Larry Summers out of the running for Federal Reserve chair

Federal Reserve Chair Ben Bernanke’s term ends early next year, and President Barack Obama’s rumored top choice to replace him has been economic adviser Larry Summers. Why Obama would want to elevate someone who’s failed at several important jobs is beyond me, particularly when a much more qualified candidate is available in Janet Yellen. She has more experience in the Fed, as well as more support in the U.S. Senate and from economists. Yellen also lacks the huge conflict of interest problems that would have dogged Summers because of his involvement with Citigroup.

Yesterday Summers saved Obama from making a big mistake by formally withdrawing from consideration for the top job at the Fed. I disagree with Jonathan Chait’s claim that Summers “paid” for Obama’s poor record on appointing women to high positions in his administrations. There were plenty of reasons to favor Yellen over Summers for this job. The fact that she would be the first woman to chair the Fed is just a bonus. Kudos to the three Democrats on the U.S. Senate Banking Committee who came out early against Summers, helping to avert what would have been a very bad choice by the president. UPDATE: Apparently five Senate Democrats were ready to vote against Summers in committee: Jeff Merkley of Oregon, Elizabeth Warren of Massachusetts, Sherrod Brown of Ohio, Jon Tester of Montana, and Heidi Heitkamp of North Dakota.

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Weekend open thread: Ups and downs

What’s on your mind this weekend, Bleeding Heartland readers?

Yesterday’s employment report was so awful (1 on a scale of 1 to 10) that a double-dip recession seems more likely than ever. At the Naked Capitalism blog, Edward Harrison reposted a piece from November 2009 on why Treasury Secretary Timothy Geithner and economic adviser Larry Summers would be President Barack Obama’s Dick Cheney and Donald Rumsfeld. It’s worth a read. At the Bonddad blog, New Deal Democrat went over lots of weekly indicators and found more evidence of an economic “stall” than a contraction (so far).

I’m still surprised by some of the bills that didn’t get through the Iowa legislature during this year’s extra-long session. I learned this week that Iowa wasn’t the only state where pro-nuclear legislation faltered. The nuclear industry failed to persuade lawmakers in five other state legislatures to advance favored bills. After the jump I’ve posted a press release from Nuclear Bailout, a project of Physicians for Social Responsibility. The Iowa chapter of Physicians for Social Responsibility lobbied hard against the bill written exclusively for the benefit of MidAmerican Energy.

In case you missed it, Iowa Senate Majority Leader Mike Gronstal and Minority Leader Paul McKinley reflected on the 2011 session during the July 1 edition of Iowa Public Television’s “Iowa Press” program. Click the link to read the transcript or watch the video. Both of them expect some progress on property tax reform next year, though they may get a crack at that sooner if Governor Terry Branstad calls a special legislative session later this year.

I’ll post Bleeding Heartland’s final news roundup on what passed and didn’t pass during the 2011 session after Branstad signs or vetoes the bills that reached his desk during the last week of June.

This is an open thread.

UPDATE: Best slip of the tongue I’ve heard this year: while phone-banking for Republican presidential candidate Michele Bachmann, State Senator Brad Zaun says he’s calling on behalf of “Congressman Boswell.” Democrat Leonard Boswell beat Zaun during the 2010 Congressional race in Iowa’s third district.

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Is Larry Summers on the way out?

The Atlantic’s Joshua Green thinks so:

I think Summers is going to leave sooner rather than later, possibly before the mid-term elections, and if not then, soon afterward.

Why? Because Summers is frustrated by his role, and his colleagues are clearly frustrated with him. Alexis Simendinger had a devastating item in last week’s National Journal suggesting that Summers’s “legendary self-regard” and “ego the size of the national debt” had gotten out of control. Some of Summers’s frustration no doubt stems from his wanting to be Treasury secretary. When that plum went to Geithner, Summers cast his eye on the Fed chairmanship and agreed to bide his time until Ben Bernanke’s term ended at the NEC–a staff position well below his old job as Clinton’s Treasury secretary. Most administration officials tactfully avoid pointing this out, because Summers has a fragile ego. But that’s why Joe Biden is so great. “How many former Secretaries of the Treasury would come in not as Secretary of the Treasury?” Biden blurted out to the New Yorker’s Ryan Lizza last fall.

But Summers didn’t get the Fed job either. Apparently that didn’t sit well. Administration insiders told Simendinger that Summers demanded a series of perks as compensation, including cabinet status, golf dates with the president, and a personal car and driver. In the “No Drama” Obama administration, such behavior stands out.  […]

Summers always seemed a bad fit for NEC director because the job entails dispassionately presenting the president with the counsel of his competing economic advisers. Summers doesn’t do “dispassionate” and he didn’t want to limit himself to fielding others’ advice–he had plenty of his own to offer. In other words, he was supposed to be the referee, but he also wanted to play power forward.

