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Home Publications Blogs Beat the Press Refereeing the Neil Irwin-Bette Midler Debate on Larry Summers

Refereeing the Neil Irwin-Bette Midler Debate on Larry Summers

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Wednesday, 14 August 2013 09:06

Things are getting hot and heavy as the battle for Fed succession moves into the second half. Earlier this week, the Washington Post's Fed reporter, Neil Irwin, decided to go head to head with Bette Midler over some unflattering tweets about Larry Summers and his prospects for becoming Fed chair. As a public service, Beat the Press is refereeing the exchange.

Ms Midler led off with the tweet:

"HUH. The architect of bank deregulation, which turned straitlaced banks into casinos and bankers into pimps, may be next Head Fed: Summers."

Irwin took issue with this by pointing out that the Clinton administration, as well as the Bush administration, were filled with proponents of deregulation. This would be people like Robert Rubin, Alan Greenspan and Timothy Geithner. Based on this background Irwin doesn't think it's fair to call Summers "the architect of bank deregulation." 

We at Beat the Press have to call this one mostly for Midler. After all, Summers is known to be a forceful character, not just a shrinking violet who sits in the corner of the room. Regulation fans everywhere remember how Summers denounced Raghuram Rajan as a financial luddite for raising the possibility that deregulation might lead to instability in the financial system at the Fed's big Greenspanfest in 2005.

Summers was a big actor in pushing the deregulation agenda. He deserves credit for his work. If we change Midler's tweet to read, "an architect of bank deregulation," she is 100 percent on the mark.

Next Midler tweeted:

"Larry Summers, Mr. De-Regulation, has never stepped forward to say..."Oops! My bad!" Five years of a world wide recession, and not a peep."

Irwin doesn't dispute this one: no apologies from from Summers. We'll call that a draw.

Then we have Midler tweeting:

"Larry Summers, a HUGE ADVOCATE of higher exec pay and bonuses for execs whose firms received billions in federal bailouts during the crisis."

Irwin takes serious issue with this one. He assumes that this refers to the scandal around the hundreds of millions paid out in AIG bonuses even as the company was being kept on life support by the taxpayers.  Irwin clearly takes Summers' side here:

"In the wake of outcry over bonuses to AIG employees, for example, Summers said that the admnistration was trying to stop the bonuses but legally couldn’t. 'Secretary Geithner courageously has gone after these bonuses and will continue to go after these bonuses in a very aggressive way, but we can’t suspend the rule of law and we can’t put the whole economy at risk,' Summers said in a CNN interview. 'It is wrong to govern out of anger . . .  we can’t let anger stop us from taking the steps that are necessary to maintain the stability of the financial system, keep credit flowing.' Not quite the same as being a huge advocate."

We're not buying Irwin's line here. First it is not clear that this is Midler's point of reference. Summers was an advocate of the no questions asked bailout from day one, lobbying the Democratic caucus in September of 2008 to approve the TARP. At that moment, the market was passing judgement on the banks and prepared to send them to the dustbin of history.

If there was to be a bailout Congress could have imposed any terms it liked. Instead, Summers insisted that Congress just give up the money with no real conditions, otherwise we would have a second Great Depression. (Sorry, this is nonsense. The first Great Depression was not caused by a financial crisis alone at its start, but rather a decade of inadequate response. Summers surely knows this.)

Even in the AIG case it is not clear the government could not have forced the bonuses to be taken back. It controlled the flow of money to the company, which it could have ended at any time. Faced with its literal demise, it is likely that the top execs at AIG could have forced substantial reductions in bonuses across the board.

It's striking that Summers was so concerned about the "rule of law" in this case but seems to show little evidence of concern for the rule of law when it comes to pensions for workers in places like Detroit and Chicago. One could reasonably conclude from his behavior in this and other instances that Summers thinks that high CEO pay and bonuses, even at bailed out companies, is just fine. Beat the Press calls this one for Midler.

So there you have it, Midler wins 2-0-1.

 

Addendum:

It's possible that in calling Summers a huge advocate of higher exec pay, Midler was referring to the accounts reported in Ron Suskind's book, Confidence Men: Wall Street, Washington, and the Education of a President. In this book, Suskind reports accounts of Summers discussing the market as a tool that exposes natural inequality. In other words, he believed that the large gaps in income that we see reflect differences in intelligence and skills.

That is certainly a plausible reference for Midler's tweet and would provide another reason to score the exchange for Midler.

 

Comments (8)Add Comment
What can't Bette Midler do?
written by Tyler Healey, August 14, 2013 10:44
She can sing and act and her positions on economic policy are vastly superior to that of the mainstream media. Those first two are really impressive!
props
written by Peter K., August 14, 2013 11:23
Bette Midler just went WAY up in my book. Also, I've gained a new appreciation of the Tweetosphere for giving us this dialogue (although I don't Tweet being a luddite).

Maureen Dowd quotes Midler favorably today in her column. Rock on Bette!
You Bette
written by Jeffrey Stewart, August 14, 2013 12:03
Wow! Actress, singer Bette Midler has way better judgment on this issue than President Obama. How does she feel about cutting Social Security benefits?
"the Fed's big Greenspanfest in 2005"
written by Widgetmaker, August 14, 2013 1:21
Had to chuckle.
Draw?
written by Rooster, August 14, 2013 1:55
If the other team doesn't show up, how is that a draw? I call it 3-0 Bette.
...
written by TK421, August 14, 2013 3:34
Well I'll be darned, I think I've become a Bette Midler fan
...
written by urban legend, August 14, 2013 6:23
What were the results of Geithner's "courageous" assault on bonuses? And for that matter, since the overwhelming majority of Americans, Democrats and Republicans alike, were disgusted by them, why would it have been courageous even if he actually did it? (I think we can figure out the answer to that. Like maybe future employers being none too pleased?)

To the extent the bonuses were supported or even triggered by gains on derivatives, were they not ill-gotten gains even for those who personally were non-participants? Another strike against Summers.
New catch phrase
written by dave, August 15, 2013 2:48
My new catch phrase: WE'RE YELLIN' FOR YELLEN!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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