Shed no tears for Lawrence H. Summers, forced out of contention for the Federal Reserve chairmanship by liberal Democratic opponents who thought he was too close to Wall Street.
Though brilliant, the Harvard economist has nonetheless ticked off too many people in his long and brash career, not only on policy grounds but also because of his famously caustic personality. Note to future careerists: Niceness counts.
Nor should you pity President Barack Obama, who reportedly favored Summers. The president is reaping what he sowed. He started the unseemly squabble among Democrats by awkwardly announcing that the current chairman, Ben S. Bernanke, had “already stayed a lot longer than he wanted or he was supposed to.” That was in June, when Bernanke was still in the middle of a second four-year term to which Obama had appointed him and had not yet publicized his own intentions.
Obama defended Summers in closed-door meetings with congressional Democrats but never mustered the gumption to nominate him and bring his party into line.
No, the real victims here are the Federal Reserve and its chairmanship, both of which are supposed to be above politics but have been dragged deep into the same political muck that stains every other institution in this polarized capital. The question is how much Fed independence, actual and perceived, has been harmed and for how long.
Of course, the Fed has never been completely apolitical. President Richard Nixon pushed his handpicked Republican Fed chairman, Arthur Burns, to engineer a boom for his 1972 re-election campaign. The 1978 Humphrey-Hawkins Act, passed by a Democratic Congress and signed by Democratic President Jimmy Carter, put the Fed in charge of value-laden (i.e., political) trade-offs by requiring it to minimize both inflation and unemployment.
Meanwhile, the Fed's role as a financial regulator has grown, subjecting it to constant lobbying from interest groups and their allies in Congress.