGeithner

      “Reid seems outwardly at least to be a closet progressive.”

      Are you kidding? Nancy Pelosi has a better track record than Harry “Keep the Powder Dry” Reid. Every six months Harry Reid threatens to stand up to the GOP then he goes back to wherever converts to Mormonism go for fun.

      The Senate is a backwards, regressive place, and Reid keeps getting elected leader because he represents Conservative Democrats which represent the majority of the Democratic elite.

      Since Summers is being discussed and has issues with women, lets not forget Harry Reid is opposed to abortion.

  24. emptyfull

    “That said, the chances of the next Fed chair encountering a financial crisis similar to 2008-9 are pretty slim: realistically, Obama’s appointee will not have to deal with such a crisis.”

    Really? Am I the only one here still expecting a massive crisis? The Euro (or Europe itself) still will go up in flames within a few years. I still think that it’s mostly about getting a ‘team player’ on board so that Wall St. can win the next crisis. The other issues (sexism, dreams of post-presidential luxury) are likely just playing supporting roles.

    Remember, also, that Summers likely knows where all the bodies are burried. Team Obama has had to weave a tangled web of lies and misdirections to keep their Rubinist economic strategy going forward. My guess is Yellen is not corrupt enough to be trusted.

  25. harry

    I have a simpler theory. What the big banks want, the big banks get.

    This has been a very accurate tool in predicting Obama policies. And it still is.

    Im not denying that Barky might be sexist. Just that you dont need sexism to explain the latest give away to the big US banks.

  26. b2020

    “That said, the chances of the next Fed chair encountering a financial crisis similar to 2008-9 are pretty slim: realistically, Obama’s appointee will not have to deal with such a crisis.”

    Why would one give any credence to this? Why would one want to give any credence to anything that follows from such debatable presmise?

    What exactly has changed – and not for the worse – since 2008? Are we better off than 5 years ago? Better prepared? Has our economist children been learning?

    Given where we are – willful austerity, excessive and increasingly permanent unemployment, financial institutions leveraged and mismanaged more than ever, and several foloow-on bubbles primed – it could fairly be said that the Fed chairman indeed would have to be a firefighter to even begin to make up for Congress and administration being arsonists, and it would be fair to say that Greenspan and Bernanke have distinguished careers based on demonstrating the impact of Fed Arse-onists.

  27. Chauncey Gardiner

    Thank you for this article with your insightful observations, together with those of many other readers above. Setting aside Summers’ long standing issues with gender for a moment, I find his candidacy wanting based on his long history of damaging financial and economic decisions which you and others have mentioned. These range from his support while at Treasury of deregulation of derivatives and overturning the Glass-Steagall Act in the 1990s, to the hundreds of millions in derivatives losses sustained by Harvard when he was president of that institution and led to his resignation there [ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHou7iMlBMN8 ], to his statement to a Fed conference in 2005 about the rapid growth of securitization on Wall Street, and the development of complex products such as credit-default obligations, when he said, “It seems to me that the overwhelming preponderance of what has taken place is positive,” to his opposing the Volcker Rule in 2009 [See: http://www.newyorker.com/online/blogs/johncassidy/2013/07/where-larry-summers-went-wrong-politically.html and http://www.huffingtonpost.com/2013/07/24/larry-summers-fed-nomination_n_3647369.html ]

    Salient extract from the New Yorkers article: … “Which brings us to what is still the heart of the matter: Summers’s beliefs, statements, and policy recommendations in the period before the financial crisis and going back to the nineteen-nineties, when he was at Treasury… his support for financial deregulation, his dismissal of officials and commentators who expressed concerns about the direction his policies, or his public support for Alan Greenspan, a Fed chairman who, in his bones, barely believed in regulation at all. Many people, myself included, have written about these things at length, critiquing the Panglossian theories on which Summers and others based their policy advice.” … “[In] the words of Sheila Bair, the former head of the Federal Deposit Insurance Corporation, you were “part of the deregulatory cabal that got us into the 2008 financial crisis.”

    I agree that Summers is absolutely correct in voicing support for increased federal fiscal spending. But that is within the purview of Congress and the president, not the Fed Chair.

    So what is really going on here?… Clearly Summers is Wall Street’s guy. IMO it’s really all about the TBTFs ongoing efforts to avoid regulatory oversight of their activities, negate any efforts to reinstate Glass-Steagall, and to enable them to continue to manipulate markets and speculate in derivatives in amounts that are reportedly several tens of times the nation’s GDP with implicit federal government backing that enables them to appropriate any financial gains for themselves and transfer the risk of significant losses onto our public Treasury.

  28. C

    While I generally agree with you that Obama is sexist I think that his responses run in general on antother footing, control.

    Consider Obama’s public statements on the drone strikes. As others have pointed out he went out of his way to assure is that they were, are good, because he picked the targets. He has also given his personal stamp to the surveillance programs, even lying to the public about them, and in both cases has come down hard on anyone who dares change the message.

    In general I think he and his team are all about controlling things and Larry Summers thinks the same way.

  29. LizinOregon

    It was after the presser that I too started to belief sexism is a significant factor here. For me it was the lame comparison to Michelle verifying that he has actually done the dishes. Deliver me from reminders of who is really in charge of the kitchen. I bet not a single woman in the room laughed.

  30. Timothy Gawne

    “So having the Fed nomination be a fight over personalities is a way of drawing attention away from the Fed’s actions during the crisis and more important, during the tepid recovery..” IMHO that nailed it!

