Richard Trumka, president of America's largest federation of labor unions, the AFL-CIO, is supporting Janet Yellen over Larry Summers to succeed Federal Reserve chief Ben Bernanke, because of her call for central bank policies that aggressively pursue 'maximum employment.'
Referring primarily to the era of deregulation that led to the 2007 US housing bubble, burst, and subsequent financial crisis, Trumka called Yellen the "better candidate…when things were going wrong in the economy, in each of those instances, she predicted them accurately. Larry didn't."
Organized labor in the US is concerned that, if chosen, Summers would hesitate to sufficiently stimulate the economy so that jobs and wages could return to pre-crisis levels.
Yellen, who says that America's jobless “are not just statistics," "appears to be speaking to many of our concerns…we would need to be convinced that [Summers] shares our concerns on unemployment and stagnant wage growth,” said Owen Hernstadt of the International Association of Machinists and Aerospace Workers.
Here's what some leading economists and analysts had to say:
Julia Coronado, chief economist at BNP Paribas, former Fed staffer
“People know Larry Summers, and Larry Summers is someone who tends to say what he thinks, who thinks he is the smartest person in the room, and that makes market participants very nervous about what he would do at the Fed.”
Princeton’s Paul Krugman
“Appointing Yellen — the first woman Fed chair, and one with utterly unquestioned credentials — would be an evidently historic act. If it’s Summers, you know what everyone will bring up: his pro-deregulation stance of the 1990s.”
Tyler Cowen, George Mason University and blog Marginal Revolution
“It is easier for me to imagine Summers having credibility with a Republican administration, and having a real voice, relative to Yellen. He simply has more right-wing street cred, keeping in mind that Yellen is a former Professor from Berkeley who has never really taken heat from the left, unlike Summers. I think that overall the voice of the Fed within government is a clear positive. The chance of a Republican administration, come the next election, is probably at least forty percent. Thus I would prefer Summers.”
Sheila Bair, former chairman, Federal Deposit Insurance Corp.
“Unlike Larry Summers, Tim Geithner, and other Bob Rubin — minions frequently mentioned in the financial press as potential Bernanke successors — she [Yellen] was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007.”
Credit Suisse research note
“A Summers chairmanship would bring with it more initial uncertainty; the markets know Yellen’s views on monetary policy better than they know those of Summers.”
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