It being an off-election year, alternative horse races must be found. Current Fed chair Ben Bernanke isn’t slated to step down until January, but rumors of who President Obama will chose to succeed him have already narrowed down the candidates to two: current Fed vice chair Janet Yellen, and former Treasury Secretary (and Citi consultant) Larry Summers. Ezra Klein reported earlier this week that Summers is the favorite at the White House.
But reports that Summers will be the nominee have brought a host of protests. As Felix wrote on Wednesday: “The arguments for Yellen are very strong; the arguments against Summers are strong; the arguments for Summers are weak; and the arguments against Yellen are all but nonexistent”.
In favor of Summers, Edward Luce argues that he has more “intellectual leadership” than the other candidates, which is the most important quality in a Fed chair, and that Yellen is too dovish. Tyler Cowen thinks that Summers “has more right-wing street cred,” meaning he would be more effective should a Republican take over the presidency in 2016. Klein’s sources essentially argue that the administration favors Summers because they are comfortable with him. According to the NYT, Tim Geithner and the president’s chief economic adviser Gene Sperling are quietly pushing for Summers. Summers is also, Klein’s sources say, “trusted by markets”.
The arguments for Yellen? She “has a much better track record of correctly analyzing the economic situation,” according to Bill McBride. Cardiff Garcia gives Yellen the edge in experience: she has “a much longer entry in her CV as a monetary policymaker”. Yellen would also make a far superior chair of the Federal Open Market Committee -- perhaps the most important role of the Fed chairman in the coming years -- argues Mike Konczal. There’s a base of support for Yellen in the Senate, which will eventually have to confirm President Obama’s pick. Richard McGregor and Robin Harding report that a letter is circulating among Senate Democrats backing Yellen.
Then of course, there are the arguments that are neither pro-Summers nor pro-Yellen, but specifically anti-Summers. Scott Sumner writes that Summers “seems to think the slowest NGDP growth since Herbert Hoover was president is just fine”. Noam Scheiber thinks “Summers is too fond of big shots—he’s always wanted to be part of the most exclusive club that will have him”. Felix trots out all of the controversies that have involved Summers over the last couple of decades:
...the utter shambles that Summers made of Harvard, or the way he treated Cornel West, or his tone-deaf speech about women’s aptitude, or the pollution memo, or the Shleifer affair, or the way he shut down Brooksley Born at the CFTC, or his role in repealing Glass-Steagall, or his generally toxic combination of ego and temper...
The third count against Summers -- based on his remarks that the lack of women in the science may have something to do with innate ability -- will certainly be front-and-center, particularly considering the “sexist whisper campaign” that Ezra Klein and the NYT report is being waged against Yellen behind-the-scenes. -- Shane Ferro
On to today’s links:
Long Reads
How America's top tech companies created the surveillance state - Michael Hirsh
The economics of a North Dakota boomtown through the eyes of a traveling stripper - BuzzFeed
MOOCs
"Designing a higher education system around maintaining living standards for college professors is an insane idea" - Jonathan Chait
Online education can be good or cheap, but not both - Reihan Salam
Cephalopods
Fab takes the stand, day 2: Emphasizes his less-than-fabulous low status at GS - Bloomberg
Alpha
Steve Cohen's assets may be in jeopardy in SAC case - Bloomberg
Sad Declines
Zynga gives up gambling, hope - Slate
China
Winners and losers in China's economic rebalancing - FT
Quitters
JP Morgan is "pursuing strategic alternatives" to its physical commodities business - JP Morgan
Awesome
Greek factory workers re-open the plant previously run by their bankrupt former bosses
FYI
Dunkin Donuts plans to teach California what a Munchkin is - Bloomberg Businessweek
Earnings
Amazon reports surprise loss because of warehouse spending - Bloomberg
Wonks
Legalize insider trading: "We don’t want a nation of shareholders... We want a nation of index fund holders" - Dylan Matthews
A few issues with Obama's view of economic history - Brad DeLong
Legalese
Halliburton pays the max fine for destroying evidence in the Gulf oil spill case. A max of $200k, that is - NYT
Cosmic
Lloyd Blankfein defines infinity - CNBC
With Their Powers Combined
Sinkholes threaten to merge - The Sentinel
YIKES
Exactly what this week was missing: Dominique Strauss-Kahn to be tried for pimping - Reuters
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