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You are here: Home / Economics / C.R.E.A.M. / Open Thread: Joe Stiglitz {Hearts} Janet Yellen

Open Thread: Joe Stiglitz {Hearts} Janet Yellen

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I have been trying to avoid the many breathless news stories about whether President Obama will appoint Larry Summers or Janet Yellen as the next head of the Federal Reserve, because (a) the more people shout at him, the less attention the President is liable to pay; and (b) Larry Summers is the man for whom the phrase “I wouldn’t spit on him if he were on fire” was invented. But Joseph Stiglitz’s latest NYTimes column makes it clear that one cannot truly loath and despise Larry Summers until one has met the man in person. On the other hand, Ms. Yellen sounds like a lovely economist:

The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective…

Whoever succeeds Ben S. Bernanke as the Fed’s leader will have to make repeated judgment calls about when to raise or lower interest rates, the levers of monetary policy.

Two elements enter into these judgments. The first is forecasting. Wrong forecasts lead to wrong policies. Without a good sense of direction of where the economy is going, one can’t take appropriate policies. Ms. Yellen has a superb record in forecasting where the economy is going — the best, according to The Wall Street Journal, of anyone at the Fed. As I noted earlier, Mr. Summers’s leaves something to be desired.

Ms. Yellen’s superlative performance should not come as a surprise. Janet Yellen, whom I taught at Yale, was one of the best students I have had, in 47 seven years of teaching at Columbia, Princeton, Stanford, Yale, M.I.T. and Oxford. She is an economist of great intellect, with a strong ability to forge consensus, and she has proved her mettle as chairwoman of the President’s Council of Economic Advisers (she succeeded me in that role), as president of the Federal Reserve Bank of San Francisco, from 2004 to 2010, and in her current role, as the Fed’s No. 2.

Ms. Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labor markets — which is essential at a time when unemployment and wage stagnation are primary concerns…

Though the willingness to take actions to prevent crises, and good judgments in a crisis, are undoubtedly critical in the choice of the next Fed chair, there are other important considerations. The Fed is a large organization that has to be managed — and Ms. Yellen demonstrated her management skills at the San Francisco Fed. One has to obtain consensus among a diverse group of strong-minded individuals, some more worried about inflation, some more worried about unemployment. One needs someone who knows how to build consensus, not someone who excels in bullying, who knows how to listen to and respect the views of others. When I was chairman of Economic Policy Committee of the Organization for Economic Cooperation and Development, I saw how effectively Ms. Yellen represented the United States, and the respect in which she was held. In the ensuing years, she has gained in stature, and today has the enormous respect of central bank governors around the world. She has the stature, wisdom and gravitas one should expect of the leader of the Fed….

Click over to read the full indictment of Larry Summers.

Reader Interactions

147Comments

  4. 4.

    Betty Cracker

    I’m gobsmacked that Summers is even on the short list, let alone the front-runner. It’s like appointing an arsonist to head up the fire department.

  5. 5.

    Davis X. Machina

    Why does this matter? Besides team spirit, and re-fighting past primaries by proxy?

    Yellen’s going to call on us to expropriate the expropriators, and Summers isn’t? Summers is going to prohibit credit unions, and Yellen isn’t?

    They’re both central bankers. For approximately 99% of us, it’s the choice between getting run over by a Greyhound bus, or one of those nice nice new Bolt buses with the wi-fi.

  7. 7.

    Baud

    @Betty Cracker:

    I’m not that surprised. Summers really wants the job, Obama knows him, and a large part of being Fed chairman is playing the inside Washington game, which Summers has experience in. That said, I hope Obama doesn’t pick him.

  8. 8.

    feebog

    Summers’ track record is pretty well documented in this article, and Stiglitz is in a position to know. And I do think the selection makes a huge difference, Yellen is clearly the better choice. I think Summers has some serious backing from WH staff, while Yellen has the support of experts like Stiglitz.

  9. 9.

    Cacti

    If Yellen isn’t the new Fed chair, it will be the greatest betrayal since ____________.

    Outrage, blarggh, sputter.

  13. 13.

    ? Martin

    @Davis X. Machina:

    They’re both central bankers. For approximately 99% of us, it’s the choice between getting run over by a Greyhound bus, or one of those nice nice new Bolt buses with the wi-fi.

    Here’s the Fed’s mission statement:

    conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
    supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
    maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
    providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system

    ‘Maximum employment’ is relatively unique to the US Fed mission statement. Protecting the rights of consumers is as well.

    These have been elements that I think we can all agree have been fairly efficiently ignored. Yellen is liked by many on the left because she’s paid more than the usual attention to issues like home lending and employment. There’s reason to believe that she would pull the activities of the Fed at least somewhat back to those issues that do affect consumers.

  16. 16.

    Yatsuno

    @Baud: He never apologised for his remarks about women and mathematics, and he has been abrasive an uncooperative in every job he’s headed up. That raises too many red flags with me, especially since part of being Fed chairman is being a schmoozer. Plus putting a woman in charge would support Obama’s commitment to breaking the white male patriarchy in upper positions of government. I also don’t see him getting past the Senate if too many Dems say no. But I’m gonna watch Warren on this one.

    PS: no troll fud from me today.

  17. 17.

    Ted & Hellen

    @Betty Cracker:

    I’m gobsmacked that Summers is even on the short list, let alone the front-runner. It’s like appointing an arsonist to head up the fire department.

