News came yesterday that ought to gladden the hearts of sensible Americans everywhere: former Secretary of the Treasury and Harvard President Larry Summers declined his nomination as the next head of the Federal Reserve.
I know what you’re thinking: “Really, you find this exciting? You should get out more. Maybe you should go see a play or something. Watch some football. Toss a Frisbee around.”
But hear me out. The demise of Summers’ candidacy is, for once, a blow for common sense and accountability, two words you almost never see in the same sentence as “Washington, D.C.” Everyone who has met with Summers agrees that he is indeed brilliant and well qualified for the role, which was enough for President Obama to float his name. Yet despite this background he has made the wrong call on nearly every major financial issue of the last 15 years. For example:
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- He told President Obama that a $800 billion stimulus would be enough to quickly move the country through the 2008 recession, despite knowing that other economists thought it’d need at least twice that much, thus prolonging the recession.
- He crushed efforts to regulate derivative trading and sub-prime mortgages, speculation on which destroyed global faith in credit markets and nearly doomed the economy.
- Summers backed the repeal of Glass-Steagall, a Great Depression-era law that banned banks from speculating with their clients assets, enabling banks to leverage their assets to the point that when the recession hit they didn’t have enough to cover their debts to clients and creditors. The federal government poured trillions into the system to bail them out and prevent a bank run.
Summers would be high on any list of individuals who directly contributed to the 2008 recession, a recession that has devastated the lives of billions worldwide. Only in Washington, D.C., where no expert of pundit loses face no matter how grave their mistakes, would he be considered even remotely plausible.
He also has, shall we say…personality issues? He doesn’t listen to other people, acts like a dictator whenever he has power, and can’t keep his foot out of his mouth. That is precisely the opposite personality of what you’d need to succeed as Chairman of the Federal Reserve, a job where the wrong comment could send markets crashing. His loose lips would sink a lot more than ships.
