Larry Summers's Legacy
What the embattled, brilliant White House economist will leave behind
Director of the National Economic Council Larry Summers will leave his post, where he has been an influential White House adviser and lead architect of Obama administration economic policy, after the November elections. Summers had become unpopular on the right for his role in the expensive stimulus efforts and on the left for not pushing for more stimulus. Summers, a former Harvard president and Clinton-era Treasury Secretary, is known for his hard-charging and often difficult personality. His departure signals a major shift for the Obama administration but also brings to a close Summers's long and--whatever you think of him--highly influential career as a Washington economic policymaker. Here's the legacy he will leave behind.
Summers Shares Responsibility for This Mess The Big Picture's Barry Ritholtz recalls, "Summers is the former Clinton Treasury Secretary, mentored by Robert Rubin. As such, he was one of the chief architects of the crisis. In addition to believing all of the usual foolishness about efficient markets, he bought into the radical deregulation arguments pushed by the free market absolutists. Summers was Treasury Secretary when Glass Steagall was repealed. Instead of speaking out against the irresponsible Gramm–Leach–Bliley Act (Financial Services Modernization Act of 1999), he actively supported it. Instead of explaining to the public how Glass Steagall prevented Wall Street crises from spilling over into Main Street for 65 years, he rolled over for Citibank. The repeal of Glass Steagall was not a cause of the crisis, but it allowed the net damage to be far far worse than it would have otherwise been. And it was emblematic of the corporate takeover of the legislative process."
- Summers Prevented This From Getting Much Worse Aspen Institute CEO and contributor to The Atlantic Walter Isaacson tells The Daily Beast, "Larry Summers is so smart that listening to him sometimes makes your head snap. He has an analytic rigor and intellectual honesty that makes him congenitally prone to toss hand grenades whenever he spots pockets of fuzzy thinking, which is often. This does not always make him popular, but it does make him invaluable—especially in an era when fuzzy thinking is rampant. History will note that he was among those who helped stop a precipitous financial meltdown."
- White House's 'Lightening Rod' The Washington Post's Ezra Klein writes, "Summers was also the most controversial member of the team. He'd worked part time for a hedge fund before joining the Obama administration. His tenure at Harvard was marred by an unfortunate comment about whether women were less likely to excel at math and science than men. He participated in the deregulation of the financial sector under Bill Clinton. And Summers's strong personality made him a lightning-rod for criticism and dissatisfaction within the White House: Many felt that his role as economic adviser to the president had overwhelmed his role as manager of the president's economic process. Summers wasn't much liked by liberals."
- What's Next for Summers 24/7 Wall Street's Douglas McIntyre writes, "He will return to Harvard, where he was once kicked out as President, to become a professor. He will certainly make millions of dollars a year as a consultant to foreign governments, corporations, and financial institutions. Summers is 56-years-old and looks older. Now is the time to save for his retirement." The Wall Street Journal adds, "If he doesn't return to Harvard by January, he will have overstayed a two-year leave of absence and his tenure would be revoked. He would then have to reapply."
- He Expected Promotion, Didn't Get It The Wall Street Journal's Jonathan Weisman and Elizabeth Williamson report, "A senior administration official said Mr. Summers had expected to be named Treasury secretary, a post he held under President Clinton. When he instead was offered a job inside the White House, he initially thought he would stay for a year, then possibly be named chairman of the Federal Reserve Board. Instead, Mr. Obama decided to re-nominate Ben S. Bernanke to head the Fed, and with health-care and financial-regulation bills still in flux, he decided to stay for another year."
- Summers's Decline and Geithner's Rise Economist Yves Smith writes, "The interesting bit is Geithner’s quiet expansion of his role, which reportedly extends beyond the reach typical for the Treasury secretary into broad economic policy matters. Summers and Geithner came to the Administration as allies, and Summers was perceived to be an adept bureaucratic infighter. Yet Geithner ... sails on seemingly above this fray. The speculation has long been that he would not stay much beyond the mid-terms, but that looks like a far less sure bet than it did a few months ago."
- National Economic Council Will Never Be as Strong Again The Daily Beast's Peter Beinart writes, "He took a job that most former Treasury secretaries would have considered beneath them in part, at least, in a bid for redemption. ... Whoever takes Summers’ place, he or she is unlikely to possess as much high-level governmental experience or as fearsome an intellectual reputation, which means the job of National Economic Council head will become less influential, as it was before Summers arrived."
- Obama's Rumsfeld Conservative blogger Allahpundit writes, "This reminds me of 2006, when Rumsfeld was finally forced out … on the day after the Democrats’ big midterm victory. Obama wants to signal to voters that the team that produced Recovery Summer™ won’t be around to repeat their mistake next year. Too late?"
- Victim of Uncontrollable Economic Forces Foreign Policy's David Rothkopf writes, "Summers is also a cautionary tale. He, like all of us in the Clinton administration, received great acclaim for economic successes that were more the result of circumstances than White House policies. And now he -- despite equally thoughtful and energetic efforts in this administration -- is on the receiving end of criticism for economic conditions over which no president could have much control."