    Would an Obama appointment of Summers do anything to alter your opinion of the president?

  18. 18.

    Davis X. Machina

    @Betty Cracker: The problem today is fiscal, and the Fed board sets monetary policy. I don’t see a lot of labour leaders on it. I don’t see many public advocates. I don’t see any environmental lobbyists. Or social scientists.

    The Fed chairman doesn’t make policy — he or she sells it. It’s a sales job.They’re the public face of the central bank, a convenient label for historians, and not a great deal else.

    Greenspan didn’t succeed in dismantling social security. Appointing Yellen isn’t going to turn us into a social democracy. Appointing Summers isn’t going to drive U3 back into double digits. Either one will, temporarily, make one wing of the Democratic party marginally less miserable.

  19. 19.

    Walker

    @muddy:

    Obama wants Summers because Summers is the most concerned about the middle class and poors

    No thank you. Summers has “helped” enough.

  20. 20.

    Baud

    @Yatsuno:

    I don’t think he would have gotten where he had if he didn’t know how to schmooze. But everything I’ve heard about him suggests he is an ass, which is probably the main reason I don’t want him named.

  21. 21.

    dmsilev

    @Yatsuno: To me, the tendency to say …unfortunate things is a damn good reason to stay far away from Summers as Fed Chair. The Fed Chair is the sort of person whose every word is parsed to within an inch of its life for meaning by all sorts of people. You don’t want a stream-of-consciousness guy in the position. That’s completely independent of the plethora of other reasons not to pick Summers.

  22. 22.

    max

    @Yatsuno: He never apologised for his remarks about women and mathematics, and he has been abrasive an uncooperative in every job he’s headed up.

    Yeah. You can’t get the guy shut up, and worse he’s deeply influenced by the sort of people who think anyone to the left of Michael Bloomberg is a racist.

    That is:

    Then there’s Bill de Blasio, who’s become the Democratic front-runner. He has in some ways been running a class-warfare campaign—
    Class-warfare and racist.
    Racist?
    I mean he’s making an appeal using his family to gain support. I think it’s pretty obvious to anyone watching what he’s been doing. I do not think he himself is racist. It’s comparable to me pointing out I’m Jewish in attracting the Jewish vote. You tailor messages to your audiences and address issues you think your audience cares about.

    That raises too many red flags with me, especially since part of being Fed chairman is being a schmoozer. Plus putting a woman in charge would support Obama’s commitment to breaking the white male patriarchy in upper positions of government.

    He’d be fine at Treasury instead of Jack Lew. He’s going to be all over the map at the Fed, and I expect not in a good way. Especially when he starts bitching about the deficit. Which he will. I think Yellen’s great, but I really want Romer. (Actually both would be best.)

    I also don’t see him getting past the Senate if too many Dems say no. But I’m gonna watch Warren on this one.

    Warren’s already a ‘no’. There are three nos on the banking committee already. Which means Larry needs two R votes to get through.

    max
    [‘I hope that blockquoting works.’]

  23. 23.

    Corner Stone

    Good sweet Christ. Now we’re down to the, “It doesn’t matter who Obama nominates anymore.” position?

  25. 25.

    Yatsuno

    @max:

    He’d be fine at Treasury instead of Jack Lew

    Ugh. Please don’t make this asshole my boss. I barely survived the stench of Geithner who approved the idiotic hiring freeze which is why the IRS is such a fecking mess right now.

    Warren’s already a ‘no’. There are three nos on the banking committee already. Which means Larry needs two R votes to get through.

    Sounds like this will die before it even starts. Good.

    (blockquoting seemed okay, if I get what you intended right.)

  26. 26.

    Higgs Boson's Mate

    Obama wants Summers because Summers is the most concerned about the middle class and poors.

    For Summers, bringing home $500K – $1mil is middle class. Bringing home $200K – $499K means you’re poor. If you make less than that you’re ignored.

  27. 27.

    trollhattan

    @dmsilev:

    Yeah, the way the chair’s every syllable is parsed and reacted to is good reason to at least tie the cannon tightly to the deck. Anybody remember this Greenspan jewel from 2004? Ah, those were heady times.

    American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.

    Conclusion

    In evaluating household debt burdens, one must remember that debt-to-income ratios have been rising for at least a half century. With household assets rising as well, the ratio of net worth to income is currently somewhat higher than its long-run average. So long as financial intermediation continues to expand, both household debt and assets are likely to rise faster than income. Without an examination of what is happening to both assets and liabilities, it is difficult to ascertain the true burden of debt service. Overall, the household sector seems to be in good shape, and much of the apparent increase in the household sector’s debt ratios over the past decade reflects factors that do not suggest increasing household financial stress. And, in fact, during the past two years, debt service ratios have been stable.

  28. 28.

    Alex S.

    Too bad that Stiglitz himself isn’t in the running… I think that history will regard him as the greatest economist of the past 40 years.

  29. 29.

    300baud

    For those wondering why who you have in these positions matters, I strongly recommend reading Sheila Bair’s Bull by the Horns. She was the head of the FDIC during the crisis; from her descriptions of events, you can really see how who leads an agency makes a giant difference.

  30. 30.

    Betty Cracker

    @Davis X. Machina:

    Greenspan didn’t succeed in dismantling social security. Appointing Yellen isn’t going to turn us into a social democracy. Appointing Summers isn’t going to drive U3 back into double digits.

