Monday, January 25, 2010

A Cry for Help From Larry Summers?

Bob Murphy points me to a curious blog post by Greg Mankiw. In the post, Mankiw tells us that he has received an email from:
One of my many friends working for President Obama...
The gist of the email is that what is going on inside the White House, versus outside views, are two totally different things, but that outside views have taken on a momentum of their own and may result in dumping two very good men, Larry Summers and Timothy Geithner.

Hmm, I wonder who Mankiw knows in the Obama Administration that is concerned with the careers of Summers and Geithner? Say didn't that guy Summers, for a bit, run Harvard University where Mankiw teaches?

Here's some of what Mankiw's "inside friend" wrote to Mankiw:
My perspective here has given me an unusual window into the looking-glass mirror of how things I see on the inside are interpreted on the outside.

The most vivid case in point is the recent policy announcements about implementing the Volcker ideas about separating investment and commercial banking.

This policy process has been in the works for months, and it came to fruition in the normal course of policy operations after extensive meetings and consultations among Treasury, NEC, the PERAB board, and other parties...

Wall Street is interpreting this as "Summers, Geithner, and Bernanke are on the way out because Obama has finally decided to go populist." Honestly, that is truly not right, though I can see how from the outside it would look like it.

Oddly enough, this is one of those cases where the whole thing could be a self-fulfilling prophecy....

PS I know it's a fool's game to try to explain moves in the stock market, but I have a friend on Wall Street who tells me that the selloff in the last couple of days is more due to uncertainty caused by the sense that Summers and Geithner are losing out to populism than to specifics of the bank plan.
Mankiw closes by thanking Summers, er ah, his "inside friend":
Thanks for helping to get the true story out.
Actually, there is some truth to the comment that there is fear on Wall Street that Summers and Geithner may lose out to populism. The thinking is pretty much that Obama is a commie and that, although Summers and Geithner are bought and paid for by Goldman Sachs and haven't been much help to anyonelse on the Street, if they are gone, things will deteriorate for markets real fast.

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