Tag: Larry Summers

I have Joslyn Stevens's permission to repost this interview.

This week I conducted an interview with a progressive populist I follow on twitter, Priceman, whose annoying habit of using facts and common sense with a dose of in-your-face realness to prove his points tends to piss off democrats over at the “progressive” DailyKos. I feel it’s necessary to showcase often ignored voices representative of the people who speak truth to power and will continue to do so on a weekly basis.

The democratic blog DailyKos claims to be a reform blog open to all views but as we both know opposing views aren’t welcome. Are they doing their readers a disservice by promoting and defending a corporate Democratic Party that doesn’t represent working-class Americans and hasn’t for a long time?

A. Hi, Joslyn. It’s nice to talk to you. I have a lot to say on this topic. Not only are they doing their readers a disservice, they are making a laughing stock of the so called progressive blogosphere as a whole. Wanting “more and better Democrats” does not mean a whole lot when those who administer and run that site, coddle so called Democrats that are openly hostile to the programs that shaped the party’s platform in the first place, from the New Deal and Great Society. That site’s administrators play favorites there and try to hide it; President Obama and his enablers are who take precedence over everything else on Daily Kos.

I base this on the very poor job their site moderators do at that site, and the lack of self awareness that comes from denying it, which happens every time anyone looks into it. There are a number of good diarists that write there, but they do not receive equal treatment; posters whose sole mission is to protect their hero in the White House, are allowed to break the site rules and troll any posts not favorable to the Obama administration. And if anyone retaliates against them, only then does the site’s administration get involved in order to put them in their place while pretending to just enforce site rules, which are arbitrary, selective, and not clearly defined at all except in secret.

Sure, they might ban an obvious sockpuppet whose sole mission is to attack Glenn Greenwald, but that is low hanging fruit and does not hide the obvious bias at that Democratic gatekeeper site. The business model there relies on pretending that every problem in our society must be the fault of the Republicans, instead of both parties colluding together for the continuing grand austerity bargain happening now with the first step: the sequester. The White House wrote the sequester and put out there, but to mention that is blasphemous at Daily Kos like most other critiques of the President when it comes down to it. This is specifically true during election season; posters are banned for harshly criticizing the President.

I witnessed this first hand, and even I was warned in 2012 for doing so; I merely uprated a factual comment that in some ways there is little difference between Mitt Romney and President Obama. The 2012 Obama campaign went after Bain for outsourcing jobs, closing plants, and devastating US communities. Yet, now that the election is over, President Obama has appointed Jeff Zients, a former executive of Gov. Mitt Romney’s Bain & Company investment firm, as head of the National Economic Council.

To add insult to injury, on civil liberties issues, the owner of the Daily Kos, Markos Moulitsas, was asked how he feels about what Snowden revealed with regard to the 4th amendment being trashed by this administration continuing and expanding the Bush administration’s NSA war on terror abuses, and he said he honestly didn’t care. He said that worrying about spying was a very white privileged thing to do. However, anyone who has done even a modicum amount of research, knows that New York — pretty much the whole country, but especially New York — has changed after 9/11; it is now outfitted with a massive surveillance arsenal to more efficiently conduct racist policies like stop and frisk which does affect black people suffering from real white privilege in the real world.

This is similar to the drug war President Obama is continuing, which is also racist, since most incarcerations for drug possession are disproportionately black even though white people use the same amount or much more in many cases. Some on Daily Kos will try to deny this by saying the drug war is mostly a state issue and that you should just go yell at your local mayor and city council, and leave Obama alone. That would be fine if the Obama administration did not deploy for-profit prison lobbyists in their Justice Department like U.S Marshall, Stacia Hylton. The Prison Industrial complex lobbies all states to have access to the prisoners arrested for drug possession in whatever state they set up. This is coddled and supported at the federal level.