Summers was one of President Obama’s worst appointments, in my opinion, but I wouldn’t expect the president to reshuffle his economic team unless a mostly-jobless recovery continues, or the worst-case scenario of a douple-dip recession develops. Anyway, Summers’ departure wouldn’t herald a real change in economic policy if Green is right about Timothy Geithner being “ever more secure at Treasury.”

What do you think, Bleeding Heartland readers?

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The Wall Street bailout looks worse and worse

I was against the Wall Street bailout from the beginning, but hoped to be wrong about what it would achieve.

Unfortunately, it’s turned out like I expected–a huge taxpayer giveaway that has does nothing to get credit flowing or stabilize the banking sector.

Read this piece by bobswern and explain to me why President Obama is letting Treasury Secretary Timothy Geithner and economic adviser Larry Summers steer him in this disastrous direction. Obama is too smart not to be able to figure out what’s wrong with continuing the expensive, accountability-free Bush policy.

More links to commentaries on the corporate bailouts are in this diary by Jerome Armstrong.

Mark my words: later this year, Washington pundits and so-called “centrist Democrats” who claimed we had to “do something” to save the banking sector will warn us that we can’t afford universal health care reform.

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News flash: personnel shape policy

When Barack Obama nominated Timothy Geithner for Treasury Secretary and appointed Larry Summers to be the chief presidential economics adviser, I became very worried. Summers had a hand in some of Bill Clinton’s deregulation policies that have contributed to our current economic problems, and Geithner was a key architect of the Wall Street bailout last fall.

Here and at other blogs, some commenters urged me to “give Obama a chance–he hasn’t even been inaugurated yet.”

Geithner confirmed my worst fears today when he rolled out the new-and-improved bailout plan (using the second $350 billion tranche from the Troubled Assets Relief Program). Economist James Galbraith came up with the name Bad Assets Relief Fund (BARF) to describe Geithner’s plan.

Other bloggers have already explained why Geithner’s proposal is an unimaginably pricey gift to Wall Street bankers at the expense of the public interest. This diary by MyDD user bobswern hits all the main points, drawing on a front-page story in the New York Times and other sources.

Writing about how Geithner prevailed over presidential advisers like David Axelrod, who wanted to attach more strings to the taxpayer money Wall Street bankers would receive, David Sirota observed,

Interestingly, the divide inside the administration seems to hearken back to a divide discussed very early on in the formation of the administration – the one whereby progressives were put in strictly political positions, and zombie conservatives were put in the policymaking positions. In this case, more progressive politicos like Axelrod was overruled by corporate cronies like Geithner.

The good news is that at least there seems to be something of a debate inside the administration, however tepid. The bad news is what I and others predicted: namely, that progressives seem to have been ghettoized into the political/salesmanship jobs, the conservative zombies shaping policy aren’t interested in having any debate with them. Worse, we’re now learning that those zombies are as rigidly ideological as their initial policies seemed to suggest.

I stand by my prediction that Geithner will turn out to be one of Barack Obama’s worst appointments. I can’t fathom why Obama wants to “own” the very worst aspects of the Bush administration’s failed Wall Street bailout, while also depriving the government of cash needed for other domestic priorities.

The stock market fell sharply today, perhaps because investors have no confidence in Geithner’s scheme and perhaps because the compromise stimulus bill that passed the U.S. Senate came straight out of bizarro world (do click that link, you’ll enjoy it).

I hope Obama will recognize his mistake and let Geithner and Summers go within a year or so, but they’re already poised to do plenty of damage to his administration.

Speaking of bad appointments, isn’t it amazing that Obama didn’t even make Senator Judd Gregg of New Hampshire promise to vote for the stimulus bill in exchange for being named Commerce Secretary? Why would you put someone in a cabinet position with influence over economic policy if that person doesn’t even support the president’s stimulus plan?

Apparently Obama’s also considering making a lobbyist for the Chamber of Commerce the main presidential adviser on judicial appointments. I’ve long anticipated that judges appointed by Obama would be corporate-friendly, pro-choice moderates in the Stephen Breyer mode, but I never imagined that a Chamber of Commerce lobbyist would be in a position to recommend only judges who would favor business interests.

If Tennessee Governor Phil Bredesen becomes Secretary of Health and Human Services, the Obama-Biden magnet is coming off my car.

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