Zach Goldfarb: Here’s what Larry Summers would do at the Fed:
Summers wouldn’t be any more dovish or hawkish than Ben Bernanke… his bias would be to keep the central bank working aggressively toward reducing unemployment…. Summers won’t have a big effect either way on the Fed’s taper…. While Summers is somewhat skeptical about QE, that has little practical import. Summers has said he doesn’t think QE has much of an effect either positively or negatively… he’s unlikely to come in and dramatically change the Fed’s approach…. Summers would look well beyond the unemployment rate to measure the health of the labor market. In the White House, Summers became obsessed with a scary fact: Even after the unemployment rate--which captures the percentage of Americans “seeking” work--falls back to the normal levels, the percentage of the population employed is likely to remain very low…. While he’s likely to focus on employment while inflation remains low, he’ll be a hawk if inflation starts to rise much beyond the 2 percent target…. Summers would think more about what the Fed can do to stop financial bubbles, but he’d be more likely to address those concerns through regulation…. If a crisis did occur, he’d be no-holds-barred…. He thinks capital is king. Before the financial crisis, he wrote that that “a critical element of regulatory policy should be insisting on increased capital in existing financial institutions.”… He would use the Fed to pressure global banks to be more transparent and accurate…. He’d try to use the Fed’s control of the guts of the financial system to help lower- and middle-class Americans…. Summers has expressed concerns that credit-worthy, working class Americans are not getting fair access to loans. He’s also worried that banks may be not be offering basic, affordable financial services to the poor, forcing them to go to expensive check-clearing facilities and the like--all issues he’d probably try to address.