The Washington Post’s Neil Irwin
looked this morningat what he sees as the many reasons the upcoming nomination of a new Federal Reserve chair became a circus, unlike past low-controversy nominations.
Irwin cited the rising importance of monetary policy in today’s economy, the White House’s mismanaged rollout of their likely nominee, and the emergence of new monetary policy-focused media such as Business Insider (thanks Neil!).
But among Neil’s four factors, only one really matters at the margin: The White House appears poised to make a demonstrably bad choice for Fed Chair.
If Larry Summers withdrew himself from consideration, or the White House announced that it isn’t going to pick him, the circus tents would pack up and we could all go home. The Fed Chair race would become uncontroversial and boring again, Business Insider’s existence notwithstanding.
People oppose Summers for all sorts of reasons, but here are my two.
One is that while we don’t know exactly where he (or Janet Yellen) would lead on monetary policy, I suspect Summers shares the White House’s unhealthy lean toward tight money. It’s particularly hard to figure out what Summers would do since he’s not actually a monetary policy scholar.
The other is that I fear Summers would squander the comity and collaboration that make the Federal Reserve Board work, since he’s had a tendency to do that at other institutions he’s been tapped to lead.
Of course, there are plausible cases against most nominees for most positions. What makes Summers unusual is that the case for him is so thin that it’s mostly being made by his close associates. President Obama and many people in the Administration — broadly, the group of Clinton Administration economic veterans that includes Summers — are enamoured of Summers’ brilliance and consider him indispensable. Who, exactly, outside Summers’ inner circle is enthusiastic about his nomination?
In this way, Summers is a lot like Defence Secretary Chuck Hagel. Making the case against the case against Hagel (“Friends of Hamas“) was not that hard. But what exactly was the case for Hagel? What made Hagel so much better a choice than then-Undersecretary of Defence for Policy Michèle Flournoy, the well-qualified, uncontroversial, female internal candidate, that it was worth enduring a bruising nomination fight to get him into the position?
Like Fed Chair nominations, Defence Secretary nominations are usually not circuses. The White House created one last year by passing over Flournoy for Hagel. To avoid a Fed circus, all the White House has to do is not nominate Summers.
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