At a dinner last week laden with economists, our discussion turned to who will replace Fed Chair Ben Bernanke. The consensus was Janet Yellen was the front runner, Roger Ferguson was the long shot . . . and then Lawrence Summers’ name arose.
Longtime readers know I have little respect for the former Treasury Secretary and Harvard President. Despite his alleged brilliance, he seems to exhibit what can charitably be described as the worst judgment of any economist ever in existence. Granted, discussing economists with poor judgement is an embarrassment of riches, but Summers manages to surpass that crowd in ways never previously imagined.
He is essentially a smarter version of Alan Greenspan — only lacking Greenspan’s keen judgment, insight and humility (in case it escaped your notice, this is sarcasm ).
Consider Summers “brilliant” track record:
• He has consistently argued for privatization and deregulation of the financial sector;
• He oversaw the repeal of Glass-Steagall via the passage of the Gramm-Leach-Bliley Act;
• He approved the (previously illegal) merger between Citibank and Travelers;
• He oversaw (and indeed encouraged) concentration in the financial sector, thinking bulked up banks are a virtue. This led to the rise of the TBTF institutions (formerly known as mega-banks).
• He successfully fought Brooksley Born, then chair of the Commodity Futures Trading Commission, to rein in financial derivatives;
• He oversaw passage of the Commodity Futures Modernization Act of 2000, preventing ALL Federal regulation of derivatives; The CFMA also exempted derivatives from state insurance oversight and antigambling laws.
• Thanks to Summers, derivatives still have no minimum reserve requirements, no disclosure obligations, no transparency and no exchange listing / reporting requirements.
After he helped to create the financial crisis and collapse, Summers found himself uniquely situated to help repair the damage he wrought. But that would have required an admission of error and responsibility; instead, he compounded his errors by pushing for a small, ineffective stimulus plan.
Note we have not even bothering with his issues with woman, his lack of collegiality, his inability to work well with others, his boorish head strong personality, and his other professional failings.
Whats next after we put Larry Summers in charge of the Fed? How much further can he fail upwards . . . ?
Summers Said to Show Interest in Fed Chairman Nomination (Bloomberg)
Larry Summers and the Subversion of Economics (The Chronicle Review)
I Come to Bury Larry Summers, Not to Praise Him… (New Yorker)
Larry Summers: “Mistakes Were Made,” But Not By Me (PR Watch)