I'm Not Wild About Larry

When it's time for a new Federal Reserve chief, Yellen is a far smarter pick than Summers

By Rana Foroohar Monday, Aug. 19, 2013
    • Yellen: Sam Hodgson / Bloomberg / Getty Images; Summers: Jerome Favre / Bloomberg / Getty Images

    Left: Janet Yellen; right: Larry Summers.

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    All that goes to the fact that Yellen has EQ as well as IQ (though some insiders joke that she gets a disproportionate boost on this score in comparison with Summers). Conversations about Summers often begin and end with how smart he is. Yes, he's a brilliant economist. But he's also been wrong about many things, from deregulation to the favored treatment of bankers over homeowners during the financial crisis to structuring a bill that actually forbade the Commodity Futures Trading Commission to regulate derivatives. (I won't even get into the Harvard gender remarks.) It's strange to me that those missteps are often ignored and equally strange that Beltway and Wall Street types will say that Yellen doesn't have enough "gravitas." She is a Ph.D. in economics with a stellar academic career. (Her research, which includes insights like the fact that lower wages can lead to higher unemployment, is fascinating.) She taught at Berkeley, ran the Council of Economic Advisers and steered the Fed's San Francisco bank successfully through the subprime crisis, which she raised concerns about as early as 2005. How much more gravitas do you need?

    I'm sure Yellen has made and will make her share of mistakes. She's less concerned about inflation than some other smart observers and more willing than some to risk market bubbles to keep the Fed's asset-buying program going longer. But few would say she isn't a great choice for the job. Insiders note that "Larry is the guy the President calls" when he needs to make big economic-policy decisions. And I'll bet Summers will continue to take his calls. But in an era in which reconnecting finance and the real economy is our chief challenge and consensus building is crucial, Obama should pick a Fed chief with a résumé more suited to those tasks.

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