Not to mention all the broken promises from Eric Holder and the President about not raiding medical marijuana dispensaries. None of this is mentioned on Daily Kos when it comes to issues about race, and it’s perpetuating real racism which involves institutions like this and always has. So, this is not something Markos — and those that like him who scoff at what Glenn Greenwald and Edward Snowden have revealed — can ignore while claiming to care about real white privilege, real racism, and what’s going on in the real world on the federal level and at the state level aided and abetted by the drug warriors in the Obama administration at the federal level.

No, once Markos wrote a book about “Crashing the Gate” with regard to the political blogosphere he was instrumental in creating, along with Howard Dean’s campaign, in filling the void that the bought oligopoly — the mainstream media that failed and is still failing the public — left. However, now that a Democrat is in the white house, sites like Daily Kos are gatekeepers. They are not interested in crashing any gates. This is how they run the site and ultimately this is their business model.

I wrote there for a time, but I would now warn others that Daily Kos is not the site where intellectual debate is allowed on anything substantial. Only about how bad the other bought political party is. That is, instead of Democrats, with few exceptions, and Republicans working together to subvert representative Democracy. Oh, how mighty the once promising site has fallen and will continue to fall now that we know what the site’s true purpose is; shilling for the status quo as long as it has a (D). This, we all now know and can see.

There’s no reason to read anything on that site. It’s no different than what’s on MSNBC.

Now here’s an interesting idea put forth by none other than President Barack Obama’s former chief economic adviser Larry Summers to get the large banks to invest the money in the economy, charge the banks for not spending. At a recent International Monetary Fund conference, Summers proposed that the Federal Reserve should charge banks a negative interest rate for stashing cash, much like the European Central Bank is considering, as a way to ward off another recession or sinking further into a full blown economic depression. Supposedly, this would force the banks to put the money to work in the economy. Some economic writers consider this an act of desperation but as Marl Gongloff at Huffington Post explains the times are already getting desperate

Slashing rates well below zero to make it painful not to spend money is the desperate approach to avoiding an economic depression recently endorsed by Larry Summers, President Obama’s former top economic advisor and one-time pick to run the Federal Reserve. With economic growth likely to be weak for the next infinity, the job market stubbornly awful and inflation disappearing, central bankers around the world have been toying with the idea for a while. Every day it gets closer to being a reality.  [..]

. . . St. Louis Federal Reserve President James Bullard told Bloomberg TV he thought the Fed should consider making U.S. banks pay money to park cash, too. He’s been saying this for more than a year, but the idea is slowly gaining more credence.

That is because, even though the Fed has had a ZIRP (zero interest rate policy) in place for nearly five years now, that has not been enough to get the economy up to full speed. [..]

But even that might not be enough: Some economists think interest rates should be much, much lower than zero: Maybe negative four percent, before adjusting for inflation. Summers recently warned that the U.S. and other big economies could be in a near-permanent state of malaise — like Japan since the 1990s — because interest rates are still too high even at zero. Many liberal economists, including Paul Krugman, think sharply negative interest rates could be the only way to deal with this.

There may be some loud noise emanating from the banks and Wall Street but since congress is stuck on the austerity train wreck, this could be a way for the Federal Reserve to kick start some stimulus. With Summers behind it, it just might be the last desperate solution.  

Effective regulation, and on that note, it is a positive thing that the Summers of our discontent can finally be laid to rest. After all the damage Larry Summers has caused in being one of the architects of this crisis, from boxing in Brooksley Born and ignoring her warnings with regard to derivatives which brought down Long Term Capital Management during the Clinton administration, to his sexism among everything else. He has now thankfully taken himself out consideration for the job.

It’s a good thing he did. Rather than fighting for something or someone that helps people suffering from this economic crisis, President Obama strongly recommended and fought for Larry Summers to be Chairman of the Federal Reserve, a guy who lost a billion dollars as President of Harvard betting on interest rates. Yeah, let that sink in for awhile.

It’s really not OK. This is why making excuses for everything the President does, as too many Democrats do without thinking of the damage, is dangerous, immoral, and unprincipled. Now it looks like the front runner to replace Ben Bernanke as Chairman of the Federal Reserve is going to be Vice Chairwoman of the Board of Governors of the Federal Reserve System and once President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, Janet Yellin. Unlike Larry Summers, she at least saw the crisis coming as early as 2005.