    I get that, but again, I refer you to the article. You seem to be saying the appointment is purely symbolic, whereas Stiglitz lays out four specific reasons why it does matter. Is he wrong?

  31. 31.

    Cacti

    @Corner Stone:

    Let me guess: “white people problems”, amirite dudebro?

    Nope, Janet Yellen vs. Larry Summers is totally not inside baseball shit for political junkies and is way high on everyone’s concern list.

    Just more outrage fodder for the perpetual outrage brigade.

  32. 32.

    Mnemosyne (iPhone)

    @Yatsuno:

    Summers is fine when it comes to schmoozing with people he thinks of as his equals or superiors. It’s when he’s dealing with underlings or others he feels are beneath him (like those lowly Harvard professors when he’s president of the university) that he causes big problems.

  33. 33.

    EconWatcher

    I think Obama usually has good instincts and judgment about people, and typically seems to have a good bs detector, all of which makes his apparent fondness for Summers all the more baffling and frustrating. Summers is like the Bill Kristol of the financial world–so pompous and wrondheaded that it would be comical, if the consequences weren’t so tragic.

  34. 34.

    Fair Economist

    What disturbs me about Stlglitz’s piece is that he has an excellent record of making accurate predictions, and an equally excellent record of being ignored by the Obama administration. This makes me worry even more than before that Obama’s going to appoint Summers and Summers is going to be a disaster.

  35. 35.

    ? Martin

    The only issue with Yellen is whether she can be confirmed. That’s why Summers is still in the running – he’ll be confirmed easily, for all the reasons we don’t want him.

    Warren being a no on Summers is incredibly important to note. She’ll bring the Dems on the banking committee around.

  36. 36.

    Davis X. Machina

    @Betty Cracker: Yes. He’s wrong.

    Stiglitz is dealing in personalities, like everybody on this thread, and doing it as if the personalities matter, and they don’t. But hey, he’s got the credentials, and we don’t.

    The expressed policy preferences of someone without the power to execute those policies in the face of opposition reveal personality, and certainly reveal the preferences themselves, but I don’t see them mattering that much.

    I’ll wait until one of the other commenters comes up with a Fed chair who pulled off anything monetary the whole Fed didn’t want, or in the teeth of what the FIRE community actually wanted…

    The appointment is an exercise in signalling, and maybe an important one — but only to the extent that signals matter. I think institutions matter more, probably much more.

  37. 37.

    Alex S.

    @Fair Economist:

    I think the Obama administration is a bit too proud of its own record. They don’t think they did anything wrong, so they don’t think that there is anything wrong with Summers. The choice of Summers would, once again, strike me as a very insular decision of a very insular administration.

  40. 40.

    Corner Stone

    @? Martin:

    Warren being a no on Summers is incredibly important to note. She’ll bring the Dems on the banking committee around

    Bring them around to what?

  41. 41.

    Mnemosyne (iPhone)

    @Davis X. Machina:

    Stiglitz is dealing in personalities, like everybody on this thread, and doing it as if the personalities matter, and they don’t. But hey, he’s got the credentials, and we don’t.

    Given Summers’ long and storied history of being a very poor manager who causes chaos in every workplace, I think this is one of those cases where personality really does matter. Yellin may not be able to implement all of her preferred policies, but at least she knows how to manage a staff.

  42. 42.

    pamelabrown53

    @Davis X. Machina: I tend to agree with you that it probably won’t, in the end, make a tinker’s dam. Usually, I don’t play the game: “Let’s make Obama’s appointments for him”. Yet, Summers is the only person with whom I have a visceral negative reaction. he just behaves like a misogynist ass-hole who sows discord where ever he fails upward. That alone seems like a strike against him: it’s hard enough to run a huge bureaucracy, let alone one who appears to be a boss from hell.

  44. 44.

    Higgs Boson's Mate

    @Davis X. Machina:

    I’ll wait until one of the other commenters comes up with a Fed chair who pulled off anything monetary the whole Fed didn’t want, in the teeth of what the FIRE community actually wanted…

    FIRE? Wuzzat stand for? Families Ignited for Revival & Evangelism?

    ETA: The captain of the Titanic had excellent credentials.

  45. 45.

    Corner Stone

    @Davis X. Machina: I disagree. In policy choices and implementation IMO both those largely figurehead roles play a significant part.
    Given that both/either may not be able to override the group as a whole, it seems to me that presenting and debating least bad options is at minimum a significantly better choice than someone who negates alternatives all together.

  47. 47.

    Corner Stone

    @Davis X. Machina:

    The appointment is an exercise in signalling, and maybe an important one — but only to the extent that signals matter.

    And given that political appointees are, in fact, a significant signal event, what does this say about the person nominating Summers?
    I already know what elevating James Comey means. So what does retreading Summers to Fed Chair mean?

  48. 48.

    Davis X. Machina

    @Corner Stone: They’re figureheads.

    Remember how William Jennings Bryan, America’s only pacifist Secretary of State, prevented our entry into World War I? Or how Robert Reich stopped Clinton’s welfare ‘reform’….?

  51. 51.

    Mnemosyne (iPhone)

    @Davis X. Machina:

    With Summers as head of the Fed, it won’t suck in one office, it will suck at every Fed branch and office throughout the country. Have you really never worked for a company with a crappy CEO who makes bad decisions that everyone else has to figure out how to implement?

    If you think total chaos in the Fed is a plus because then at least the implementation of their bad policies will be completely fucked up, then pull for Summers, but at least admit that’s what you’re rooting for.

