Larry Summers is not happy…

August 25, 2009

He wanted Ben Bernanke’s job, but he’s not going to get it.  Reuters:

U.S. President Barack Obama will reappoint Ben Bernanke for a second term as chairman of the Federal Reserve on Tuesday, a senior administration official said on Monday.

Bernanke, whose four-year term as head of the U.S. central bank ends on January 31, 2010, will also be praised by Obama for his handling of the financial crisis, the official said.

If Summers was the only other option on the table, then I’m not so disappointed Bernanke is sticking around.  That said, I think Fed policy under Bernanke has been terrible. The Greenspan interventions he supported inflated the largest credit bubble in 80 years; the de-leveraging that needs to happen to correct the damage has been delayed indefinitely by Bernanke’s own interventions.

His supporters say he averted a second Great Depression. I disagree. He’s merely delayed it. The liabilities of the financial and consumer sectors haven’t gone away, they’ve merely been absorbed by the public balance sheet. This is as much Hank Paulson’s and Tim Geithner’s fault as it is Bernanke’s. I’m not thrilled with their leadership either.

Just my 2¢


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Summers is more arrogant, which is dangerous. I strongly disagree with Bernanke’s policies, but Summers would be a step-down.

I suppose Simon Johnson and William Black weren’t interviewed for the job? *puzzled* Too bad…

Posted by Adam | Report as abusive

Fully agree with Adam on all counts.

Posted by Joe | Report as abusive

Your 2c is worth a $1 as a summary. The one problem I have is in the delay. The beginning of the conclusion may not be far away and will be a currency event. The breakdown of the 28 year uptrend in the long bond will indicate in early to mid November the process has begun. There are no more entities or real people to buy the bonds to finance this Ponzi scheme. The nincompoops that tell you China must keep buying and that you need a business cycle pickup and a close of the output gap in order to see inflation are 100% wrong.

Posted by walkdontrun | Report as abusive

Those who disagree with bernanke’s and the president’s actions do not submit any alternatives. I guess they will argue to let the market do its job. But that is exactly the point. The Fed and the White House prevented a worldwide economic collapse the consequences of which would have been tragic in every aspect. The market FAILED. Economics is not only about the economy. It is about economy, sociology, psychology, politics and so on. Economics is also about cost-benefit analysis. Just think about the social costs, worlwide, of the alternative.
Tahar Mansour, Ph.D.

Posted by Tahar Mansour | Report as abusive

The Federal Reserve must be abolished and the 16th Amendment must be repealed if the U.S. is to see anything approaching real recovery. The New World Order must be stopped dead in their tracks.

Posted by Mike | Report as abusive

$0.02 and waiting for change!!!!!!

Posted by agauagau | Report as abusive

the alternative was to do NOTHING. the flawed entities would die, and the population would have felt real pain. the measures taken by the Fed, current & previous Admins were a band-aid and helped soften the landing. in other words, they put off the inevitable until later.

the “Market” never had a chance to work like a boxer with both arms tied behind his back.

Posted by slim | Report as abusive

The 800 pound gorilla in the room that is being ignored is that our ratings agencies and banks simply engaged in piracy and have not been subjected to any remedial treatment. If you were European, Asian, or South American,
would you ever do a major deal with this bunch of goons again?

Posted by Ken | Report as abusive

as much as i despise the federal reserve and bernanke, anyone but summers! bureaucratic monster

Posted by dvictr | Report as abusive

If I were European, Asian, or South American and I had a gun pointed at my head, would I have a choice? Is there any doubt that the wars in Iraq and Afghanistan are all about money, might (flexing US military muscle) and distraction (from the domestic disaster)? Constant undeclared war distracts from the thievery happening under our noses. Led by a group of private bankers called the Federal Reserve. The alternative to the Fed? Gold standard. There was a time when Greenspan was nostalgic about this system. The only thing that keep us from this is our love of big government and war.

Posted by Nick | Report as abusive

Take a look at the history of finance and gov’t in South America, Asia, and even Europe and get back to me on how anything that has gone on in the US recently is even AS outrageous as things that have happened in those places in the last few decades.

Posted by Andrew | Report as abusive

Tahar, that’s just flat-out untrue. Those who disagree HAVE provided alternatives – even Elizabeth Warren, who’s supposed to have oversight over everything that’s going on under TARP (the Treasury is making it difficult for her, however) has said as much.

Posted by joetauke | Report as abusive

Obama turns out to be a Big Dud after all.

Change? Has has changed nothing.

The US Federal Reserve is the principal culprit for the creation of economic disaster under Greenspan and Bernanke. Yes these two chairmen have much to account for but just as faulty is the way the US central bank is organized and managed.

Obama has a once-in-a-century opportunity to reform the Fed. He could propose reform legislation and install a new kind of chairman to run it. He did neither.

He will appoint a money printer (how many trillions already?), a 0% interest rate bubbler, and a bailouter of the most corrupt banking system in the world. To top it off, he will give the Fed even more power to ‘supervise’ so-called systemic risks. In effect to perpetuate the Greenspan policy, to tighten the monopoly power of the Great Money Printer to control the country.

All in the name of ‘saving’ the world from a depression. Obama turns out to be just like Bush II. You know, the guy who preemptively invade a country in the name of ‘freedom’.

This confirms the the United States of America is so corrupt that it is un-reformable. It has lost any pretense of leadership and sense.

Posted by The Real Deal | Report as abusive

Everyone’s taking their hyperbole vitamins I see.

Posted by Andrew | Report as abusive

William Black would be a good start.

Posted by Lim | Report as abusive