The progressive Democrats of the Senate got Larry Summers to withdraw from consideration for chair of the Federal Reserve over the weekend. So now they’re yellin’ for Yellen. Well, folks Janet Yellen the current vice chair of the Federal Reserve is just the distaff version of Larry minus the misogyny.

Huffington Post‘s senior political economy reporter Zach Carter gives a rundown of Ms. Yellen’s policy history before and during her tenure as chair of Council of Economic Advisers in the Clinton administration. During that time she backed the repeal of the landmark Glass-Steagall bank reform, supported the 1993 North American Free Trade Agreement and pressured the government to develop a new statistical metric intended to lower payments to senior citizens on Social Security. Yes, dears, that last one would be an earlier version of the Chained CPI.

But in the 1990s, Yellen and Summers both served in the Clinton administration, and pursued many of the same policies. Yellen began serving as Chair of President Bill Clinton’s Council of Economic Advisers in 1997, and publicly endorsed repealing Glass-Steagall’s separation between traditional bank lending and riskier securities trading during her Senate confirmation hearing. Yellen referred to deregulating banking as a way to “modernize” the financial system, and indicated that breaking down Glass-Steagall could be the beginning of a process allowing banks to merge with other commercial and industrial firms. [..]

At the same event, Yellen endorsed establishing a new statistical metric that would allow the federal government to reduce Social Security payments over time, by revising the consumer price index, or CPI, the government’s standard measurement for inflation. [..]

Before Yellen joined the Clinton administration, she was a respected economist at the University of California at Berkeley. In 1993, she joined dozens of other academics in signing a letter to Clinton advocating for the North American Free Trade Agreement. The letter was signed by prominent conservative economists including Milton Friedman, but also by many economists who are now considered progressive, including Paul Krugman and former Obama adviser Christina Romer. Krugman has since expressed disappointment with some of the trade pact’s effects.

(all emphasis mine)

The full transcript of Ms. Yellen’s Feb. 5, 1997 conformation hearing can be read here (pdf).

To be fair on the Glass-Steagall repeal, Ezra Klein weighed in at his Washington Post Wonkblog:

Another point here is that Glass-Steagall really wasn’t behind the crisis. Wonkblog’s Glass-Steagall explainer has much more detail on this, but perhaps the simplest way to make the point is to quote Sen. Elizabeth Warren, the lead sponsor behind the bill to restore Glass-Steagall. When Andrew Ross Sorkin asked her whether the law would’ve prevented the financial crisis or JP Morgan’s subsequent losses, she said, “the answer is probably ‘No’ to both.” There are good reasons to bring back Glass-Steagall, but they’re separate from the events of 2007 and 2008.

Which is only to say that supporting the repeal of Glass-Steagall in 1997 doesn’t say that much about somebody’s opinions on regulating Wall Street today. And, in general, we don’t know very much about Janet Yellen’s views on the subject. As I’ve argued before, the support for her on this dimension (as opposed to on the monetary policy dimension) really comes from an anybody-but-Summers impulse.

Carter also noted in his article that Ms. Yellen is more consumer friendly. During her tenure as president of the San Francisco Federal Reserve from June 14, 2004 until 2010, she identified the housing bubble and urged stronger regulation to limit its damage.

This still leaves a lot of questions about whether she would support the chained CPI, that is very unpopular among seniors and the public in general, or support regulation to rein in the TBTF banks. As lambert at Corrente puts it:

“Be careful what you wish for; you might get it” was made for situations like this.

So let’s not confuse a solid base hit with a game-winning grand slam, OK?

A long time ago, after an incident that had left me particularly furious with a disagreeable colleague, a friend told me to be patient eventually this person would fall on his own petard. After all, it wasn’t the short term paybacks that one needs to worry about, its the long term paybacks that get them in the end. And so it was, some years later, my nemesis got too arrogant, made some foolhardy decisions and was forced to retire in disgrace. I had long since moved on another path that was ultimately more satisfying but when I heard the story of his fall I had to wryly smile.

