This Summers/Yellen fight is a good thing.
From a narrow political perspective, I'm not sure it was tactically smart for Obama to float Larry Summers’ name so prominently in the hunt for the next Federal Reserve chair. The rivalry between Summers and the other leading candidate, Janet Yellen, has drawn some blood, revealing sensitive divisions within the Democratic party on economic matters.
Federal Reserve policies are a bit out of my lane. I’m certainly no expert on monetary policy. Watching this controversy from afar, I do believe the process has done the nation some good.
Most obviously, this discussion has fostered a useful discussion of gendered notions of expertise, and the hiding-in-plain-sight clubbiness of elite personnel decisions in Washington. President Obama likes and respects Larry Summers, Tim Geithner, and a handful of others in economic policy. That’s not necessarily a bad thing. Summers was present at the creation as the Obama administration navigated terrible challenges in the depths of the recession. It remains noteworthy that the president’s policy brain-trust is a conspicuously male group of high achievers.
This fight has also focused public attention on the job and on monetary policy. Most Americans, even those who read the New York Times every day and follow politics have very little idea of what the Federal Reserve actually does, what the letters FOMC stand for. Now we have two superbly-qualified but quite different people competing for the job. So the interested public must consider which aspects of this very difficult job—political, analytic, organizational—are really the most important.
A strong case could be made for either person. Yellen is probably the better manager, coalition-builder, and diplomat. She may draw more effectively on the expertise of others. Summers may be the most brilliant economist of his generation. He is widely respected by economic policymakers around the world, having served with distinction as Secretary of the Treasury, as chief economist of the World Bank, and in other roles. That could be essential in a bewildering global crisis.
This controversy has also (re-)exposed sensitive issues of regulatory policy, for example the reserve requirements that should be imposed on financial institutions and the proper regulation of derivative instruments. These policy issues are so intricately mind-numbing that most Americans ignore them unless we’re in a crisis.
Most educated Americans don't realize that the Fed plays an important role in these regulatory matters. As Mike Konczal usefully reviews, Summers made important mistakes during the Clinton era, opposing useful financial regulations.
More to the point, Wall Street simply has too much political and intellectual influence over both sides of the political aisle. So it’s been healthy to have broader discussion of Summers’ extensive personal ties to (and a multi-million-dollar income from) financial firms during his time at Harvard. Some of this information was presented in unduly personal blunderbuss attacks. It’s still an important matter.
Finally, this controversy has brought useful attention to another sensitive issue. Before raising it, I should mention that I agree with Larry Summers on most aspects of economic policy. I greatly admire his research, going back to his path-breaking work in the economics of unemployment. He has more liberal policy values than he is often credited with having on issues ranging from carbon taxes to education policy to the role of women in global development.
Given his stellar qualifications and strong policy values, this would ordinarily be enough to make him the overwhelming choice to chair the Federal Reserve. Yet in positions of authority, Summers has not always treated people with the respect they deserved. Nor has he always acted with the personal and political sensitivity that positions of leadership require. I think he would own up to this, and be the first to say that related missteps have cost him dearly. He had some excellent plans as president of Harvard. These shortcomings cut short his Harvard presidency before these plans could be realized.
Such shortcomings shouldn't be determinative in choosing the next Fed chair. Summers is hardly the first brilliant economist who can be belittling or abrasive. Still, these issues matter. How someone treats the people around him is an important qualification for holding public office. It should be discussed.