I won’t bullshit you. I have stayed out of all the lobbying over who should be the next chairman of the Federal Reserve because I don’t know that much about fiscal policy and I don’t know much about the candidates. While I was willing to advise against the appointment of Larry Summers, that was based on my political judgment and on the fact that I don’t particularly like what I know about Mr. Summers’ personality. As to his record during the Clinton administration, I think it is a disastrous record, but I also think some people on the left have made opposition to Summers into a symbolic fight. If I believed that defeating Summers would be a great victory for stronger regulation of the markets, I might have been on board the campaign, but I think there is a great deal more to consider than that. The markets moved up sharply yesterday in response to Summers’ withdrawal because they think Yellin is more likely to keep the cheap money flowing to the bankers.
Stock markets soared on Monday on the withdrawal of Mr. Summers. Many investors regarded him as less committed to the Fed’s monetary stimulus campaign than Ms. Yellen. In trading, the Dow was up 118 points and interest rates down in a show of increased confidence that the Fed would withdraw more slowly from its efforts to stimulate the economy, including bond purchases.
Another symbolic victory could be at hand if Summers is set aside in favor of a woman. While president of Harvard, Mr. Summers said that women may have less intrinsic aptitude for science and engineering.
Symbolic victories can be very overrated, but sometime they’re important. It’s just that I think people can be led astray when they invest too much in these battles. For one thing, you can mis- or over-interpret the ideological component of something if you totally dismiss the personal element. I think too many people thought the president was trying to send an ideological message when he chose Rahm Emanuel as his first chief of staff, when it was far more likely that he was chosen because of a combination of a close personal friendship between Emanuel, Obama, and Axelrod, and Emanuel’s immense influence over the House after having successfully run the campaign to retake control of it in 2006. Likewise, I have gotten the sense that Obama wanted Summers at the Fed because the two of them had forged a close personal bond during the height of the financial crisis, not because the president is ideologically inclined toward deregulation of the financial markets. He wanted Summers because Summers had earned his trust.
That’s why the following may be true, but probably shouldn’t be:
Administration officials and supporters acknowledged that the president would enrage his party’s base if he were now to reject Ms. Yellen and forfeit the chance to name the first woman to the most influential economic job in the world. On the other hand, with no obvious alternatives, the choice of Ms. Yellen — which months ago might have been celebrated as historic — is likely to be seen as Mr. Obama’s reluctant capitulation to his party’s left wing.
It probably is a reluctant capitulation to the party’s left-wing. Objectively, it’s hard to argue anything different. But it’s not clear that it would actually be any kind of ideological victory for the left. Wall Street seems happier with this outcome, and they have some actual reasons for feeling that way. If you insist on seeing Larry Summers as nothing more than a Clinton Era deregulator and arrogant male-chauvinist, then this looks like a clear-cut victory.
It isn’t.
