The Ballad of Summers and Geithner

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Flights from London to DC via Frankfurt (don't ask why, just learn from my mistake and never do it) put the recent Atlantic and New Yorker profiles of Tim Geithner in a good light. Longer than they needed to be, you say? I was wishing they were longer.

Josh Green was better on Geithner's character, I thought, and John Cassidy more at home with the economics. Both pieces are well worth reading, regardless of your itinerary. But I have to say that neither really dispelled for me the big mystery about Geithner, which is the nature of his professional and intellectual relationship with Larry Summers.

When the appointments were first made, I foresaw trouble. Like many others, I assumed that Obama would have wished to make Summers Treasury Secretary, but recoiled at the difficulty of getting him confirmed. So Summers became chief economic adviser while his former subordinate Geithner (whose confirmation turned out to be no stroll in the park either) got Treasury.

A hazardous arrangement, I thought, though possibly workable, if Geithner was sufficiently self-effacing to accept the  de facto number two position. Summers, I reasoned, never would. But if Geithner decided he was going to be in charge, there would be a fight for influence, the economic message would be muddled, and the loser would have to go. Adding to the danger was the milling profusion of other top economic talent-Volcker, Orszag, Goolsbee, to name just three-in or around the White House.

This setting reminded me of the fight between Nigel Lawson, the brains behind the Thatcher Revolution, and Alan Walters, Thatcher's favorite economist, in the late 1980s-a calamity I watched at close quarters. Lawson was chancellor of the exchequer when Thatcher brought Walters into 10 Downing St as her personal adviser. They disagreed about monetary policy; after a period of friction Lawson decided he was no longer trusted to do his job, and quit. You could plausibly argue (and many did at the time) that this was the beginning of the end of Thatcherism. Letting this happen-driving her most talented lieutenant out of her government-was the biggest mistake she ever made.

Now, Geithner and Summers appear to get along. But what I really want to know is how they have managed it. My theory-that the secret of their success, if they were going to have one, would be Geithner's modesty-is somewhat undermined by Josh's piece. I find it frustrating that the question is never really confronted head on, but the implication of the piece is that Geithner ("confident and brash-almost unnervingly so") and Summers have disagreed on some big questions, and that Geithner has prevailed every time. This, frankly, I find hard to believe. The force of Summers' intellect is such that he dominates a discussion even when he just sits there brooding. And he knows it. Can he really have been sidelined like this? By a former underling? If so, why is he still there? I don't feel I understand this mysterious and pivotal relationship any better than I did 15,000 words ago.

I would have liked to read much more, too, about the "Volcker rules" episode. This again was most bizarre. There stood Geithner, Treasury secretary, off to one side, while Volcker strode up to explain why the Treasury's proposals for financial regulatory reform had missed the point. My instant reaction, much as I admire Volcker, was that his proposals missed the point. Many of those who initially celebrated them now seem to have come around to the same view. But here I'm talking not about the substance, but about the personal chemistry.

Again, it seemed to me at the time an instance of Geithner's modesty that he was willing to stand there and be upstaged by one of Obama's other heavy hitters. Without going into detail about how this initiative came to be-details I will need, if I am to be convinced-Josh says this is not how it was. Volcker's rules were devised by Geithner.

After the Massachusetts loss, Obama made a show of introducing additional "tough" new rules, bringing back Volcker to lend him credibility and endorse constraints on future bank growth and on banks' ability to bet on risky assets like hedge funds-an episode widely interpreted as a rebuke to Geithner. For political purposes, it was. But in truth, the new measures were relatively small ones rushed forward to appease a hostile electorate. (And Obama had Geithner design them.)

Love that parenthesis. This makes Geithner the master architect, acquiescing in his own seeming rebuke "for political purposes"-as he designs a phony policy, and pushes Volcker forward as public-relations dupe to announce it.

Well, as they say, interesting if true.


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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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