Summers No Longer Too Big To Fail

On the fifth anniversary of Lehman’s bankrupty and the ensuing meltdown, Larry Summers has tasted the agony of defeat. He has withdrawn from consideration for the post of Federal Reserve chair. He did the right thing. Thank goodness a few Democratic Senators made their feelings known. Maybe he would have made a terrific Fed leader, but his temperament is suspect to say the least. Do we really want somebody, anybody, who emanates an “I am too big to fail” vibe in charge of the world’s (still) main reserve currency? If Summers or somebody like him became head of the Fed, he or she (I am not saying Janet Yellen resembles Summers) also becomes too big to save. That would likely become a big problem before long.

You might have hoped that in 2008 we would have seized the day to deal with regulatory capture and moral hazard (big subjects for another day). Dodd-Frank regulations are less than half done, and the Volcker Rule has not been implemented. But we can hope than someone less captive than Larry Summers may become Fed chair.

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