Over the weekend, after some weeks of speculation about who would succeed Ben Bernanke as chair of the Federal Reserve, President Barack Obama’s rumored favorite, his former chief economics adviser, Larry Summers, withdrew his name from consideration. Mr. Summers had come under fire from the progressive left for his Chicago School economic policies and his past history as President Bill Clinton’s Treasury Secretary. It was during Summer tenure as Treasury head that Glass-Steagal was repealed leading to the current economic mess. Add to that his misogynistic attitude and the rise of one of the women to whom he was so dismissive and you have the recipe for the down fall of one of the most “dickish” (Charlie Pierce’s term) personalities in government.

Washington bureau chief for The Huffington Post Ryan Grim summarized Larry’s fall from grace:

A progressive-populist coalition fueled by women’s groups and high-end donors was responsible for undoing President Barack Obama’s bid to install Larry Summers as the next chairman of the Federal Reserve. [..]

The five opposing senators were a combination of traditional progressives — Merkley, Elizabeth Warren (Mass.) and Sherrod Brown (Ohio) — and prairie populists — Jon Tester (Mont.) and, according to three Senate Democratic sources, Heidi Heitkamp (N.D.). Tester’s opposition was reported Friday by Reuters; Heitkamp’s intention was not previously public. [..]

Meanwhile, a coalition of progressive groups — which included UltraViolet and the National Organization for Women, two powerful women’s groups — teamed with the big donors and grassroots advocacy groups to pressure Banking Committee members and other Senate Democrats. ..]  The donors, who were mostly women, had [concerns that ranged from populist to feminist. [..]

Merkley, according to another aide, spoke to Democratic senators on the committee during caucus meetings on Tuesday and Thursday, and made Summers’ closeness to Wall Street and prior support for deregulation the key element of his pitch. He homed in on Summers’ backing for the Glass-Steagall repeal, which allowed banks to grow much larger and take on more risk. He also highlighted Summers’ opposition to regulating derivatives in a battle with then-Commodity Futures Trading Commission head Brooksley Born. Summers took both positions as treasury secretary during the Clinton administration. To make the point that Summers had not revised his approach, Merkley noted his intense behind-the-scenes opposition to the Volcker Rule, an attempt to reinstate some of Glass-Steagall’s restrictions that was added to the Dodd-Frank Wall Street reform law by Merkley and Brown. [..]

Summers had also opposed naming Warren to permanently head the Consumer Financial Protection Bureau, a decision that came back to haunt him, as Warren instead ran for the Senate and won a spot on the Banking Committee, where she has now helped tank Summers’ shot at the Fed chairmanship.

Essentially, Larry Summers was the author of his own demise. As Charlie Pierce observes:

The fact is that Senator Professor Warren was one of the driving forces behind a genuine populist uprising of liberal Democratic senators — and Jon Tester, too — and that uprising has kicked Larry Summers to the curb. She has quietly carved out a leadership role in the one area in which she is an acknowledged expert. (What she will do if it ever comes to a vote on making war in Syria is anybody’s guess.) Quite simply, she is doing what she said she would do when she was running for the Senate. She has enough allies to get done a lot of what she wants to get done. Anything this president — or his successor — wants to do as far as national economic policy now has to go through her, and through the coalition to which she belongs. I still don’t think the president will nominate Janet Yellin — He’s got his back up about it now — but whoever he does nominate is going to have to have a chat with the nice professor in the glasses who’s got just a few questions she’d like to ask.

I’m sure there are a lot of women, from Brooksley Born to Christina Romer, wryly smiling. Long term paybacks can be very satisfying.

