All In   |  September 16, 2013

Summers bows out for Fed Chair

Larry Summers withdrew his name from consideration for Chairman of the Federal Reserve. Chris Hayes talks to Sen. Sherrod Brown about the letter circulating in favor of Janet Yellen for the position, as well as what Summers’ withdrawing his name means for the larger economic picture.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> is recognized as the five-year anniversary of the financial collapse of 2008 . in a speech this afternoon, he touted a more stable, growing economy but acknowledged much more work to be done. much of that work will come from the federal reserve , whose future leadership is very much in question after the president's reported top choice for the job, larry summers , took his name out of the running.

>> it is said occasionally that i can be arrogant. of all the introductions i have received, that was surely the most recent. that question was both predictable and a good try. they want to sell me the books for the franchise. one of the things you learn as a college president is that an undergraduate is wearing a tie and jacket, there are two possibilities. one is that they are looking for a job and have an interview. the other is that they are an [ bleep ] hole.

>> for all his unanimously acclaimed brilliance, larry summers is not someone who's won any popularity contests with his co-workers throughout his long career.

>> of larry summers , i think we had a long history of arrogance and relative ignorance about poor people 's culture.

>> i don't think it's any secret that larry was not my first choice.

>> despite his habit of allenting colleagues, summers also accounts some of the most popular people in the world as his supporters.

>> larry summers did a heck of a job trying to figure out how to --

>> do you don't want to use that phrase, do you?

>> there's an excellent reason why jon stewart gave the president a hard time about larry summers . that's because through his professional career, summers has been destructively and demonstrably wrong on many of the biggest policy issues he faced. he was wrong about derivatives regulation while working in the clinton administration , where he famously stone-walled regulator brooksley born, who asked questions about the lack of oversight of the derivatives market .

>> i thought asking questions couldn't hurt, and i was shocked that there was a strong, negative reaction to merely asking questions about a market.

>> born turned out to be prophetic. the issue she identified and that summers ignored were what played the central role in the great crash. after his tenure in the clinton white house , summers then moved on to an ill-fated run as the president of harvard where he made bad bets on interest rates while running the harvard endowment that eventually cost the school nearly $1 billion. it was also as harvard president that summers hypothesized that the lack of women in the science and engineering field could be acontributed to "issues of intrinsic aptitude."

>> that the president of this great university should say that in his opinion, an explanation for why there is a lack of women at the top of any profession is aptitude differences between men and women , i was quite shocked.

>> reporter: from there, summers went to work under president obama , where as a member of obama's transition team, summers fought with fellow economic adviser christina romer over the appropriate size for a post-crash economic stimulus package. while romer calculated that restarting the economy would require more than $1 trillion in stimulus, summers managed to bring the proposal down to around $800 billion. that was the second time larry summers fought with a powerful woman who was right, but somehow lost the argument to summers , who was wrong. and until this weekend, it looked like larry summers was going to ascend to the most powerful economic job in the entire world, chairman of the federal reserve , over the eminently qualified current fed vice chairwoman janet yellen .

>> saying markets are in rally mode this morning following larry summers dropping out of the running for fed chair.

>> but the backlash against summers ' nomination grew so strong, particularly among the left, this past weekend, larry summers shocked almost everyone watching by withdrawing his name for consideration. yesterday, larry summers wrote in a letter to the president, "i have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve in the best interests of the federal reserve , the administration, or ultimately, the interests of the nation's ongoing economic recovery." joining me now is senator sherrod brown , democrat from ohio, on the senate banking housing affairs committee. senator brown, was this your doing?

>> of course it wasn't my doing. i circulated a letter a few weeks ago on the senate floor, about 20 of my colleagues signed it in support of janet yellen , because the federal reserve has two functions. one is to dampen inflation, to keep inflation under control. the other is to do all they can to enhance employment and work towards a full-employment economy. the second part of that responsibility is not emphasized enough. i'm confident, as i assume the other 19 senators that signed that letter are confident, that janet yellen will do that. it's the president's choice. my job is to vote for or against the nominee, but it was to us, i think janet yellen will do a good job, but it's the president's call.

>> there has been reporting that there were a number of no-votes on your committee from democrats. i mean, you and i have both been following this story, and you and i both know that circulating a letter in favor of janet yellen amidst all the speculation on larry summers sends quite a clear message. i mean, were there back-channel communications at the white house from you or from the committee about summers ?

>> there were none from the committee that i know of. i don't speak for the chairman. there were certainly discussions between members of the senate and people in the white house , perhaps with the president himself. i did not have a discussion with the president about larry summers or janet yellen , for that matter. it's unusual for senators to weigh in on something like this, and the discussions about larry summers really came mostly after that letter, but i think that the importance of that letter was simply that a number of the senators said to the president of the united states , we think that employment is at least as important as keeping inflation in check, and we think there should be a federal reserve -- there should be a fed chair who fits that bill. we thought janet yellen did and still do think that. but again, it's the president's call, as you know, chris.

>> there's a really interesting situation playing out in which this is now the most covered, the most watched fed chair race ever. and i wonder whether you think this tremendously powerful position is benefiting from more public attention?

>> i think the more the public knows about this, the better, because i mean, we've seen some of the fed chairs. the one that chairs -- well, the one that stands out particularly was alan greenspan , who got to be well known, but clearly had very little focus on what he needed to focus on, and that was full employment . his focus was on deregulation and, secondarily, i think keeping inflation in check, and the damage he did with deregulation that markets are self-correcting, for which he later apologized in front of a house committee , i think is particularly significant. but the important thing to me is whomever the president appoints, the questions about keeping attention on full employment and the fed playing a role as a regulator to make sure that these wall street banks, which are getting bigger and bigger, their wealth and power is unprecedented, the banks are again on wall street engaging in risky behavior, calling in many cases, meaning federal taxpayers subsidizing these largest wall street banks. i want a fed chair that's going to go after that and make sure that the banking system is more solid than it's been over the last decade or so.

>> you make a great point, which is that under dodd/frank, the regulatory supervision of the fed chair is greater. senator brown, thank you. we go,