Why Larry Summers Will Be Next Fed Chair
Posted by Larry Doyle on July 29, 2013 8:36 AM |
The race to occupy the most influential position in the nation — that is, the chairman of the Federal Reserve — is now widely acknowledged to be a two horse sprint between Janet Yellen and Larry Summers.
Those supporting the appointment of Ms. Yellen, including Nancy Pelosi, Christina Romer and others, are actively and publicly voicing their endorsement of the current Vice-Chairman of the Federal Reserve.
Meanwhile we hear little from those most closely aligned with the oft-described arrogant — and sleep-deprived? — Mr. Summers. I gather that Robert Rubin and others supporting Summers are more comfortable operating under the blanket that has come to define Washington as being in bed with Wall Street.
So who will President Obama appoint?
Actually let’s stop right there.
Are we supposed to believe that simply because the position of Fed chair is an appointment made by the President, that fact actually means he makes the selection as well? Or does the President merely read the delivery that is provided to him by those who write up a background review on the individual whom the major banks want to oversee them?
The Federal Reserve is not a public institution but rather an independent entity — or at least it is supposed to be independent — that derives it authority from Congress but — let’s be serious — serves at the behest of our major banks.
To that end, are we supposed to think that President Obama or any other President unilaterally selects the chairman of the world’s most powerful institution? In my opinion, NO WAY.
I strongly believe the President takes his directive in appointing the chairman whom the banks themselves want to run the institution that oversees them.
Remember, despite what some in Washington may like to present publicly, Wall Street is very much a self-regulated industry that sends on average $1 billion a year to Washington to fill campaign coffers and sprinkle lobbyists’ dollars around the capitol.
Are we supposed to think that the bankers do not expect something as important as the position of Fed chair in return for their do-re-mi? No, I do not think so. As such, they will tell our President whom to appoint. So who do the banks want? The individual whom they have already bought and paid for, that is, Larry Summers.
For a wealth of supportive material indicating that Summers will be the choice, I would recommend people read Sheila Bair’s book, Bull by The Horns. Ms. Bair, a highly respected Washington insider herself as the the former chair of the FDIC, provides extensive detail as to how then Treasury Secretary Tim Geithner and Director of the National Economic Council Larry Summers operated effectively in a vacuum in implementing economic policy during Obama’s first term. (Recall that Summers was also a critical supporter in the late ’90s of legislation allowing for the deregulation of the derivatives market despite the desperate attempts of Brooksley Born to forestall that disaster.)
Bair highlights the frustration experienced by herself, Ms. Romer and others who thought they had a seat at the economic table only to discover that Tim and Larry had already made decisions that have impacted us all over the last few years.
I personally would prefer to see Thomas Hoenig or Richard Fisher as Fed chair but despite their strong experience this race has seemingly always been between Yellen and Summers.
I hope I am wrong but I would actually make a small wager that the fix is in and Summers is the choice.
What do others think?
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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.