Well, OK, I’m summarizing. I was startled to read at Agent Orange that Summers was a progressive thinker because Summers recognizes the massive increase in economic inequality that has taken place over the past three or four decades:

It would be, however, a serious mistake to suppose that our only problems are cyclical or amenable to macroeconomic solutions. Just as evolution from an agricultural to an industrial economy had far reaching implications for society, so too will the evolution from an industrial to a knowledge economy. Witness structural trends that predate the Great Recession and will be with us long after recovery is achieved: The most important of these is the strong shift in the market reward for a small minority of persons, relative to the rewards available to everyone else. In the United States, according to a recent CBO study, the incomes of the top 1 percent of the population have, after adjusting for inflation, risen by 275 percent from 1979 to 2007. At the same time, incomes for the middle class (in the study, the middle 60 percent of the income scale) grew by only 40 percent. Even this dismal figure overstates the fortunes of typical Americans; the number unable to find work or who have abandoned the job search has risen. In 1965, only 1 in 20 men between ages 25 and 54 was not working. By the end of this decade it will likely be 1 in 6-even if a full cyclical recovery is achieved.

…

 

There is no issue that will be more important to the politics of the industrialized world over the next generation than its response to a market system that distributes rewards increasingly inequitably and generates growing disaffection in the middle class. …

Now that the academic and evidentiary support for austerity is shot full of holes, President Obama has an opportunity to perform a face-saving extrication from his position.  Will he do it?

A recent study by a grad student at the University of Massachussets has pointed out critical errors in celebrated Harvard economists Carmen Reinhart and Ken Rogoff’s study which has been the much-cited intellectual underpinning of the austerity movement.  In short R-R’s study showed a correlation between high levels of national debt (with a stated critical threshold point at 90% of GDP) and slow economic growth.  The results of the study have been often stated as proof that debt at 90% GDP causes slow economic growth and that austerity measures must be employed to bring down debt.  

Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.

Many prominent economists had previously pointed out another major error in the way that the study has been used by those who favor austerity:

There were good reasons for not accepting the Reinhart and Rogoff results even before this error was uncovered, as many of us had argued. Most importantly there is a serious issue of the direction causation. Countries tend to have high debt levels because their economies are doing poorly.

Unfortunately, there was not much press notice of the causation problem in R-R’s study, probably because it’s the kind of story that the media find too difficult to explain.  But when the grad student from the University of Massachussets discovered spreadsheet errors in their work, now there was an issue that our news media could latch onto with confidence that it was within their ability to explain it.  Consequently it has gotten quite a bit of coverage and R-R’s study has been discredited.

In a surprise announcement President Barack Obama nominated Dartmouth College President Jim Yong Kim to head up the World Bank:

Dr. Kim’s name was not among those widely bandied about since Mr. (Robert B.) Zoellick announced his plans to move on last month. Highly respected among aid experts, Dr. Kim is an anthropologist and a physician who co-founded Partners in Health, a nonprofit that provides health care for the poor, and a former director of the department of H.I.V./AIDS at the World Health Organization. [..]

Dr. Kim, who was awarded a prestigious MacArthur Fellowship in 2003, was born in Seoul, South Korea, in 1959 and moved with his family to the United States when he was 5. He graduated from Brown University in 1982, earned an M.D. from Harvard University in 1991 and received a Ph.D. in anthropology there in 1993.

He was the first Asian-American to head an Ivy League institution when he took the Dartmouth post in 2009.

While working with Partners in Health in Lima, Peru, in the mid-1990s, Dr. Kim helped to develop a treatment program for multidrug-resistant tuberculosis, the first large-scale treatment of that disease in a poor country. Treatment programs for multidrug-resistant tuberculosis are now in place in more than 40 nations, according to Dr. Kim’s biography on Dartmouth’s Web site. He Kim also spearheaded the successful effort to reduce the price of the drugs used to treat this form of tuberculosis.

The United States traditionally selects the head of the World Bank and Europe the leader of its sister institution, the International Monetary Fund, since they were founded during World War II.

Apparently, Dr. Kim was suggested by former President Bill Clinton and Secretary of State Hillary Clinton, who was present with the President and Dr. Kim at the Rose Garden press conference. Though Dr. Kim will certainly be the front runner for the position, he isn’t the only candidate:

Angola, South Africa and Nigeria put forward Ngozi Okonjo-Iweala, the Nigerian finance minister and former World Bank official.

