Nor should you pity President 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 reelection 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.
In 2010, Republicans mounted an unjustified but successful partisan attack on Obama’s nomination of Peter Diamond to be one of the Fed’s seven governors.
Still, the Fed managed to avoid undue politicization. Chairman is the key job, and all chairmen since August 1979 — Paul A. Volcker, Alan H. Greenspan and Bernanke — served at least part of their tenure after being reappointed by a president of the opposite party.
In all that time, the closest Senate confirmation vote was 70 to 30 in favor of Bernanke’s reappointment in 2010.
Now Summers’s withdrawal under fire suggests the Fed’s top position may be subject not only to fierce wrangling between the parties but within them. He never got a hearing, just a lot of flak about what he or his competitor, Janet Yellen, mightdo in office.
Supposedly Summers would have unduly tightened monetary policy, perhaps even more than the bond-buying “taper” Bernanke is already weighing. Says who? Last I checked, Summers hadn’t tipped his hand about monetary policy and was waging an op-ed campaign for greater infrastructure spending, out of concern for jobs.