Dave here. Keep in mind that the article Black rightfully calls to task cites analysts presuming that a Summers nomination would lead to demonstrably lower economic growth and less job creation. Julia Coronado of BNP Paribas estimated a 0.5%-0.75% reduction in GDP over two years and between 350,000-500,000 fewer jobs. More of Coronado’s note and analysis here. Paul Krugman calls it an anti-regime shift signal (though, in fairness, Yellen would be the ultimate in such signals, at least on monetary policy. It so happens that Black and I agree that financial regulatory policy is where the divergence really matters).
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posed from New Economic Perspectives
The Obama administration, for reasons that pass all understanding, has been running a campaign of leaks disparaging one of Obama’s few senior female appointees, Janet Yellen. Her high crimes include not being a protégée Bob Rubin and doing exceptionally well in economic forecasting. Rubin wants the job of Fed Chair to go to his top protégée, Larry Summers. Yellen, as Vice Chair of the Fed stands in the way of Rubin’s ambitions. (Rubin is too toxic to take the Chair directly.) The administration has been leaking primarily to the New York Times’ Binyamin Applebaum. His latest article contains this remarkable statement, without analysis.
“[T]he president’s top economic advisers uniformly support the selection of Mr. Summers. They regard him as a creative thinker and an experienced crisis manager, qualities they value in particular because they expect the Fed may confront difficult choices as it begins to retreat from its six-year-old stimulus campaign.”
The obvious question, except to the NYT, is who the “president’s top economic advisers” are who “uniformly support the selection of Mr. Summers”? There are six such advisers:
1. Gene Sperling (Director, National Economic Counsel)
2. Jason Furman (Chairman, CEA)
3. James Stock (Member, CEA)
4. Jacob Lew (Treasury)
5. Penny Pritzker (Commerce)
6. Sylvia Mathews Burwell (OMB)
Each of Obama’s top economic advisers is a Rubinite. Sperling is one of Rubin and Summers’ closest allies. Furman’s prior job was running the Hamilton Project – created by Rubin to propagate his ideas. Stock is a Rubinite, a colleague of Summers, and the co-author of the article that infamously coined the term “The Great Moderation” (Ben Bernanke popularized, but did not invent, their phrase.) Some “moderation” – to state the case gently he missed the most important economic developments in modern history. Jacob Lew and Furman share the characteristic of being Rubinites and leading architects and proponents of the “Grand Betrayal” (the effort to inflict austerity and cuts in the safety net). Pritzker is a national disgrace. She connected then Senator Obama with Rubin. Her appointment prompted extremely pointed criticisms.
Office of Management and Budget Director Sylvia Mathews Burwell is a Rubin protégé who most recently worked for Walmart’s foundation.
So the real story should have been that one of the discredited officials who visited so much harm on our Nation and the world, Bob Rubin, has managed to place his protégés and allies in all six of the top economic positions in the Obama administration. Rubin and Summers are infamous for eviscerating effective financial regulation. Unsurprisingly, financial regulation, which has been under unremitting attack for 20 years since the Clinton administration’s “reinventing government” movement began in 1993, has remained scandalously weak and produced with the aid of another Rubinite, Timothy Geithner, the de facto decriminalization of the elite banking frauds that drove the crisis. It tells us nothing substantively that six Rubinites “uniformly support” a seventh Rubinite.
Pritzker and Rubin exemplify the problem. They are huge donors directly and they provide the links to other big bank donors for the Democratic Party. The banks Prizker and Rubin were most closely associated with engaged in massive frauds while they were in a position to prevent such crimes and failed to do so. Rubin leads the Wall Street Wing of the Democratic Party with the aid of allies like Pritzker, Rahm Emanuel, and Bill Daley – the leaders of the disreputable Chicago contingent. The Clinton, Bush (II), and Obama administrations have overwhelmingly given a free pass to the elite banksters. (The Pritzkers were a semi-exception. Bush II was willing to crack down on a leading bank fraud so closely associated with the Democratic Party.)
With the possible exception of their ally Alan Greenspan, no two individuals have as much culpability in the modern era for causing crises as Rubin and Summers. The Rubinites’ stated rationale to the NYT for appointing Summers to run the Fed redefines the old joke: “what’s chutzpah mean?” Instead of killing one’s parents and then demanding that the court show mercy to you as an orphan, the Rubinites demand to be put in charge of the Fed because they’ve caused so many more crises than Yellen that they have vastly more experience trying to deal with crises. When we were financial regulators we found it desirable to avoid creating crises. Summers and Rubin did not respond well to the crises they helped cause. Their “solutions” caused great misery in much of the world for decades.