Shots in the Dark

CNBC reported yesterday that the President’s pick to be the next Fed chair is almost certainly Larry Summers.

Buckle up, America, it’s going to be a wild ride!

Ezra Klein in WashPo follows up:

The White House’s economic team is lockstep behind Summers. And President Obama’s mind has long been pretty much made up. His preference for Summers comes from two years of working with the guy every single day and two more years in which they were routinely in touch. It’s not a soft lean.

The one question, Klein says, is whether Senate Democrats would really refuse to support Summers—and if the White House would accept that fight, or choose not to have it.

If the comments following the article are representative of anything, the President could certainly expect a fight from the progressive wing of his party.

Yesterday I had a long talk with a Bloomberg reporter working on a piece about Summers. His angle—at least in terms of our conversation—is whether the Harvard experience is relevant to this debate about whether Summers should be Fed chair. In particular, he was interested in my opinion about the debt swaps Summers persuaded HMC to make and whether that was a bad call.

I’m not enough of a financial expert to give an opinion on that, but I did say two things. One, as I’ve said before in this space, on his way out the door Summers could have said, “Hey, by the way, those financial instruments I got us into…? Might want to keep an eye on those.”

And b, more important for the purposes of this conversation, is that Summers thought he was qualified to make investment decisions for HMC—more qualified than Jack Meyer, whom most observers would have agreed was doing a rather remarkable job at growing Harvard’s wealth. Summers’ move to make investment decisions was clearly an expansion of the president’s role and a reflection of his remarkable, let’s say, self-confidence.

And to me, that extension of power, more than whether or not Harvard should have gotten out of the swaps sooner than it did (obviously it should have), is the real problem here. There was a system in place; it was working; Summers’ sense of self-importance, his desire to be involved in everything and his certitude that he could not only be involved, but run everything—destabilized a successfully functioning system. The seeds of multi-billion dollar losses were thus sown.

Which, to me, feels absolutely relevant to the issue of whether Larry Summers should lead the Fed.

One other note: The reporter said he’d reached out to folks at Harvard to talk about the Summers presidency, and no one really would help. People just didn’t want to talk to him.

That’s unfortunate. I can understand why people might not want to revisit painful memories, but there’s a lot at stake here.

Update: Here’s that Bloomberg Business Week piece for which I and other folks were interviewed. The quote/paraphrase from former provost Steve Hyman, if it’s accurate, is…interesting.

So is the attempt to redefine the swaps as a collective idea of which LWS was only a small, practically shrinking voice. I can’t speak to this as true, but no one’s ever said it before and one has to wonder why they’d suddenly put this theory out now.

In other news, the CEO of a Wall Street investment firm says that the appointment of Summers to the Fed could be a “black swan” event, which is to say a completely unexpected phenomenon for which no one has prepared and throws the markets into turmoil.

Meanwhile, the Wall Street Journal reports that Janet Yellen “has downplayed her chances of getting the [Fed] job.” That, of course, is what one does. But it’s also what one does if you really do think you’re not going to get the job and you want to start lowering expectations.

Update #2: I received an anonymous email arguing that I made several mistakes in describing the swaps. One was the idea that LHS pushed them singlehandedly; the correspondent argued that quite a few people were involved in that decision. The other was to suggest that the failure to extricate from them was not LHS’, because the presence of these swaps on Harvard’s balance sheet was far from secret. I will leave those who know more about this than I do to continue to argue about it, but thought it only fair to present that perspective.

Also, thanks to the commenters who pointed out that I didn’t link to the Bloomberg story. I actually did-just made a technical gaffe, now corrected.

I just noticed that Janet Yellen went to Brown for an undergraduate degree and Yale for her doctorate.

By contrast, Larry Summers attended M.I.T., then Harvard.

I wonder how much of their differing world views has been shaped by the philosophical divides between those two sets of schools…..

Even as he was horrified by it. As was I while watching it—partly because of several moments of painful self-recognition.

It’s been, what—five years since the last Zero 7 album? Five long, hard years.

The wait may almost be over. Here’s a new song from them.

Despite what Felix Salmon rightly calls “one of the most badly-orchestrated trial balloons I’ve seen in a very long time“—one in which the possibility that the President would nominate Larry Summers to be the next Fed chair provoked dismay, outrage and criticism that is, I think, without precedent for a nomination that hasn’t yet happened—Summers seems likely to be President Obama’s pick to head the Federal Reserve.

In yesterday’s Washington Post, Neil Irwin, who probably covers the Fed better than anyone else, wrote about the White House’s “uneasiness” with Yellen.

She is methodical, not manic. And the prevailing style of the White House insiders advising on the decision leans a bit more toward manic. Geithner, for example, jumps from meeting to meeting, from hearing to phone call, without so much as a set of talking points to work from….

As Salmon points out, this reasoning reeks of sexism; “It’s not that there’s anything specifically wrong with Yellen, we just don’t like her style. ”

Wouldn’t it be ironic if Larry Summers, who lost a job in part because of a furor over his alleged sexism, actually got a job (and one that he wants more, I suspect) because of sexism?

