Tuesday, August 25, 2009

Was Roubini Tipped Off to the Bernanke Re-Nomination?

I think so.

And I should have picked up on it, but missed it.

As I have pointed out in the past, Larry Summers and Nouriel Roubini are tight. In fact, the White House confirmed to me that Summers owned stock in Roubini's firm, RGE Monitor. It was given to Summers for advisory work he had done for Roubini.

It appears that Summers leaks to Roubini. Roubini, for example, appears to have had details on how the stress tests were being conducted, details that were not public. Summers was Roubini's most likely source on this. Thus, I could not get my mind around Roubini's endorsement a couple of week's back of Bernanke to be re-nominated as Fed chairman. Why would Check SpellingRoubini go out and publicly damage his compadre Summers, who was considered to be very desirous of the Fed position?

In retrospect, the answer was obvious. When Roubini made his endorsement of Bernanke, the decision had already been made at the White House. Roubini wasn't pushing for a re-nomination of Bernanke, he was getting in front of a story that was already in the bag.

Summers let Roubini know that the decision had been made to keep Bernanke at the Fed and that the announcement would be made sometime in the near future. Ultimately, the announcement was made, for whatever reason, in a rushed fashion when Obama was on vacation.

Lesson to be learned here: Forget Roubini's forecasts, pay attention to his comments on White House policy. He has the inside track on that.

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