A Really Important Read On Larry Summers

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If you’re following the “race” for the Fed chairmanship, then you ought to read Ben White and Patrick Reis at Politico in a big story that basically amounts to the compleat defence of Lary Summers, the embattled frontrunner to replace Ben Bernanke.

White and Reis report that Summers is the White House’s #1 choice right now, although nothing is settled.

What’s key is that the piece has a roundup of all of the arguments from the Summers camp against the biggest anti-Summers complaints. Specifically it addresses claims of sexism, that he’s uncomfirmable, that he caused the meltdown, and that his views on monetary policy are a wildcard.

Here’s part of the section on Summers and monetary policy:

People close to Summers rebut this argument in two ways.

First, they say that the one person who knows exactly where Summers stands on monetary policy is the only one who really matters right now: Obama.

They also note that Summers has actually written extensively on monetary policy. One person noted that if you use Google Scholar and type in “Lawrence Summers” and “monetary policy” you get more than 7,000 hits, including many long academic papers on the subject.

Summers has indeed questioned the overall efficacy of “quantitative easing” — widely known as “QE,” which means buying up bonds to keep the rate low across the economy. According to the Financial Times, he told a conference in April: “QE in my view is less efficacious for the real economy than most people suppose.” Summers supporters note that Bernanke himself has questioned how effective it is. And there is no real evidence that Yellen, though beloved by liberals, is some kind of radical who would dramatically change the central bank’s current direction.

Another person who has questioned the risks of QE: Barack Obama. The president told The New York Times in an interview last week: “I want a Fed chairman that can step back and look at that objectively and say, ‘Let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles.'”

Anyway, the big thing is that between this story, and tonight’s story from WSJ’s Jon Hilsenrath (which focuses specifically on Summers’ views on monetary policy), it appears that A) Summers is still the state frontrunner according to insiders and B) Team Summers has decided to really fight back against some of the stories going against them.

Read the full POLITICO story here >

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