It takes a special kind of magic to bring together groups as diverse as progressive Democrats, Californians, conservative Republicans, feminists, a number of prominent economists, and a large chunk of the global investment community.
Lawrence Summers has that kind of magic.
These groups oppose the choice of Summers to lead the Federal Reserve, a move the White House has been pushing all summer. Resistance among progressives has been broad and deep, as reflected in this petition against the Summers nomination. Their opposition was unsurprising given Summers’ pivotal role in disastrous Wall Street deregulation, and his history of personal enrichment from the same banks he empowered as Treasury Secretary.
But the independent left is not the only hotbed of anti-Summers opinion. Key Democrats on Capitol Hill, including Senators Jeff Merkley, Sherrod Brown and Elizabeth Warren, have expressed their opposition as well.
It’s probably fair to say that most feminists also oppose Summers. It’s not just that the person most people assumed would get the nod is a woman, Fed vice-chair Janet Yellen, and the Administration appears to be sidestepping her. Summers’ problems with the women’s movement date back to 2005 when, as Harvard University president, he suggested that there may be fewer women scientists because of “innate differences” in “aptitude” — presumably meaning skills such as mathematics and analytical reasoning.
Summers also has a history of opposing, hectoring, and marginalizing women in his field — women who were later proved to be right. In 2008 Summers famously prevented President-elect Obama from even seeing economist Christina Romer’s estimate of the stimulus needed to repair the economy. At Summers’ insistence, Romer’s $1.8 trillion number was reduced to $1.2 trillion — and the stimulus package did, in fact, prove to be inadequate.
Summers also prevented Brooksley Born, chair of the Commodities Futures Trading Commission (and a woman), from regulating the swaps which eventually proved so decisive a factor in the 2008 financial crisis.
Californians of both genders have an axe to grind against the former Treasury Secretary. In 2000 Summers rejected the idea that market manipulations like Enron’s could contribute to that state’s energy crisis. He opposed Gov. Gray Davis’ plan for price controls and said, “This is classic supply and demand. The only way to fix this is ultimately by allowing retail prices to go wherever they have to go.”
That isn’t just wrong. It’s economic voodoo.
In a chummy letter to Enron CEO Ken Lay (or “Ken,” as Summers addresses him), incoming Treasury Secretary Summers even promised to “keep my eye on power deregulation and energy-market infrastructure issues” for the soon-to-be-arrested executive. And an investigation of Enron’s lobbying efforts by Public Citizen revealed that Summers used his influence to block regulation of energy dealers like Enron.
Progressives. Key Democrats. Feminists. Californians. And here’s another demographic for the swelling anti-Summers ranks: Only 17 percent of global investors, traders and analysts thought his appointment would be a good idea, according to a recent Bloomberg poll. Thirty-four percent had no opinion on the matter, and 49 percent were opposed to his nomination.
That means that three out four investors who had an opinion were against Summers. (There was significantly less opposition to Yellen.)
The reasons for investors’ opposition were not enumerated, but they presumably include his famously impulsive and anger-prone personality. Global markets can be roiled by a single impolitic word from the Fed chair’s lips, and Summers has been known to utter more than one such word at a time.
A number of prominent economists (though not all) have also expressed their concern. Dean Baker detailed Summers’ history as an “ineffectual regulator,” calling it “bizarre” to favor Summers over the “obvious” Yellen and offering a laundry list of Summers’ disqualifications for the position. Paul Krugman explored the sexism behind the administration’s favoring of Summers over Yellen.
Former IMF chief economist Simon Johnson was more circumspect when he said the Obama administration was “playing with fire by proposing a Fed chairman who would aspire to become a dominant figure.” (Summers is notorious for “aspiring to be a dominant figure.”) Johnson added that outgoing chair Ben Bernanke had “established the rudiments of a more collegial and balanced decision-making process within the Fed” and said “his successor should be chosen with the goal of building on this achievement.”
For anyone with knowledge of Summers’ personality, that sounds like fierce opposition.
The defection of key Democratic Senators led Reuters to observe that the president would need Republican support to win his confirmation. But would he get it? Many Republicans will oppose Summers because they’re hostile to anyone and anything that’s associated with the Clinton administration. Others are hostile to anyone or anything that’s associated with the Federal Reserve. It might be possible to win a few GOP votes, but they would come at a very high price in horse-trading — and the nomination would still be a long shot.
Larry Summers has accomplished something unprecedented by united such disparate groups. This could even become something of a kumbaya moment. But while that accomplishment is impressive, it doesn’t qualify him to lead the nation’s central bank at such a critical time.
As Robert Borosage has noted, the “boys’ club” inside and outside the administration has been pushing Summers heavily. But the odds are stacked against this nomination, and it would carry a high price. His hearings would become a knock-down, drag-out fight on the Hill. His appointment would also cost the Democratic Party dearly among key voter groups.
If the White House insists on this nomination we may learn that, at least where Larry Summers is concerned, it’s the boys who aren’t very good at math.
(Sign the petition, “Tell the White House Not to Nominate Larry Summers,” here.)
Richard “RJ” Eskow
Sunday, 1 September 2013