Obama has thrown the Fed Chair race into a tizzy with his posing former Vice Chair, Donald Kohn, as the third person under consideration to succeed Chairman Ben at the Fed, along with Janet Yellen and Lawrence Summers. Pretty clearly he likes and wants Summers and is ticked that the trial balloon for Summers resulted in a massive and widespread denunciation of him and fervent defense of Janet Yellen and her candidacy. He and his Summers-Rubin-cronies advisers have had to beat a strategic retreat, noting no decision until fall.
As it is, I think that the Kohn balloon is not for real. This is a scam to advance the candidacy of Summers over Yellen. Well, maybe not a total scam. Clearly Kohn's vast experience at the Fed makes him a serious candidate. But he has advantages that Yellen has, that vast experience at the Fed especially, an issue that has been used against Summers. So, bringing him in presumably undercuts Yellen by drawing off support from the hardcore Fed crowd. Furthermore, he has a reputation for being more conservative than Summers, if that descriptor even means anything anymore in connection with the Fed. Given that Yellen is being labeled as a liberal dove who is backed by the liberal wing of Dem senators (with the WSJ whining about the danger of a "female-backed currency," eeeek!), this makes Summers the centrist, supposedly making him acceptable to liberals if Kohn appears to be the real alternative to Yellen.
So, there it is. I think that Gene Sperling has convinced Obama that bringing in Kohn will help the candidacy of Summer, and I think they may be right. The game is getting dirtier by the minute.
Barkley Rosser
4 comments:
Among economist bloggers - Brad DeLong seems to be the champion for Summers but even Brad can't bring himself to put Kohn even on the long list. OK, John Taylor likes Kohn as John hopes Kohn will return us to the Taylor rule. That alone should disqualify Kohn. If Obama has ruled out Alan Blinder and Christina Romer, it is Yellen or Summers. Nothing else makes any sense. I'm still hoping it will be Yellen.
I have been a loud proponent of Janet all along and continue to be, which is why I worry about what is going on here. Kohn clearly lacks the sort of knowledge of economics that both Yellen and Summers have, and has not had the forecasting record that she has had (not clear he is any worse than Summers on that one).
His big advantage is his long experience in the Fed system, which puts him in competition with Yellen. But, unlike her, that is the only place he has been, an insider gradually moving up from the bottom over decades. He knows fine details, but he is really hurting on the big picture.
The other salient fact about him is that apparently he was the main sidekick and adviser of Greenspan when he was in. Certainly some view that as a recommendation, but it is also something to give many of us great pause.
In any case, I suspect this latter is what may have put him on Obama's radar screen as a serious candicate to the extent that he is not just a stalking horse to disrupt the push for Yellen and pave the way for Summers, as I described in my post.
Check out Rattner's Op-Ed at the NYTimes today strongly supporting Summers. I await an editorial counter from the NYTimes. Rattner says nothing negative about Yellen; in fact, he is so busy promoting Summers that he ignores Yellen. This may be Obama's "Summers of Discontent."
Rattner is part of the Rubin mafia that pushes Summers from Wall Street. Funny how Rattner says nothing about his own past connections. The NY Times likes that crowd, even though it has officially editorialized in favor of Yellen.
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