    When the police play the “Good Cop, Bad Cop” thing, remember that they are both on the same team…

    Good Fed Chief, Bad Fed Chief…

  31. indio007

    I’m sure their polling indicated people are opposed to Summers. Obama and friends couldn’t simpl just say “We want Summers. The initial backlash would have sunk the idea.
    Plan B
    They have been desensitizing the public by floating his name every 3-5 days. That’s who they have wanted all along. Someone completely corruptible.

  32. Rodger Malcolm Mitchell

    1. Summers is the best choice to widen the income gap between the rich and the rest.
    2. Obama is bribed by the rich (via campaign contributions and promises of lucrative employment later) to widen the gap between the rich and the rest.

    Obama and Summers are owned by he rich.

    If you have any questions about this, ask Penny Pritzker.

  33. Eric L. Prentis

    Larry Summers, a lackey for Wall Street, “never has to say he is sorry.” Screw-up Larry will have a leadership position in government, regardless.

  34. Kostas

    This was probably coming ever since there was no pressure for re-election anymore. First term is always a charm, the second when the real changes for the worse begin.

  35. rich

    Next Fed Head Should Meet the Bernie Sanders/Elizabeth Warren Standard

    President Obama, who says he will make his selection this fall, has defended Summers. A number of prominent Democratic senators have suggested that the president consider a more appealing prospect: Janet Yellen, the vice chair of the board of governors of the Fed.

    But not everyone is satisfied with predictable prospects, or politics as usual.

    Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) keep making the right demands and asking the right questions.

    Several weeks ago, Sanders suggested that, instead of narrowing the choice to Summers — and Yellen — Obama should be considering a wider range of contenders, including Nobel Prize-winning economist Joseph Stiglitz or former Labor Secretary Robert Reich.

    There’s every reason to talk up Stiglitz and Reich.
    But, no matter who the nominee is, Sanders and Warren argue this week in a Huffington Post column that “the next Fed chair will have an opportunity to get our economy back on track and to help rebuild America’s middle class. But that will require the right temperament and a willingness to take on Wall Street CEOs when necessary. It is critical that the next Fed chair make a genuine, long-term commitment to supporting those who don’t have armies of lobbyists and lawyers to advance their interests in Washington — working and middle-class families.”

    To that end, the senators have developed a set of questions that need to be answered by whomever is chosen to replace Bernanke.
    http://billmoyers.com/2013/08/14/next-fed-head-should-meet-the-bernie-sanderselizabeth-warren-standard/

  36. steve from virginia

    I like coming over here, the anti-Obama diatribes are much more articulate and witty than the Zero-Hedge/Missouri State Fair varieties.

    I personally thing RGIII will be the next Fed nominee …

  37. Fiver

    First, I disagree that the next Fed chief could encounter a crisis as profound as that which we experienced 5 years ago, as each financial crisis has been greater that the previous one for 2 decades and the argument for a non-financial event with profound financial implications is stronger now than it has been over that entire period. The Fed is hopelessly trapped in an ultra-low interest rate environment it simply cannot exit in anything like as short a period of time as needed should it become the policy required – as John Hussman noted, it would take a $800 billion contraction in the Fed’s balance sheet just to move interest rates up .25%. Good luck with that when Chinese and other emerging markets’ inflation finally starts flowing through to end consumers.

    Also disagree that a nomination for Summers is a “blow” to women, for the very simply reason that the Fed is now a completely compromised, wholly corrupted place no woman of character would wish to be part of in the first instance.

    The much simpler reason for Obama to appoint Summers is that Obama has an unerring sense of the sleazy, i.e., he has
    always picked the worst candidate available for any possible position, be it at CIA, DIA, FBI, Homeland Security, Treasury, Commerce, EPA, DoD, the Fed or anywhere else. He is undoubtedly the most corrupt person ever to sit in that chair in the White House, always looking for new ways to mangle the language attempting to claim “good” out of “bad” or “responsibility” out of “negligence” via whole-hog corruption of the meanings of key words and phrases.

    So, since Summers is hands-down the worst, he gets the job. Period.

  38. TC

    How do we comment on Capo Confetti’s replacement without looking at the bi-partisan consensus making his so-called “retirement” forced: the public sector’s version of “pursuing other opportunities”? It’s not like Helicopter Ben chose to retire. He’s being forced out. Why? It certainly is not the case his hyperinflationary policy is Wall Street unfriendly, even were it taken to the extreme where the physical economy’s shutdown precipitates a liquidity-fueled, shortage-driven Wiemar 1923 redux.

    A new phase of the post-Bretton Woods imperial swindle appears to be upon us, and the majority of people rather choose to present arguments assuming the Fed’s role in this has been nothing but egalitarian, or at least intended as such. History rather reveals, though, the Federal Reserve is part of a treasonous criminal enterprise whose compromise of “the general Welfare” has been exceedingly instrumental to the rise of “the 99%,” or “the forgotten man,” first under the tutelage of the monetarist hatchet man, Paul Adolph Volcker, followed by the Ayn Rand clone and King Ponzi, Alien Greenspan (misspelling intended).

    Who should lead the Fed is the House of Representatives, much as Article I, Section 8 of the U.S. Constitution prescribes. So, now that Confetti has been PNGed, the rallying call of the 99% should be “Seize the Fed!” On this count the libertarian, Austrian fascists who wish to abolish the Fed are no less imperialist sideshows than was Keynes. Both sides simply deny the Hamiltonian idea of “credit,” an idea even codified in the highest law of the land.

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