FED, Larry, Secretary Paulson discussed on Bloomberg Best
Launch will hopefully take place Monday night. If weather cooperates. I'm that Maddens and This is Bloomberg Wall Street Week with David Westin from Bloomberg Radio. We'll have up the week we welcome now our special contributor Larry Summers of Harvard, so, Larry Great to have you here, particularly because at the very end of the week we had a fair amount of secretary Treasury action there. One of your successors took some action. Second, Mnuchin wrote a letter to the head of the Fed Jay Powell saying, Please give us back that money we gave you for those emergency lending facilities. And you had something to say about that. In fact, you had a tweet in which you said Secretary Paulson taught, referring to Hank Paulson, another predecessor, understood in transition. It was his Job to help the Fed and the incoming administration established a basis for strong cooperative efforts to contain the crisis. Secretary Mnuchin has done just the opposite. So drawing a contrast between these two secretaries. What is going on here, Larry? Into two separate points. One, uh, every previous government I mean, there was plenty of bitterness in the Bush Gore campaign. Really there, Woz? I mean, we all thought that election was stolen. But he didn't occur to me or to anyone who worked with me or to any other Cabinet officer in the Clinton administration not to cooperate fully. In helping the government be ready to do whatever our successors wanted to do. The last thing we envision doing was thwarting their ability to carry out their policies. What Steve Mnuchin Did in writing that letter and making those demands and reducing the authorization was floor. What is clear and incoming Biden administration wants to do? That's just wrong on process terms. Second problem is, it's just incredibly imprudent and reckless. At a time when the pandemic is getting far worse. At a time when we don't really know where this pandemic is going to go before a vaccine. At a time when we don't have any basis for being confident that there's gonna be agreement on fiscal stimulus. To tie the Fed's hands in any way to construct their abilities to act in an emergency. Is the height of foolishness. Why would you throw away a potential insurance policy? Nobody's asking Secretary Manu Shin toe trigger anything toe pull panty money to authorize any checks. He doesn't want to, but preserving the capacity to ensure against financial Armageddon. It's elementary that that's the right thing to do. It's elementary that it's the right thing to do to facilitate the next administration being able to do what it thinks. Is is wise. I I've been surprised by the secretary before, but never more than this, which really does seem to me very much outside the tradition of the office he holds. So this is a transition that at some point presumably will be over and then the same time. There are longer term issues at play here, And just this week, Bloomberg had the new economy for him that you appeared on with Janet Yellen, the former Federal Reserve chair, and one of the subjects was actually Are we saving too much? And are we really in secular stagnation? A term that you really revived some years ago? And she basically totally agree with you? This is part of what she had to say. Central banks need to do what they can within not overstate what it's possible for them to do well. I strongly believe central banks. Need to be independent and need to do everything they can to changes. They've made their not a game changer from the point of view of secular stagnation and bottom line, I agree with wiring on what what's required. So there you go, Larry. Things have changed something the first time. I think that you wish you'd had paper some years ago, when you were sort of an out liar, I think on the subject, but that late leads to the question. Okay of Central banks can't fix this, and we're in secular stagnation. What do we do about what does it mean for longer term economic policy? It means we're gonna have to rely on fiscal policy rather than monetary policy to stabilize the economy. Going forward when we have cyclical fluctuations. It means more generally that an important part of the design of policy is going to have to be assuring that savings or fully absorbed..