Why Larry Summers Should Not Head the Fed

The Federal Reserve Bank (affectionately referred to as the Fed) is not a government institution. It is America’s centralized bank. The U.S. Congress ostensibly exercises a modicum of control over the Fed, laying out what is known as its “dual mandate”: maximum employment, stable economic prices, and moderate interest rates. This mandate is followed about as often as drivers who use their turn signals to switch lanes on the highway.

In reality, the Fed exerts total control over American monetary policy with little to no government oversight. The Fed also regulates banking institutions and provides financial services to the United States government. Again, the federal government has very little control over what the Fed does or does not do. The Fed is comprised of more than one-third of the American commercial (private) banks. The one area of influence the federal government has is the president is allowed to appoint its chairman.

Currently, Ben Bernanke sits at the top post of the Fed, arguably a more powerful position than being President of the United States. But in a few months, good old Ben will step down. So who does Obama have in mind to fill this incredibly important job once Ben leaves? The name at the top of the list: Larry Summers.

If the name sounds familiar, it should. Larry Summers, as journalist Matthew Rothschild says, “Has a resume of disaster.”

 

A few highlights:

–       Just before joining the Obama White House, Summers was caught accepting free rides on Citigroup’s corporate jet. And when he was caught, he had the audacity to go on and attempt to exempt Citigroup from caps on executive pay.

–       After he was fired from President Obama’s National Economic Council, he took a job as president of Harvard, where he gambled and lost $1 billion of the university’s money.

–       Also while president of Harvard, he bailed out a buddy of his, a Harvard professor  named Andrei Shleifer, when Shleifer was caught engaging in a little insider-trading. Summers used his power and influence at the university to clear up Shleifer’s debts and even allowed him to return to his teaching post at Harvard.

–       While chief economist of the World Bank from 1991 to 1993, Summers liked to joke about dumping toxic waste in poor countries. This was leaked and confirmed via memo. Summers admitted the memos were real and written by him but, of course, he claimed he was only being sarcastic.

–      While a member of Clinton’s Working Group on Financial Markets, Summers vehemently opposed the regulation of the derivative market, the cause of the great market crash of 2008, from which our country is still struggling to recover from.

–       Summers does not believe in global warming. Seriously. While acting as Clinton’s Treasury secretary, he implored the president not to sign the Kyoto Protocol, in effect stating that fossil fuel emissions should not be curbed in any way whatsoever as he believed they did not damage the environment one iota.

So there you have it: this is the man Obama wants to put in charge of the most powerful and influential financial institution in the world. That is who Larry Summers is. So if you think Ben Bernanke has been doing a poor job as head of the Fed…baby, you ain’t seen nothing yet.

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