Appropriately authored by the person who coined the term, "The One Percent," Joe Stiglitz absolutely killed it last night over at the New York Times' Opinionator Blog...
Why Janet Yellen, Not Larry Summers, Should Lead the Fed(And, the prescient Columbia University economics professor's just warming up. This gets even better, the further along you read! Yeah, I’m a bit embarrassed with regard to how much I truly enjoyed reading this. Took me at least a good five seconds to get over it.)
By JOSEPH E. STIGLITZ
Opinionator Blog (The Great Divide is a series about inequality)
New York Times
September 6, 2013, 9:11 pm
The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective.
But why, one might ask, is this a matter for a column usually devoted to understanding the growing divide between rich and poor in the United States and around the world? The reason is simple: What the Fed does has as much to do with the growth of inequality as virtually anything else. The good news is that both of the leading candidates talk as if they care about inequality. The bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.
The Fed has responsibilities both in regulation and macroeconomic management. Regulatory failures were at the core of America’s crisis. As a Treasury Department official during the Clinton administration, Mr. Summers supported banking deregulation, including the repeal of the Glass-Steagall Act, which was pivotal in America’s financial crisis. His great “achievement” as secretary of the Treasury, from 1999 to 2001, was passage of the law that ensured that derivatives would not be regulated — a decision that helped blow up the financial markets. (Warren E. Buffett was right to call these derivatives “financial weapons of mass financial destruction.” Some of those who were responsible for these key policy mistakes have admitted the fundamental “flaws” in their analyses. Mr. Summers, to my knowledge, has not.)
Regulatory failures have been at the center of previous crises as well. At Treasury in the 1990s, Mr. Summers encouraged countries to quickly liberalize their capital markets, to allow capital to flow in and out without restrictions — indeed insisted that they do so — against the advice of the White House Council of Economic Advisers (which I led from 1995 to 1997), and this more than anything else led to the Asian financial crisis. Few policies or actions have greater culpability for that Asian crisis and the global financial crisis of 2008 than the deregulatory policies that Mr. Summers advocated…
Join your fellow Kossacks and tell Democratic senators: Don’t cave to White House pressure on Summers.
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