  53. 53.

    I'mNotSureWhoIWantToBeYet

    Felix points us to an article that says it won’t be Summers:

    The drumbeat of leaks from the White House this summer has made clear that former US Treasury secretary Larry Summers is the Obama administration’s leading candidate to be the next chairman of the Federal Reserve. But that may all be over now that three key liberal senators—Elizabeth Warren, Jeff Merkely and Sherrod Brown—have said they won’t vote to confirm him.
    +
    The problem for Summers is that US president Barack Obama’s Democrats have only a two-seat majority on the Senate Banking committee, and without the votes of those three members, Republican senators will have to fill the gap. While there are several, including top Republican Mike Crapo, who haven’t voiced an opinion, they aren’t inclined to do the administration any favors.

    I’ve thought it was going to be Janet for a long time, not least because when he was criticized for having too few women in important positions in his 2nd term he said, roughly, “it’s early yet – just watch.”

    Of course, it’s not over till it’s over, but I’m still optimistic that he’ll pick her.

    FWIW.

    Cheers,
    Scott.

  54. 54.

    Corner Stone

    @Davis X. Machina: They are largely figureheads. That does not mean they have no power or authority over policy choices and/or implementation.
    Do you honestly believe the Fed Chair does not matter?

  55. 55.

    Fair Economist

    @Corner Stone:

    Who the Fed Chair is is irrelevant to any actual policy decisions or implementation?
    It’s just the mouthpiece, and no more?

    What matters most for Fed policy is *expectations* of future policy. So mouthpiecing is actually the real work. Summer’s remarkable ability to say the wrong thing loudly in public almost guarantees a disaster over a Fed governor’s term.

  57. 57.

    Betty Cracker

    @Davis X. Machina: Have to disagree with you there — Stiglitz cites actual Fed responsibilities and critical attributes the next chairman will need (the ability to competently make judgment calls, assess risk, create consensus, evaluate forecasts, etc.) and then shows why Summers is ill-suited to the role, documenting serial cock-ups where those attributes come into play. He’s not just focusing on personalities, though personality does come into play and not entirely without justice in a role like that.

  59. 59.

    Yatsuno

    @Mnemosyne (iPhone): Your GEC still has a few lingering wounds from the Eisner interregnum. And I just got out of a situation with a bad boss. YES. IT. MATTERS. Summers will have direct control over situations that affect all our lives. He’d be a disaster.

  60. 60.

    Mnemosyne (iPhone)

    @Davis X. Machina:

    Or, to put it another way, ask the employees of Hewlett-Packard whether Carly Fiorina’s bad management decisions were confined to the executive offices.

  61. 61.

    Laertes

    @Davis X. Machina:

    I’ve heard people argue that the fed chair’s policy preferences don’t matter because the role is more of a consensus-builder and a public face of the organization, in which case personality would seem to matter a lot.

    And I’ve heard people argue that that’s nonsense and that the fed chair is also a working central banker and their analytical skills get a workout and have a significant effect on fed policy.

    You’re the first person I’ve read who argues that the post is a pure figurehead with no significance at all beyond signaling the priorities of the people making the appointment. That’s an interesting and novel position. Can you elaborate on that a bit?

  62. 62.

    Davis X. Machina

    @Corner Stone: It means, inter alia, that what passes for a Left in this country is fixated on who gets the job of putting its boot on its neck, not that there’s a boot on its neck.

  63. 63.

    Corner Stone

    @I’mNotSureWhoIWantToBeYet:

    But that may all be over now that three key liberal senators—Elizabeth Warren, Jeff Merkely and Sherrod Brown—have said they won’t vote to confirm him.

    Fucking Dudebro Brogressive Firebaggers!!

  65. 65.

    MikeJ

    Summers had said he wants our current low rates not just until hiring starts, but until the jobs number is strong.

    That’s really the only thing he has control over, he wants to implement my preferred policy, I don’t really care beyond that.

  66. 66.

    ? Martin

    @Corner Stone:

    Bring them around to what?

    To let Obama know that they won’t support Summers. If the Dems on the banking committee oppose Summers, than his candidacy is dead. They can do that quietly and steer Obama to a candidate that they’ll enthusiastically support, which politically will look good all around.

  67. 67.

    Mnemosyne (iPhone)

    @Yatsuno:

    Yep. Top management influences the whole ball of wax, not just the people in direct contact with that manager.

    It’s true that this conversation is primarily about Summers’ personality and management style vs. Yellen’s, but this stuff really does matter when it comes to running an agency or other workplace.

  68. 68.

    Laertes

    @Mnemosyne (iPhone):

    Have you really never worked for a company with a crappy CEO

    This. I’ve worked at seven different companies in a 21-years-and-counting career, and what I’ve seen seven times now is that the personality of the leader informs the personality of the organization at every level. People treat their reports the way their bosses treat them, all up and down any org chart, and when the leader changes the transformation happens much faster than you might expect.

  71. 71.

    Corner Stone

    @? Martin:

    They can do that quietly and steer Obama to a candidate that they’ll enthusiastically support, which politically will look good all around.

    I thought only Republicans were allowed to do that? Albeit without the “quiet” part.

  73. 73.

    gene108

    @Yatsuno:

    Obama’s commitment to breaking the white male patriarchy in upper positions of government

    That’s been going on since President Clinton made a conscious decision to appoint the first woman, minority, etc. to cabinet level positions and to Bush, Jr.’s credit he continued to make appointments of women, minorities, etc. to cabinet level positions.