José Antonio Ocampo, the former finance minister of Colombia and a United Nations official, is rumored to be another candidate.

Jeffrey Sachs, the development economist and director of the Earth Institute at Columbia University, has put himself forward for the position.

If there are more than three candidates, the board will announce a “short list” and the new head will be named in time for the April meeting of the World Bank and the International Monetary Fund.

Dr. Kim is an excellent choice with experience in global development and management. He is well known and well liked. We wish him luck.

If there could possibly be a worse choice to head the World Bank when Robert Zoellick’s term expires later this year, I am sure that President Obama would find him or her. The rumors are that the president has decided to leave his “mark” on that banking institution by nominating Larry Summers for the position. Yes, that Larry Summers of the Harvard president of misogyny fame who was chief architect of banking deregulation that led to the repeal of Glass – Stiegel during the Clinton, that begat our current financial crisis. The Larry Summers who dismissed out of hand the suggestion that a bigger stimulus package would do more to boost the economy most likely because it was a woman, Christine Roemer, who proposed it.

And one of the biggest reasons why Larry could be one of the worst choices, as Felix Salmon explains, besides the fact Larry lacks the skills, he isn’t a diplomat:

The only way to be an effective World Bank president is to be an effective diplomat. Like all CEOs, the head of the Bank reports to a board of directors – but at the World Bank, the board of directors meets twice a week. And they’re not friendly hand-picked board members, either – they’re political appointees who fight their geographical corners, who live full-time in Washington, and who work full-time out of offices within the Bank itself. If you want to get anything done at the Bank, you need to persuade the board to leave you alone and not micromanage every decision you make.

You also need to be an almost superhuman manager. The World Bank has more than 10,000 employees from over 160 countries, with offices in more than 100 countries around the world. The range of cultural expectations they bring to their jobs is truly enormous, and the amount of political jostling and mutual incomprehension which results is entirely predictable. In order to manage this rabble, you need a very high level of cultural and interpersonal sensitivity.

And then there’s leadership: “the vision thing”, as Geoge HW Bush would put it, and the ability to get your organization to line up behind how you think the Bank – and, for that matter, the World – should work. Summers is not known for his work on global poverty reduction, and his previous tenure at the World Bank is remembered mainly for the pollution memo – an “ironic” proposal to increase pollution in poor countries, which resulted in the label “perfectly logical but totally insane” being attached to Summers for many years thereafter.

If Obama wants to leave his mark on the World Bank, this will definitely do it but not the way he’d like.

This past Wednesday “Barack Obama was a guest on The Daily Show, thereby becoming the first sitting president to appear as Jon Stewart’s guest. (In July, Obama became the first sitting president ever to appear on The View.) In the half-hour-long interview, Stewart quizzed his grizzled guest about health-care reform, the financial crisis, and the midterm elections.”

“Stewart’s most combative query concerned National Economic Council director Larry Summers-in particular, Obama’s hiring thereof. ‘We can’t expect different results with the same people,’ Stewart said, referring to Summers’s previous stint as treasury secretary under Bill Clinton. He continued, ‘Larry Summers … that seems like the exact same person.’ Obama, inadvertently quoting his imminently quotable predecessor, replied, ‘Larry Summers did a heckuva job.’ Stewart, somewhat shocked, advised him, ‘You don’t wanna use that phrase…'”

This morning at GRITtv Laura Flanders talked with journalist and Truthdig Editor-in-Chief Robert Scheer, who reminds that “Summers was the chief architect of Clinton-era policies that created the economic crisis in the first place, and that Obama’s appointment of him to get us out of it was never going to result in anything but more money being thrown at Wall Street.”

It’s no wonder that there is now so much irrepressible enthusiasm among the liberals and independents and progressives who tipped the balance in the democrats favor in 2006 and in 2008 to get out and vote for democrats in the 2010 midterm elections.