Felix Salmon, writing on Lawrence Summers as a candidate for chairman of the Federal Reserve:
In other words, when there’s a crisis, it really doesn’t matter whether you’re Ben Bernanke or Mervyn King or Jean-Claude Trichet — or Janet Yellen or Larry Summers or pretty much anybody else bar Rand Paul. The central banker’s crisis playbook is a thin document, and easy enough for anyone to master. It’s what central bankers do when there isn’t a crisis that matters, since they’re all going to do exactly the same thing when there is one.
More importantly, financial crises aren’t things which just happen, like asteroids or earthquakes. They have causes — which means that they can also be prevented. Crisis management is an important skill, and it’s one where Larry Summers has a lot of experience. But crisis prevention is the thing which really matters. Summers has demonstrated essentially zero crisis-prevention skills: his deregulatory instincts helped make the financial crisis more likely and more severe when it happened. Mark Carney, to take one obvious example, is a better central banker than Larry Summers will ever be, because he did something vastly more praiseworthy than managing a crisis: he prevented a crisis from ever happening in the first place.
As a result, Obama should be bending over backwards to appoint not the candidate who can best manage a financial crisis, but rather the candidate who is most likely to stop a crisis from happening in the first place. That candidate is Janet Yellen. (Or maybe Mark Carney, but he’s taken.)
Does Dr. Summers have what it takes to maintain a future state of crisis (which by nearly any reckoning he would have had a role in fomenting) for as long as possible? I think he does.
Summers certainly didn’t handle crisis well when he forced the school to invest operating funds in high-risk derivatives and caused a $2 billion loss during the following financial crisis.