    I think appointing Yellen because of her chromosome alignment shouldn’t be a consideration. I want the best possible person for the job.

    I also don’t get what makes Summers so popular. He’s been wrong enough that at some point you’d figure he’s just slink away into some corner.

    I don’t mean the stuff he did in the 1990’s, which in hindsight was a bad move, but as a member (or head) of this President’s Council of Economic Advisers giving over optimistic predictions about the severity of the recession really helped screw up so much of what this Administration did in response.

    I don’t think the Administration could get a bigger stimulus package through, at the time. It’s the messaging that came out from those wrong forecasts that blew-up in this Administration’s face. The prediction that unemployment wouldn’t reach 8%, if the stimulus bill passed turned out to be a political disaster, for example.

    I just don’t understand how you can screw something like forecasting how bad the Great Recession was going to be on the outset and still have the trust of the President you screwed.

    He really must be the life of the party, because I don’t understand how he’s even come up as a candidate.

  74. 74.

    Jim, Foolish Literalist

    the more people shout at him, the less attention the President is liable to pay; and

    I think that’s true, and while that’s often a strength of Obama’s, in this case, it’s unfortunate. I would prefer Yellen over Summers, but I don’t really care that much, and the merits aside, I think Obama is underestimating the political backlash at a time when he, and Democrats heading in to mid-terms, really doesn’t need one more

    That said, the tendency of the left, at least the portion represented on blogs, to emotionally invest for or against individuals fucking exhausts me.

  77. 77.

    Laertes

    @Davis X. Machina:

    Thought experiment. I can, by fiat, appoint James K Galbraith Fed chairman. Impeccable academic credentials, mind you, not some crank.

    What changes?

    Damned if I know. I don’t know much about how the Fed works, and I don’t know how great a role the chair plays in policy making. You sounded like you did, so I was sort of hoping you’d explain.

  78. 78.

    gene108

    @EconWatcher:

    Summers is like the Bill Kristol of the financial world–so pompous and wrondheaded that it would be comical, if the consequences weren’t so tragic.

    Yeah, but Kristol has the back of the people he works for and was right once, with his 1993 memo about outright defeat of Clinton-Care that helped kill liberal policy by the Clinton Administration and made the 1994 Republican take over of the House possible.

    But health care is not, in fact, just another Clinton domestic policy. And the conventional political strategies Republicans have used in the past are inadequate to the task of defeating the Clinton plan outright. That must be our goal.

    Simple Criticism is Insufficient. Simple, green-eyeshades criticism of the plan–on the grounds that its numbers don’t add up (they don’t), or that it costs too much (it does), or that it will kill jobs and disrupt the economy (it will)–is fine so far as it goes. But in the current climate, such opposition only wins concessions, not surrender.

    Link

    If Summers did something that helped the Democrats take control of ‘x’ branch of government for the first time in 40 years, I think there might be some reason to keep him around.

  79. 79.

    Mike G

    @muddy:

    Obama wants Summers because Summers is the most concerned about the middle class and poors.

    Yes, Summers is most concerned about how they can be turned into useful fertilizer.

  80. 80.

    Davis X. Machina

    @Laertes: The Chair? Legally, not much. He or she heads the FOMC, but that’s custom, and that committee is stacked anyways — 7 of its 12 members are the Fed Board of Governors, and the other 5 are Presidents of regional reserve banks. Not much room there for an independent voice to move things.

    The Fed’s regulatory responsibilities     are delegated to it by Congress via legislation, and are broadly overseen by the Board of Governors.

    (Yellen, incidentally, is already one of the Fed Governors…this would be promotion from within, not setting an independent watchdog over the herd.)

  81. 81.

    Ted & Hellen

    @Jim, Foolish Literalist:

    to emotionally invest for or against individuals fucking exhausts me.

    Are you incidentally implying that you are NOT (fucking!) emotionally invested in the political fortunes of Barack Obama?

  82. 82.

    Cacti

    @Corner Stone:

    No, you’re right. The economy and money flow/supply is a matter that few really care about.

    And the fate of everything depends on whether it’s one of two people.

    Drama, does our emo progs has it?

  83. 83.

    trollhattan

    @ranchandsyrup

    The hell is it with the LaRouchies? They take the standard concept of dead-enders and make them seem like an interstate.

    Last ones I saw were at a teaparty wankfest. They kinda fit in there.

  84. 84.

    Mnemosyne (iPhone)

    @Davis X. Machina:

    Setting an independent watchdog is usually overrated. G has had 10 managers in the past 20 years because the company is obsessed with bringing in “new blood” to “shake things up.” Of course, what happens 9 out of 10 times is that the “new blood” takes so long to get up to speed on how things operate that they end up flaming out.

    Better to promote an “insider” who already has some ideas about how to fix things.

  85. 85.

    ? Martin

    @Corner Stone:

    I thought only Republicans were allowed to do that?

    Democrats do it a lot. And they’re usually pretty quiet about it. But that’s because Reid and Pelosi have control over their caucuses, and because they appear to work well with Obama. The GOP is really a bunch of lone wolves.

  88. 88.

    Corner Stone

    @Cacti: Admitting you’re ignorant on the economic policies of this admin is a good first step to getting clean dudebro. Commendable in its honesty.

  89. 89.

    Corner Stone

    @Davis X. Machina:

    Hard to storm a castle if you’re already in it.

