The “Larry Summers for Fed” trial balloon is suddenly facing some serious headwinds. In the past week, a group of Democratic politicians sent President Obama a letter expressing their support for Summers’ presumed main rival, current Fed vice chair Janet Yellen. Several Senators also openly questioned whether Summers would survive the confirmation process. Then The New York Times editorial board bashed Summers in an op-ed, saying he is “not the best person for the job” while endorsing Yellen.
Kai Ryssdal, host and senior editor of Marketplace, has joined the anti-Summers brigade.
“What we want in the Chairman of the Fed is a guy who can speak calmly and in measured tones and carefully about what’s going on in the macro economy,” Ryssdal tells me in the accompanying video. “What we have in Larry Summers -- as demonstrated by his history in academia and politics and just out there as a gadfly -- is not a guy who speaks carefully when the pressure’s on. I don’t think we need somebody… when the market is hanging on his every word who is perhaps not as careful as everybody might wish.”
Regular viewers know I’ve been vocal in my opposition to the idea of ‘Chairman Summers’ for a variety of reasons, as first detailed here on July 12, i.e. before it was fashionable.
Notably, Ryssdal’s critique seems to undermine what many on Wall Street say is Summers’ greatest attribute: The market’s presumed comfort and confidence in him, based on his tenure as Treasury Secretary, most notably.
“This idea that ‘the market has confidence in somebody’ is baloney,” Ryssdal quips, noting the market freaked out after Ben Bernanke’s June 19 press conference. “The Dow was down 170 points within three seconds of him opening his mouth. Yet you could probably say the market has confidence in Bernanke.”
The Marketplace host also strikes down the other asset Summers reportedly has going for him in the race to be the next Fed chair: His relationship with President Obama.
“I’m not sure we really want the President of the United States to be worried about having a warm and fuzzy with the chairman of the Fed,” he says. “This is a job on which the entire global economy is dependent. Whether or not the President has a warm and fuzzy shouldn’t really matter.”
I’ll take that one step further: Given concerns about the Fed’s independence from political influence, it would be better if the President doesn’t have a close relationship with the next Fed chair, or even the perception that one exists.
In the end, Ryssdal believes Janet Yellen will be the next Fed chair, citing her impeccable credentials -- buttressed by a WSJ article about her prognosticating prowess -- and current experience as Fed vice chair. On a related note, BTIG's Dan Greenhaus notes nobody really knows what Larry Summers thinks about monetary policy, adding another element of uncertainty to his candidacy.
“And, oh by the way, [Yellen's] a woman too," Ryssdal notes. "I think that’s going to help.”
I’m inclined to agree, as are the vast majority of economists polled by Reuters.
Still, it ain’t over until it’s over and Summers is a powerful, well-connected guy. Politico reports "that while no decision has been made, Summers remains Obama’s preferred choice and the leading candidate for the job."
So I’ll reiterate my plea to President Obama: Just say ‘no’ to the idea of Summers for Fed chair.