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Former White House Official: Summers as Fed Chief May Mean 'Severe Dysfunction' at Fed

By Michael Kling   |   Thursday, 05 Sep 2013 08:11 AM

Larry Summers as Federal Reserve chairman could lead to "severe dysfunction at the Fed," a former top White House official told The Huffington Post.

The push for Summers as the next Fed chairman "really does need to be stopped, so that's why I'm willing to do something," the official said, explaining why he was speaking to The Post. "I think it's gone this far, I think it's time to say it'd be very problematic."

Summers certainly has his strengths, but monetary and regulatory policies are not one of them, said the unnamed source described as a former high-level official.

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A Fed chairman must be able to win people over through the strength of their arguments and persuasion skill. The Fed chairman must work with other regulators such as the Securities and Exchange Commission an FDIC to ensure safety of the financial system. Summers, the official said, may be a brilliant economist, but those are not his strong points.

"You're not going to be able to dictate to these other regulators if you're the Fed chair," the official said. "You're going to have to work with them and persuade them and work with the secretary of Treasury and all of that is a difficult dance. And someone with good relationships with people and who starts with a trust of good will would have an easier time being effective in that role."

Other former colleagues of Summers support him, saying he did an excellent job as Treasury secretary under President Bill Clinton.

"He's so interesting intellectually, thinks each argument six ways over," said another official who worked with Summers. "I think there'll be more of these crises and if I was a firefighter I'd want him in the room."

Media reports have said President Obama is leaning toward picking Summers over Fed Vice Chairman Janet Yellen.

Obama believes Summers, his former National Economic Council director, would do a good job handling the next financial crisis. However, Obama is not familiar with Yellen, according to The Post.

Both have their supporters and detractors, but criticism of Summers has been severe.

Peter Ubel, a behavioral scientist at Duke University, doubts Summers has the social and emotional intelligence to be a good Fed chairman.

"His communication style is described as combative. He has irked people almost everywhere he has worked," Ubel wrote in an article for Forbes.

The chairman must be able to communicate decisions well, as poor communication can create economic turmoil, and must be able to work well with other Fed members, Ubel explained. "The job is not a dictatorship after all. A chair who doesn’t play well with others is not likely to succeed."

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