    I don’t think, IMO, anyone is asking for s fire breather to get in there. And I also don’t think most here would disagree with you riding contention that Fed Chair is a largely ceremonial mouthpiece job.
    So how’s about you drop that conceit and speak to the fact that Summers is an awful human being and should not be afforded a role any where near the levers of power, ever again, no matter what the figureheadedness of that position actually is?
    In fact, it does matter who the Fed Chair is. It matters for what it means and it matters for what it does.
    They don’t just give garbled speechifying soundbytes.

  91. 91.

    Davis X. Machina

    @Corner Stone:

    I don’t think, IMO, anyone is asking for s fire breather to get in there

    I don’t necessarily disagree, or even necessarily mind. But we’re being sold Yellen as if she was one and she’s not, which was the gravamen of my complaint.

    So how’s about you drop that conceit and speak to the fact that Summers is an awful human being and should not be afforded a role any where near the levers of power, ever again.

    He’s a central-banker-to-be. I think we can take ‘awful human being’ as a given, or at least a presumption. I’d make the opposite presumption in the case of a kindergarten teacher. It goes with the job.

  98. 98.

    trollhattan

    Completely OT: Neko Case is on Wait-Wait today. She actually works the word, “cloaca” into a discussion of rental chickens. I suspect she’s aware of all internet traditions.

  99. 99.

    Corner Stone

    @ranchandsyrup:

    I can’t believe the larouchies are still unembarrassed to identify publicly as larouchies.

    Years ago I went to the courthouse for something and when I exited there was a larouchie table right outside. I asked the person if I could have one of their newspapers and she said, “Really? You’re serious?”
    And I said yes, went home and then proceeded to fall into crazytown next time I went to potty and started reading it.

  100. 100.

    Mnemosyne (iPhone)

    @Davis X. Machina:

    Neither one. Therefore, I prefer the good manager who has the better record of forecasting the economy and won’t panic in a crisis.

    Call me an optimist, but I always think that the person who has the best and most accurate set of facts at his/her fingertips will make the best decision. But a person who doesn’t have the right facts will make a bad decision no matter how good a schmoozer s/he is with the higher-ups.

  101. 101.

    I'mNotSureWhoIWantToBeYet

    @gene108:

    I don’t mean the stuff he did in the 1990′s, which in hindsight was a bad move, but as a member (or head) of this President’s Council of Economic Advisers giving over optimistic predictions about the severity of the recession really helped screw up so much of what this Administration did in response.

    DeLong has been trying to pushback against a lot of the conventional wisdom about Summers:

    Michael Grunwald’s New New Deal reports that when people much less powerful than Summers in the Obama administration said “this [Recovery Act] thing is much too small. It needs to be bigger, at least $800 billion”, Summers replied “I agree”, and that he then “took that as license to run. Our feeling was: We’ve got to hit this with everything we’ve got…”

    Perhaps the New York Times editorial board could go read Michael Grunwald’s The New New Deal?

    DeLong is very, very smart and his inclinations about just about every other economic topic seem to me to be correct. Maybe he’s blinded by Larry’s RDF – I dunno. It’s often impossible to know who is right about what happened in these private conversations.

    And the data about the severity of the recession was always too optimistic. One can’t really fault Summers for that, IMO. Recall that a year after the fact the BEA said the recession started in December 2007 while Phil Gramm was saying as late as July 2008 that the recession was “mental”.

    I recognize that people who are bad in one position, say President of Harvard, can be much better in some other position, say head of the Federal Reserve. That is possible. But, it seems unlikely in Summer’s case with his well-published background and on-the-record statements.

    But, I do think Yellen is a better choice. She’s got the background, she’s been there for many years as #2, and the politics of the choice is better for Obama’s supporters.

    I personally get nervous when great stories in the press about who someone “really” is. Too many people use the press to distort a person’s actual statements to fit their agenda. Larry may be great, and Larry may be a better choice than Janet, and Larry may actually do more good than Janet would. I dunno. But, as someone above said, don’t turn the choice into a morality play…

    Something that may be a strike against her is her relatively old age (67 vs 58 for Larry). But since the Chairman serves a 4 year term, that seems unlikely to be a major concern – whoever is in there isn’t guaranteed multiple terms.

    tldr; Be a little skeptical of Larry’s press (good and bad).

    FWIW.

    Cheers,
    Scott.

  107. 107.

    diana

    @Higgs Boson’s Mate: FIRE is “Finance, Insurance, Real Estate” = in this case, their lobbyists mostly.

    Also, re Baud: “Maybe Obama can appoint Assad and kill two birds with one stone.” F*cking brilliant, funniest comment here!!!

  109. 109.

    Ruckus

    @Mnemosyne (iPhone):
    I’ve had a few jobs other than owning my own businesses but only one with a big(not GEC big but still) corp. Went through 2 CEOs at the wholly owned subsidiary and 3 at the parent co. Of the five one was great, two OK and 2 were horrible. I left during the tenure of one of the horrible ones at the parent co. And the board managed to hire someone far worse. My friends that stayed when I left said it was still not a bad place to work. They all changed their tunes when the worst CEO came on board. An asshole deluxe he was(knew him when he worked in another department) and he went downhill as CEO.
    So yes it makes a huge difference who is hired as to not only what gets done, or not, but also how many people get chased off and have to be replaced but can’t because they won’t work for an asshole. Or they stay and do the minimum necessary not to get fired all the while spreading discontent.
    A great way to run any organization.

