Summers says Bessent right to question Fed on ‘overreach'
backed Treasury Secretary
Scott Bessent
's questioning of the
Federal Reserve
's non-monetary policy activities, saying that there were some areas that are distinct from the broader issue of
central bank independence
.
'History teaches that the Fed should be autonomous and independent' on setting interest rates and deciding how much fuel to inject into the economy, Summers, a former Treasury and White House National Economic Council chief, said on Bloomberg Television's
Wall Street Week
with David Westin. 'When the political process gets in their way, the result is more inflation, less economic stability, and ultimately higher interest rates. That lesson is clear.'
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Dolly Parton, 79, Takes off Her Makeup and Leaves Us Without Words
The Noodle Box
Undo
Bessent has repeatedly said that
monetary policy
should be put in a figurative 'jewel box.' On Monday, he also called for the Fed to conduct 'an exhaustive internal review of its non-monetary policy operations.' He said on Fox Business Tuesday that such an effort could become part of Chair
Jerome Powell
's 'legacy.'
Summers, a Harvard University professor and paid contributor to Bloomberg TV, said he didn't think there was 'a case for autonomy' with regard to the Fed's oversight of financial regulation and stability. 'Certainly, the judgments of political officials should influence those things,' he said.
'There's no basis for the Fed being entirely autonomous and separate in those areas,' Summers said.
Live Events
'Real Question'
That issue most recently came to the fore late last year and in early 2025, when former President Joe Biden's pick for the Fed's vice chair for financial supervision, Michael Barr, at first said he intended to keep serving as the central bank's top banking cop until his term was up in July 2026, then declared in January he'd relinquish that role — giving President Donald Trump room to name his replacement. Barr remains on the Fed board.
With regard to a 'third set of areas — what you might call public policy' is something where 'there's a real question about whether the Fed should be using its moral authority in those areas and should be an important part of national debate,' Summers said.
Republicans have for years criticized aspects of the Fed system's economic research undertakings, which have covered a wide array of public-policy topics, such as housing and education. District banks have also held conferences on particular topics. In 2022, the Fed tightened its code of conduct to bar the kind of advocacy engaged in by Minneapolis Fed President Neel Kashkari with regard to a state constitutional amendment on education.
'Concerns that there have, at some points, been overreach in what you might think of as public policy, liberal arts are quite legitimate,' Summers said. 'I think Secretary Bessent is right to be' raising a question there, he said. involved. 'The question of mission creep with independence is an entirely legitimate issue. That should be reviewed and debated.'
An argument can be made that research on the economy in all dimensions can contribute to monetary policy, so 'line-drawing here isn't easy,' he said. But there should be a three-part distinction with regard to the Fed's activities, he said, with independence on monetary policy, 'shared responsibility' on financial regulation and a 'flashing yellow, bordering on red light' for non-financial policy.
Earlier Tuesday, Bessent offered support for Powell amid pressure from some Republicans for the Fed chief to resign or be removed. Bessent said on Fox Business that 'there's nothing that tells me that he should step down right now.'
Summers argued against any call for Powell to step down, saying, 'The idea that allowing himself to be forced out would somehow make Jay Powell be serving the interests of the independence of the Fed is, I think, very wrong.'
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