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editorial

Tornado at the Fed? Obama has better choices than Summers

When Federal Reserve chairman Ben Bernanke’s term expires in January, his successor’s first duty will likely be to oversee the end of quantitative easing, the Fed’s massive bond-buying program to stimulate the economy. It’ll be a delicate task, one that will require clear, deliberate communication, and it’s best overseen by someone who understands and values deeply how a dynamic, interconnected institution like a central bank should operate. Larry Summers, the hard-charging former Harvard president who looms large in Democratic economic-policy circles, is not that person. His talents, while substantial, don’t match up well with the Fed’s needs, and his liabilities are far from irrelevant to the job.

A former Treasury secretary and top Obama economic adviser, Summers is widely considered one of his generation’s leading economic thinkers. He’s rumored to be the president’s favored candidate. Still, little about his background makes the case he’ll be a good custodian of the Fed’s initiatives to avoid future financial risk. Throughout the 1990s, Summers championed deregulation of the securities industry. He blocked early efforts by Brooksley Born, then chairwoman of the Commodity Futures Trading Commission, to regulate derivatives, the financial instrument most to blame for the housing bubble. Today, Summers has close Wall Street ties, especially to Citigroup, where he has been a paid consultant since 2012. That relationship, plus Summers’ political ties, would undercut the Fed’s image as a credible independent regulator.

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