  111. 111.

    MikeJ

    All I know is that if Obama doesn’t dress as Josef Stalin for Halloween, I’m done with him. And after that, if he doesn’t have yams with those little marshmallows on for thanksgiving, forget it.

    I am disappoint.

  114. 114.

    feebog

    @ ImNotSureYetWhoIWantToBe:

    And the data about the severity of the recession was always too optimistic. One can’t really fault Summers for that, IMO. Recall that a year after the fact the BEA said the recession started in December 2007 while Phil Gramm was saying as late as July 2008 that the recession was “mental”.

    Utter and complete horseshit. The economy was shedding half a million jobs a month. By the time Obama was sworn in it was more like 700K jobs a month. And who the fuck would listen to Phil Gramm when he was behind the legislation to deregulate the banking industry. Any one, any one who knew even a little bit about economics was shitting their pants and running around with their hair on fire. Summers got it completely wrong and for that reason alone he should be disqualified.

  115. 115.

    I'mNotSureWhoIWantToBeYet

    @feebog: Unemployment is only one (important, but only one) measure of economic activity.

    Read me in my posts, please.

    BEA, July 31, 2008:

    Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.9 percent in the second quarter of 2008 (that is, from the first quarter to the second quarter), according to advance estimates released by the
    Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent.

    The Bureau emphasized that the second-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The second-quarter “preliminary” estimates, based on more comprehensive data, will be released on August 28, 2008.

    Not so bad for actually being in a recession, eh?

    Early estimates were wrong. Badly wrong. How badly?

    BEA August 5, 2011:

    Why has the initial estimate of real GDP for the fourth quarter of 2008 been revised down so much?

    In the fourth quarter of 2008, which immediately followed the 2008 financial crisis, economic activity fell sharply. BEA’s initial, or “advance” estimate of GDP for the quarter, which was released on January 30, 2009, showed a decrease of 3.8 percent at an annual rate. In the second estimate, which was released on February 27, 2009, the revised estimate showed a decrease of 6.2 percent. Since then, the estimate has been revised several more times (in March 2009, July 2009, July 2010, and July 2011), and the latest estimate shows a decrease of 8.9 percent.

    BEA’s advance GDP estimates are among the timeliest in the world, but BEA also emphasizes (as stated in the second paragraph of each advance GDP news release) that they “are based on source data that are incomplete or subject to further revision by the source agency.” For advance estimates, three months of source data are generally available for consumer spending on goods, shipments of capital equipment other than aircraft, motor vehicle sales and inventories, manufacturing durables inventories, federal government outlays, and consumer, producer, and international prices. Only two months of data are available for nonresidential, single family, multifamily, and state and local construction, manufacturers’ shipments of complete aircraft, manufacturing nondurables inventories, merchant wholesale and retail inventories (other than motor vehicles), exports, and imports. For these series, BEA makes assumptions for the missing data for the third month and publishes these assumptions in the “Technical Note” that accompanies the GDP news release.

    […]

    Initial economic data for the economy as a whole often lags. Sometimes very badly, as in this case.

    HTH.

    Cheers,
    Scott.

  116. 116.

    lojasmo

    @Corner Stone:

    No, people who are in an actual position to do something taking a principled stand on something they feel strongly about.

    And good on them for it.

    I for one don’t think Summers will be the nominee. Time will tell.

  117. 117.

    lojasmo

    @? Martin:

    I know Warren and Obama will be in LA early next week for the AFL-CIO national conventtion. Maybe she’ll give him a talking to on AF-1.

  119. 119.

    Davis X. Machina

    There are now two vacancies on the Fed’s Board of Governors (Duke’s and Rastin’s, if her appointment at Treasury gets through the Senate.)

    Appointing, say, Richard Trumka and James G. Spath to fill them would be significant.

  121. 121.

    Hill Dweller

    @Davis X. Machina: Dr. Peter Diamond, who won the Nobel prize for economics while waiting for a vote, couldn’t get confirmed because he “wasn’t qualified”. There is no way in Hell Trumka nor Spath can get confirmed.

  125. 125.

    trollhattan

    @Yatsuno:

    Isn’t that The Marketplace at work? Stupid moocher hospital can’t survive off the gummint teat, so HAH.

    Or some variation of that.

  128. 128.

    Bill Arnold

    @Ted & Hellen:

    Would an Obama appointment of Summers do anything to alter your opinion of the president?

    I’ll treat this as a general question to the readership. Yes, for me it would. Negatively, about 10%, from a currently very high opinion. Summers has made too many big-consequence mistakes in his careers, IMO.

  130. 130.

    Laertes

    @Ted & Hellen:

    That’s a great article. Thanks for the link.

    I broadly agree with Mr. Grayson, though there’s one graf that I find less than persuasive:

    The allegedly doctored report attributes the attack to the Syrian general staff. But according to The Daily Caller, “it was clear that ‘the Syrian general staff were out of their minds with panic that an unauthorized strike had been launched by the 155th Brigade in express defiance of their instructions.’ ”

    This really doesn’t matter. Whether Assad ordered the attack, or his general staff ordered it against his wishes, or some brigade commander did it in defiance of the Syrian general staff makes no difference. Assad is the Commander in Chief of the Syrian armed forces, and he bears command responsibility for whatever those units get up to.

    There are plenty of good reasons to not bomb Syria. This isn’t one of them.

