A group of U.S. Ssnators have sent a letter urging President Barack Obama to appoint Federal Reserve vice-chair Janet Yellen as the nation’s first female chair of the Federal Reserve bank, according to The Wall St. Journal.
While the letter does not mention economist and former Treasury Secretary Larry Summers, it was reportedly prompted by a Washington Post article that pegs him as the new frontrunner, despite Summers’ lack of experience with central banking.
Several senators told the WSJ that they did in fact sign the letter, but it was not released publicly. Senate aides reportedly said that up to one-third of the Senate’s Democrats signed the letter, but only Sens. Tom Harkin (D-IA), Dianne Feinstein (D-CA), Dick Durbin (D-IL) and Angus King (I-ME) confirmed their roles.
“There’s a lot of concern among a lot of Democrats about an appointment of Larry Summers to that long-term position as Fed chairman,” Harkin told the paper. “He was one of the architects of getting rid of Glass-Steagall, of getting rid of other regulations.”
Glass-Steagall, a Great Depression-era rule that separated investment and commercial banking and forced banks to keep depositors’ money out of risky wagers, was overturned during the Clinton administration at the prompting of Republicans and some Democrats.
The growth of “too big to fail” institutions in the wake of Glass-Steagall’s repeal is what many economists blame for the 2008 financial crisis, as banks merged their divisions and pooled their resources, piling debt atop their assets at astonishing rates.
Summers has said he would not have done anything differently if he could revisit the Glass-Steagall repeal. Meanwhile, one of the key architects of “too big to fail,” former Citigroup CEO Sanford I. Weill, said last year that he believes it’s time to go back to a time when banks did not grow to such a size that their failure could wreck the whole nation’s economy.
That same message has been echoed by Sen. Elizabeth Warren (D-MA), who introduced legislation earlier this month that aims at stopping banks from risking their depositors’ funds on uncertain investments. “The 21st Century Glass-Steagall Act will reestablish a wall between commercial and investment banking, make our financial system more stable and secure, and protect American families,” Warren said in an advisory.
However, Yellen has said she too does not support reinstating Glass-Steagall, telling an audience in June that such a “blunt” approach could be damaging. Still, she’s seen as more of a hawk on banking regulations than Summers, which prompted her recent support in the Senate.