Of Summers, Discontent

Based on conversations with "plugged-in sources", Ezra Klein reports:

The word among Federal Reserve watchers right now is that the choice is down to Janet Yellen or Larry Summers as Ben Bernanke’s replacement. I can’t find anyone who really thinks it’ll be Roger Ferguson, Tim Geithner, Alan Blinder, or some other dark horse.

People dismissed Summers’s chances a month or two ago, but he’s increasingly viewed as the leading candidate today — and opinions on this, for reasons I don’t fully understand (though I suspect have to do with a bunch of elite trial balloons going up at the same time), have really hardened in the last 72 hours.

I'd thought the persistent reports that Summers was a leading candidate represented some wishful thinking among writers in need of a more interesting story; like Matt Yglesias, I thought Yellen over Summers a no-brainer.  Yellen's qualifications are beyond doubt - she has strong academic credentials and experience at high levels of the Fed.  From a political perspective, Summers seems to have obvious drawbacks - supposedly one of the reasons Obama appointed him CEA chair rather than Treasury Secretary at the beginning of his administration was to avoid a messy confirmation fight (the CEA position does not require Senate approval).

Moreover, as Bill McBride details, "Yellen has a much better track record of correctly analyzing the economic situation, while Summers has frequently been wrong (but never in doubt)" and Cardiff Garcia's endorsement of Yellen provides further evidence on that point.  Scott Sumner is also unimpressed with Summers' views (or lack thereof) on monetary policy.

Also, as Paul Krugman notes:

[Y]ou need someone who can be effective at bringing the rest of the Fed along — but that’s a bit of a mysterious quality. Ben Bernanke has been far better at that than one might have expected from an academic. Looking forward, which is better: someone who has already demonstrated an ability to get along with her Fed colleagues, or someone who has a reputation as a tough guy but also a reputation for raising hackles? 

As Richard Grossman explains, one of Bernanke's big achievements has been to move away from the "cult of personality" style of central banking that was one of the worst aspects of the Greenspan era.  In that respect, appointing someone with a reputation for being obnoxious "strong personality" like Summers would likely be a step backward.

Up to this point, I've refrained from mentioning the fact that an appointment of Yellen would be historic because she would be the first woman to lead the Fed.  Even without taking that into consideration, its clear that she is a strong candidate, and Summers a highly problematic one.  But breaking the "glass ceiling" that still seems to exist in the monetary policy world would be no small thing.

Ezra Klein recently argued in a column that there was an undercurrent of sexism in some of the arguments being made against Yellen (e.g., "She lacks 'toughness.' She’s short on 'gravitas.' Too 'soft-spoken' or 'passive.'").  He pointed out that

An interesting wrinkle is that the current chairman of the Federal Reserve doesn’t fit the default masculine leadership model himself. Bernanke is soft-spoken and conciliatory. He doesn’t pound the table in meetings or preen at conferences. When he took the job, there were concerns about his gravitas. He’s not a social or political force around Washington in the way his predecessor, Alan Greenspan, was. He leads by consensus, with none of the high-stakes showdowns that burnished the legend of former Fed chairman Paul Volcker. Yet Bernanke has managed to pull the Federal Reserve through an extraordinarily turbulent period.

Yellen’s background bears similarities to Bernanke’s, though she’s got more Washington and Fed experience than he did at the time of his appointment. 

Klein generally seems to know what he's talking about, and I believe him when he says his reporting is well-sourced.  His story lays out the reasons Obama is apparently leaning towards Summers, none of which I find very persuasive.  I hope he's wrong on this one.

See also: Noam Scheiber, who asks "can we at least talk it over first?"

Update (8/1): There has been quite an outpouring of commentary on this in the last week.  While much of it focuses on the perceived drawbacks of Summers (e.g., Paul Krugman), James Hamilton makes a case for Yellen.  The New York Times has editorialized in favor of Yellen, and President Obama defended Summers at a meeting with congressional Democrats (he also mentioned Don Kohn as a possibility for the Fed position).  This widespread, almost campaign-like debate is little uncomfortable for those who subscribe to the view that the Fed should be somewhat removed from politics.

Ezra Klein dug further into the administration's arguments for Summers, and Brad DeLong makes a (somewhat lonely) pro-Summers case (see also his blog post).