Thomas Palley, Guest Blogger
Some months ago it became known that Federal Reserve Chairman Ben Bernanke was likely to step down as the end of his second term of appointment drew near. Initially, Federal Reserve Vice-Chair Janet Yellen appeared the favorite to succeed Bernanke, but now it seems as though Larry Summers has become the Obama administration’s preferred candidate. Summers’ candidacy raises grave political and policy concerns.
The case for Larry Summers rests on claims that he is a seasoned, crisis-tested, and known policy maker. His experience includes a stint as treasury secretary in the late 1990s and a stint as director of the National Economic Council from 2009-2011, where he oversaw the stimulus and recovery program. He is also a known quantity on Wall Street, where he has earned millions in speaking and consulting fees. Add in his academic credentials as an economics professor at Harvard, and Summers appears to be a model candidate – experienced in government and trusted by financial markets.
But digging deeper, the flaws begin to show. Many critics have pointed out that Summers led the charge for financial deregulation in the 1990s. Worse yet, he opposed updating regulation to deal with financial innovation, as exemplified by his opposition to derivatives regulation in 1998.