Larry Summers may be a creature of Wall Street, but Wall Street didn't want him.
News of Summers' withdrawal from the race to be the next Federal Reserve Chairman sent stocks and bonds jumping around the world Sunday afternoon and Monday morning. U.S. stock futures rallied more than 1 percent, equity markets in Asia and Europe cheered, and rising bond prices pushed interest rates to their lowest levels in a month (bond prices and interest rates move in opposite directions).
"I think this is overall good for the markets," Peter Tchir, founder of research and trading firm TF Market Advisors, wrote in an email.
"Bullish methinks!" wrote David Ader, chief bond strategist for CRT Capital in Stamford Connecticut.
If you've read any of the press about Summers over the past few months, this reaction might surprise you. Summers is generally considered to be in the pocket of Wall Street. He actually gets paid by Citigroup and other banks for his bloviations. He is infamous for his push in the 1990s to deregulate banks and derivatives. That helped the banks make kazillions of dollars.
But Wall Street made it clear early and often that it never wanted Summers to be the Fed Chairman, for more than one reason.
For one thing, traders feared Summers would tighten monetary policy more quickly than his rival for the Fed job, Vice Chair Janet Yellen. He grumbled publicly about the Fed's extraordinary stimulus program known as "quantitative easing."
Otherwise, Summers revealed little about his approach to monetary policy -- the term for the Fed pumping money into the economy to make it run. That made him a huge unknown quantity, about to take over the most important monetary-policy job in the world. Markets don't like uncertainty.
On top of the uncertainty about what Summers would do as Fed chair, there was the uncertainty about whether he would even get the job. Wall Street would have gnawed its fingernails over a knock-down, drag-out fight over the Fed chairmanship. It would be like the final season of Breaking Bad, only less entertaining and with real money at stake.
And don't ignore the problem of Summers' reputation as a miserable jackass who is often wrong but never in doubt. That is a recipe for sure failure on the Federal Reserve. Yellen, in contrast, is seen as scholarly, collegial, prescient -- a smarter, female Ben Bernanke. As much as markets don't like uncertainty, they love consistency.
Summers might not have hurt the economy as Fed Chairman. Fortunately, we'll never know. But the mere threat of his becoming Fed Chairman was hurting the economy lately, by hurting stocks and bonds. His withdrawal from the race is a boon. As American University economist Daniel Lin hilariously tweeted on Sunday:
"Upon hearing that stocks futures are rising, Summers promises to keep withdrawing from Fed chair consideration until economy recovers."