Like Alan Greenspanlast week, ex-Treasury Secretary Larry Summers is providing an embarassment of riches for those of us who like to pick apart the fatuous pronouncements of former government officials. And to think Summers doesn't even have a book deal.
Here's the latest, Summers responding to critics of the Federal Reserve who think the Fed should have done more to crack down on shady subprime lending practices:
“I think it’s clear that when you vest regulation for consumer protection with agencies like the Federal Reserve whose primary mandate is the health of the financial system or the health of the lenders, you are going to get insufficient vigilance with respect to consumer protection,” he said during a panel discussion for the Brookings Institution’s Hamilton Project.
OK, for the moment let's leave aside the pure laissez-faire issue of whether government should protect people from signing for loans that sheer common sense dictates they can't pay back. Indeed, based on another account of the discussion, Summers seems to think it should not:
Summers emphasized the risk of doing too much to help people who have made bad decisions. "There are some people who in almost no credible scenario are going to be able to continue to make payments," he said.
The more important point here is Summers's opinion that the role of the Fed is to protect "the health of the lenders," no matter what damn fool thing the lenders do. As I pointed out yesterday, that was the take-away from Summers' column in the Financial Times condemning the "moral hazard fundamentalists" who — perish the thought — think that Wall Street big boys should have to live with the consequences of their bad decisions. The thought that bailing out the big boys might trash the dollar and make ordinary folks suffer doesn't seem to enter Summers's mind.
Oddly, another Clinton appointee, former Labor Secretary Robert Reich, understands this point:
The real worry isn’t inflation, as Wall Street thinks. It’s our pocketbooks. The bitter truth is that even as American exports do better when the dollar drops, most Americans get poorer.
Maybe we should get poorer. After all, the dollar’s tanking because we’ve been living beyond our means – borrowing some $2 billion a day from the rest of the world to go on buying from the rest of the world, and pay for some big-ticket items like a huge military. Rack up that much debt, and it’s no wonder our national IOU, called the dollar, is losing credibility.
It's yet another measure of the peculiar times we live in when unreconstructed leftists like Reich and Paul Krugman can make more sense than ostensibly "free market" thinkers like Summers and Greenspan.