  134. 134.

    feebog

    @ ImNotSureYetWho IWantToBe:

    Sorry, not buying the argument. By August of 2008 we had been shedding jobs for over a year. Here is what the BLS said in their August 2008 report:

    The number of unemployed persons rose by 592,000 to 9.4 million in August, and the unemployment rate increased by 0.4 percentage point to 6.1 percent. Over the past 12 months, the number of unemployed persons has increased by 2.2 million and the unemployment rate has risen by 1.4 percentage points, with most of the increase occurring over the past 4 months.

    With unemployment numbers like that forecasting any gain in GDP is nuts. However, what I am blaming Summers for is forecasting of unemployment, not GDP. He was telling people not to worry, this is going to bottom out at 8% when every indication was that it would go well over 10%.

  135. 135.

    Corner Stone

    @Laertes:

    Assad is the Commander in Chief of the Syrian armed forces, and he bears command responsibility for whatever those units get up to.

    This is a very dangerous precedent to assert in these parts.

  136. 136.

    Corner Stone

    @liberal: I’ve been wondering for a while now why anyone would call DeLong “very, very smart” unless it was a prelude to slag him.

  137. 137.

    Corner Stone

    @EconWatcher:

    I think Obama usually has good instincts and judgment about people, and typically seems to have a good bs detector, all of which makes his apparent fondness for Summers all the more baffling and frustrating.

    Isn’t there a simpler answer?

  138. 138.

    I'mNotSureWhoIWantToBeYet

    @feebog: Meh. Nobody knew how bad it was and everyone was making extrapolations based on the existing numbers (including unemployment). Here’s Krugman from January 2009:

    Finally, compare this with the economic outlook. “Full employment” clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we’re looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure.

    The January 2009 unemployment rate was actually 7.8%. The peak unemployment rate was 10% in October 2009. 2 years later it was 8.9%.

    PK was right that a larger stimulus was needed. How big? If he’s right that it takes $300B to reduce unemployment by 1%, then to get back down to ~ 5% would have cost about $1.5T over 2 years. That’s in line with Romer’s headline estimate. But recall that Romer’s estimate was actually $960B of fiscal stimulus with another $900B in tax cuts, transfers to states and localities, etc. It seems to me, if I’m doing the math right, that even Romer’s and Krugman’s estimates were too small because they thought the recession was less severe than it actually was. She said as much:

    Most obviously, it was too small. When we were designing it, most forecasters estimated that the United States would lose around six million jobs during the recession without fiscal stimulus. Compared with this baseline, creating three million jobs would have filled roughly half of the employment hole.

    As it turned out, even with the stimulus, we lost almost nine million jobs. Indeed, because of horrific job losses in late 2008 and early 2009, we’d nearly passed the six-million mark before the Recovery Act was even signed. Adding in the estimated effect of the act, the correct no-stimulus baseline was a total employment fall of nearly 12 million. With a loss that big, creating three million jobs was helpful, but not nearly enough.

    The point? Larry was probably wrong in cutting off Romer’s estimate of $1.8 or $1.2T. But even that probably would not have been enough. It probably should have been $2.4-$3.6T.

    And Obama and Summers were almost certainly right that nothing over $1T was going to be passed anyway. Should they have tried? Maybe. But it still wouldn’t have passed.

    FWIW.

    Cheers,
    Scott.

  139. 139.

    CONGRATULATIONS!

    I like the man but there is an inescapable truth about Barack Obama: he is totally and completely in the pocket of Wall Street. Always was. I voted for him knowing that. Summers will be the nominee. And I’m not at all happy about that.

    I think it was worth it to not be sitting here talking about President McCain, but I may well not be saying that a year from now. Because Summers as head of the Fed will be an absolute disaster for this nation and the world’s economy. Not “might be”. Will be.

  143. 143.

    I'mNotSureWhoIWantToBeYet

    @schrodinger’s cat: DeLong has also written papers with Dean Baker and Paul Krugman. ;-)

    DeLong’s been very up-front about his long-time relationship with Summers. It’s not a secret. It’s clear he likes the guy and greatly admires his mind – he’s said as much. Lots of people do.

    I think he’s wrong that Summers is the right choice for Fed Chairman now, but he’s said that Yellen is a fine choice too – he just thinks Summers is a better fit now.

    FWIW.

    Cheers,
    Scott.

  144. 144.

    CONGRATULATIONS!

    Isn’t there a simpler answer?

    @Corner Stone: Obama wants Summers because Summers and he both share a predisposition for raping white women and roasting live puppies over 55-gallon drums of burning chemical waste for fun.

    I know no other explanation will satisfy you.

  145. 145.

    Corner Stone

    @CONGRATULATIONS!:

    Obama wants Summers because Summers and he both share a predisposition for raping white women and roasting live puppies over 55-gallon drums of burning chemical waste for fun.

    I knew it!
    Fuck that fucking whitey raping, puppy..roasting…chemi…
    Waaaaiiitt a second.

  146. 146.

    fuckwit

    @CONGRATULATIONS!: And he’s different from every other politician how?

    Let’s face it, with very few exceptions, all of our government has been utterly and completely captured by Wall Street. DC is just a bunch of whores for the banking system. It’s one dollar, one vote, and it’s been that way since long before Citizens United.

    The business of America is business, and political “leaders” are the tail, not the dog.

    Or, as Frank Zappa put it: “Politics is the entertainment branch of industry”.

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