And in today’s Post, Zachary Goldfarb writes on the “behind-the-scenes war” between Summers and Yellen allies to land their candidate the job—a war it sounds like the Summers camp is winning.

As [former Treasury secretary] Geithner has helped Summers navigate the uproar this summer, he also has been consulted by the president on whom the next Fed chairman should be, said a person familiar with the matter. Longtime advisers to Obama such as Jim Messina and Stephanie Cutter, now in the private sector and more skilled in the world of politics and media than Summers, offered to lend a hand to their former colleague.

Meanwhile, allies of Yellen publicized her attributes in the media while privately lobbying on her behalf — often without much success.

(Just as an aside: After years of observation, Tim Geithner seems like a really unpleasant person. Don’t you think?)

The Post points out that Yellen has visited the White House only once in the past two and a half years—which is, frankly, appropriate, given the political independence that is part of the Fed’s mandate—while Summers has crashed 1600 Pennsylvania 15 times.

Uh-oh.

Summers has witnessed the drama this summer from a home on Cape Cod, Mass., where he occasionally has talked to former colleagues between playing golf and tennis. Friends say he has been fairly philosophical about the whole thing — hoping that he is nominated, but not overly tangled up in plotting.

This, of course, is complete bullshit. While Summers may not know everything that’s being done on his behalf, this is clearly so that he can say that he doesn’t know everything being done on his behalf. But he’s clearly supportive of those efforts and doing everything he can to land himself the job.

(One commenter on the Post site points out that, while Yellen is actually at work doing her job, Summers is kicking back in a luxury home paid for by Wall Street millions. True or not, that sentiment is representative of a legitimate criticism of LHS—that he’s indebted to the Street, which has made him a rich man.)

You hope that the President is not so isolated from reality that he fails to see just how big a fight—and how unnecessary a fight—he would provoke by picking Summers.

Kansas senator Pat Roberts, a Republican, just openly announced his hostility to Summers.

“I wouldn’t want Larry Summers to mow my yard,” Roberts said. “He’s terribly controversial and brusque and I don’t think he works well with either side of the aisle, quite frankly.”

All true! But highly unusual of a senator to come out and put things so bluntly.

Yesterday Reuters reported that dozens of professors sent the President a letter urging him not to pick Summers. For what that’s worth. (Were any Harvard profs on it? I can’t find out.)

And then there’s this cartoon, sent to me by a reader (as was the previous link):

Does Obama see this stuff? If he does, does he care?

As I’ve written before, there’s one lesson that President Obama should take from the fight over the Fed chair, a fight that, so far as I can tell, has never happened before in the history of that institution: Everything Larry Summers touches turns to controversy.

That would be a terrible quality for the chair of the Federal Reserve to possess.

MLB has suspended Red Sox bonehead pitcher Ryan Dempster for five games for deliberately hitting Alex Rodriguez with a pitch.

Good.

Flailing hedge funder and Harvard grad/donor Buddy Fletcher is trying to sell his—for $8.85 million.

But I have a feeling the price is negotiable; this is what you’d call a sale under pressure…

I saw last night one of the most unpleasant incidents I’ve ever seen on a baseball diamond. Naturally it came from a Red Sox.

With Alex Rodriguez hitting for the first time last night, Red Sox starter Ryan Dempster threw at him on the first pitch. The ball actually went behind Rodriguez. Then he threw high and tight on the next two pitches. Then, apparently upset that he’d missed the first time, Dempster hit A-Rod in the back, not far from the head.

In a moment that I’d love to see them explain to their children, the Boston animals fans roared with approval.

This from a city whose players—and players’ sons—commit murder. (And the Jerry Remy thing is so deeply sad.)

How Dempster was not immediately thrown out of the game, I don’t understand. Yankee manager Joe Girardi, to his credit, defended his player so forcefully that he was thrown out of the game. As a parting shot, he called Dempster a “fucking coward,” which he is. Standing 60 feet away from someone and throwing a baseball at 90-plus miles an hour at his body isn’t a principled move, and it’s certainly not a courageous one. Now Dempster doesn’t even have the balls to take responsibility for his actions and admit that he did it on purpose. I guess he doesn’t want to get suspended.

As the Globe’s Nick Cafardo writes,

What was served by this act by Dempster? That he and other players hate A-Rod? They already hate him.

Is A-Rod the first guy to take steroids? Did pitchers plunk Barry Bonds because he took steroids? Or Mark McGwire? Or Sammy Sosa? Did they plunk Melky Cabrera after he returned from his 50-game suspension?

Rather convenient of Cafardo not to mention the possibility that, well, certain Red Sox players have surely taken steroids.

I understand that Alex Rodriguez isn’t a well-liked guy. He’s certainly not my favorite Yankee. But what happened last night was bush league even by Boston standards. Ryan Dempster and the Red Sox fans have done their team—and their organization—an enormous disservice. Let’s hope that this move backfires and causes some of the fans and players in baseball to reconsider their behavior towards A-Rod.

John Sexton is out at the end of his contract and the university board agrees to stop awarding low-interest loans so NYU celebrities can buy summer homes….

But NYU is still plowing ahead with that ill-conceived 2 million square foot expansion in Greenwich Village….