A Resolution Opposing the Appointment of Larry Summers as Chairman of the Federal Reserve

Whereas the current term for the Chairman of the Federal Reserve, Ben Bernanke, will end in early 2014 requiring President Obama to nominate a successor and the US Senate to confirm him or her, and

Whereas the Federal Reserve, since its creation in 1913, has had a dual mandate of (a) maximizing employment and (b) stabilizing prices, i.e. inflation, but since then its scope has expanded to include maintaining the stability of the financial system, as well as supervising and regulating banking institutions, including new regulations imposed by the Dodd–Frank Wall Street Reform and Consumer Protection Act, and

Whereas Larry Summers, a possible nominee for the position of Chairman of the Federal Reserve has possibly the worst record among leading American economists with regards to banking regulation and financial stabilization, with examples including:

  • in the 1990’s then-Treasury Secretary Larry Summers successfully prevented the then-head of the Commodity Futures Trading Commission (CFTC), Brooksley Born, from regulating derivatives – the financial instruments that magnified the housing bubble and accelerated the financial collapse,
  • Larry Summers fought successfully as Treasury Secretary to dismantle Glass–Steagall banking regulations, which created a firewall between commercial and investment banks, with the passage Gramm–Leach–Bliley Act in 1999,
  • Larry Summers promoted as Treasury Secretary the passage of the Commodity Futures Modernization Act of 2000, which banned all regulation of derivatives, and

Whereas Larry Summers also denied the existence of the housing bubble in the mid-2000’s and criticized economist Raghuram Rajan’s paper warning of an imminent catastrophe due to excessive risk-taking and the banking system’s toxic securities as “misguided” and based on a “basic, slightly lead-eyed premise,” and

Whereas Larry Summers also as Director of the White House United States National Economic Council for the Obama Administration blocked Christina Romer, then-Chair of President Obama’s Council of Economic Advisers, from proposing her recommended stimulus packages ranging from $1.2-to-1.8 trillion to President Obama, which would have led to a far more rapid economic recovery post-Great Recession, and

Whereas Larry Summers also has shown an indifference to income inequality and was quoted in Ron Suskind’s book Confidence Men as saying “One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way that they’re supposed to be treated,”

Therefore be it resolved we, The 30th District Democrats, call upon President Obama to nominate someone as Chairman of the Federal Reserve who would not only seek to fulfill the Federal Reserve’s dual mandate, but also be a good steward for banking regulation and financial stabilization, including proper implementation of the Dodd–Frank Wall Street Reform and Consumer Protection Act, and

Be it finally resolved that The 30th District Democrats urge Senator Patty Murray and Senator Maria Cantwell to oppose and vote against the appointment of Larry Summers as Chairman of the Federal Reserve should he ultimately be nominated by President Obama for that position.

7th day of August, 2013 by The 30th District Democrats

Tim Burns, Chair

Submitted by Richard Champion, richard.champion@gmail.com