Tuesday, December 22, 2009


From the Wapo article everyone is talking about today:
The hands-off approach also was a matter of philosophy. Rather than scrutinize banks directly, the Fed decided to push them to appoint internal risk managers who imposed their own checks and balances. Regulators focused on watching the watchmen. Bernanke's predecessor, Alan Greenspan, said that banking was becoming too complicated for regulators to keep up. As he put it bluntly in 1994, self-regulation was increasingly necessary "largely because government regulators cannot do that job."

In a meeting with economists, Bernanke apparently dismissed claims that the housing crisis was in a bubble. Krugman writes that this new news has led him to think worse of his old department head.

However, here at "Economists for Firing Larry Summers" we never had such a rosy opinion of the Fed Chair in the first place...

Also, I'll weigh in on Krugman's claim that Obama "was always centrist". My view is rather that, on social issues, or things such as health care, he wanted to be as liberal as possible. On financial crisis issues, I suspect it's rather the case that he wasn't sure what the proper course of action was, and so took the opinion of the most alpha-malish liberal economist from Harvard he could find, assuming, that, if you're tenured at Harvard at 28 you must be on top of things. Obama could hardly have known about how worthless many leading Harvard economists are...


  1. I could not disagree more strongly.

    He's always been a squish on abortion, from his days in the Illinois State Senate abstaining on abortion restrictions, and on gay rights, it's clear that he's directed the DOD, DOJ and the OPM to vociferously defend DADT and DOMA, so he is at best unwilling to expend political capital on civil rights for gays.

    He also aggressively courted wall street, and, as Taibbi so thoroughly demonstrated, dumped anyone who had any intent to either regulate finance, including Paul Volker, who is on a do-nothing panel.

    Barack Obama is a corporate-o-crat who leans right on social issues.

  2. Oh my goodness, Thorstein, you're alive!! And not a moment too soon.

    I have spent a lot of time in recent years building a website dedicated to the Veblen who died in 1929.


    So I am happy to see that you have progressed to the stage where you are at a fancy Ivy League school and discovered your expensive professors in economics are utterly full of shit. Your are making FINE progress, new Veblen. The original Veblen had those moments with John Bates Clark (Carleton--economics) and Graham Sumner (Yale--social Darwinism.)

  3. Maybe this isn’t the right post to respond to but I had to get this off my chest before Christmas and in time for a new year.

    This is a suggestion to improve your blog’s usefulness in achieving its goal of getting Larry fired. Shamelessly copy/adopt a format idea from Simon Johnson’s blog “The Baseline Scenario.” Add an opening section like Johnson and Kwak’s “Orientation” section. Explain why Larry should be fired and provide examples of his major failures and shortcomings. Mostly we need a comprehensive catalog of Larry’s major failures listed and explained in one place. Your blog is an ideal location.

    I believe Larry should be fired because: while he may have many strong points, he has one overriding fault. When it comes to the really big important policy decisions, when judgment is needed most, he has a consistent record of being wrong, often 180 degrees wrong.

    I don’t believe anyone denies he has considerable intelligence, has had many (minor) economic insights, can catalog and explain most, maybe all, of economic theory and history, and can suck up to the powerful as skillfully as anyone in the history of civilization. And, once ensconced at the center of the government he is a masterful player who can maneuver his preeminence and survival as long as he wants. It appears to me his main goal is to BE a player, be at the center of things, to survive there, but NOT to achieve anything.

    The President needs sound judgment and advice from his closest advisors. The President doesn’t have a macroeconomic background and his longtime buddy Goolsbee isn’t a macro guy. Larry’s the macro guy who is closest to the President. That suck-up-to-the-powerful clone, Geitner, isn’t providing a different view either. It appears the person with the best wise, grey-beard judgment, Volker, has been elbowed out of the loop by Larry.

    So, with economic recovery and banking reform at the top of the president’s agenda in the coming year, we need your best efforts to help get Larry (and Tim) fired. A Wikipedia-type catalog where all Larry haters can contribute accurate history and anecdotes to flesh out a balanced analysis is, I believe, timely and sorely needed.

    Maybe we’re wrong about the guy. Maybe Larry is the best guy for the job. Maybe the President really wants a toady to the powerful. But, I’d sure like to see well-informed opinion get it right about this guy. Please don’t leave his current reputation in the hands of those puff pieces printed in the past year.

  4. Word up on the analysis of Larry Summers, anonymous.

    Much like Condoleeza Rice, he is a talented academician who has been wrong on everything in the real world. (See swaps, credit, Harvard)

  5. Good comments and suggestions above -- I'll address everything after the christmas break -- I'm at the 'rents place, barely surviving with slow Internet...


  6. Re: Matt Saroff

    Good point on DOMA and DODT. Obama could definitely do more for the Gay community.

    But on health care, I think Obama really tried to get as liberal a bill as he possibly could. I also thought with the Housing Bill earlier this year, it was aggressive and just not the sort of bill that "conservatives" would like in any way.

    With Financial regulation, however, I think a big part of it is that President Obama sees tenured-at-28-at-Harvard Summers to be a true Democrat and a genius economist. Summers is in the guy's ear. And since Obama is not an economist, he doesn't realize that Harvard Econ is no seal of competency. The emperor (LS) has no clothes... I see the problem more as a failure of Obama's econ "help" rather than in any underlying conservatism on Obama's part. The horrid decision to reappoint Ben Bernanke falls into this category.

    By now, of course, reality should have sunk in, but that would mean that Obama would have to admit to himself that he made a colossal mistake in giving Larry Summers so much power over the administration. Psychologically, it's much easier for him to soldier on and pretend to himself that he made the right move...

  7. Re: Anonymous...

    Great suggestions. I've tinkered a bit with the blog layout, and will continue to make changes.

    For example, here is the laundry list of Summers' trangressions: http://firelarrysummersnow.blogspot.com/2009/01/raison-detre.html

    -- which I've now linked on the upper rhs of the blog, and which itself needs to be updated!

  8. «And since Obama is not an economist, he doesn't realize that Harvard Econ is no seal of competency.»

    Note that Obama is an Harvard graduate himself, and his wife is an Harvard graduate too. They are unlikely to be cynical about what made their careers too.