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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?

Larry Doyle

For those reading this via a syndicated outlet or receiving it via e-mail or another delivery, please visit my blog and comment on this piece of ‘sense on cents’.

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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.

 

  • LD

    Summers has all kinds of connections to Obama and the White house. Yellen … not so much, actually hardly at all.

    As Obama ponders a potential successor to Federal Reserve Chairman Ben S. Bernanke, his familiarity with Summers, 58, may give his onetime adviser an edge over Fed Vice Chairman Janet Yellen, whom Obama has scarcely met, the officials say.

    Obama considers whether he “has a relationship with the person he’s about to name,” said former Chief of Staff Rahm Emanuel. “I wouldn’t call it the factor, but it’s a factor.”

    Obama Bonding with Summers Over Tennis No Ace In Decision at Fed

  • Andrew

    No Way. Art Cashin thinks this is a ruse, and I agree. Makes Yellen look acceptable by comparison.

    I was hoping that you’d take nominations from the audience. I bet your readers have some excellent ideas as to who can best steward the Fed.

    My submission: Bernard Madoff. Who better to run the biggest Ponzi scheme of all?

    • LD

      Andrew,

      How do you think BO and MO are going to make their $$$ when they sail off into retirement? It’s not going to be from community organizations but rather from the well endowed financiers whom he will take care of by appointing Larry-boy.

      I could be wrong but if the past is prologue, then Summers is the pick.

  • Russ

    Larry Summers is the loser of all time.

  • Jake

    I agree, how many times have we ever seen Washington make the bold right choice. I guess we could say that about the American voters (on either side) as well.

  • Jim

    Fisher would be great. I think Yellen has a chance.

  • Happel

    Zero doubt slobbering Summers will be the guy. Zero. Spot on observation as always, LD – Banksters are going to appoint Larry, and BO will do as he is told. If the poor soul had a mind of his own, he would have never achieved his post. Good muppet he is for the big banks and he will do what they demand.

  • Matt

    If Larry handles the Fed’s balance sheet like he did the Harvard Endowment under his watch (lost billions in derivative trades)this will be entertaining! The phrase “Often wrong, but never in doubt” comes to mind.

  • RG

    Back in the Obama White House as an economic advisor, Summers helped consolidate the decision to bail out the banks without reforming them. He isolated stronger voices like former Fed chairman Paul Volcker, and worked to weaken Volcker’s attempt to limit the big banks’ abilities to speculate with taxpayer-guaranteed deposits. Summers and Treasury Secretary Tim Geithner also opposed any effort to break up the big banks or limit their size. After leaving the Obama administration, Summers again made millions as a consultant for Citigroup, which had received generous rescue packages from the U.S. government during the financial crisis.

    For the anointed, this unseemly revolving door isn’t considered corrupt. Summers’s supporters argue that his consulting provides invaluable experience, gaining the “perspectives” and the “relationships” with Wall Street movers and shakers vital to “command the respect of the markets.” But his opponents know different.

    Fed Up With Wall Street’s Revolving Door






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