Larry Summers watches as President Barack Obama and Vice President Joe Biden speak in the East Room of the White House on January 30, 2009. (REUTERS/Jason Reed)
Washington insiders are spreading an alarming news alert. Barack Obama, I am told, is on the brink of making a terrible mistake by appointing Lawrence Summers as the new chairman of the Federal Reserve. That sounds improbable, since Summers is a toxic retread from the old boys’ network and a nettlesome egotist who offended just about everyone during his previous tours in government. More to the point, Summers was a central player in the grave governing errors that led to the financial collapse and a ruined economy.
Surely not, I thought, when I heard the gossip. But my source heard it from the White House. Obama’s senior economic advisers—still dominated by Clintonistas and aging acolytes of Robert Rubin—are pushing the president to choose Summers as the successor to Ben Bernanke, whose term ends in January. And they are urging Obama to make the announcement right now, before the opposition can get organized.
To thwart this ploy, Democratic senators and rank-and-file constituents need to sound the alarm promptly and promise, loud and clear, to vote against Summers if Obama once again accepts the choice of the Clinton-Rubin crowd. The former Harvard president was himself a Wall Street player between his government positions. He was a soft-on-banks adviser to Obama during the president’s first term. Choosing Summers now would be another great gift to the mega-banks. But it would be a very tough vote for Democrats who claim the mantle of reform.
There are many reasons to oppose Summers as Fed chair, but the strongest objection is that Obama would be rewarding the same guys who got things disastrously wrong for the country—the Clinton-Rubin policy makers who danced to Wall Street’s tune of financial deregulation and collaborated with the Greenspan Fed and Wall Street to gut prudential regulation like the Glass-Steagall Act. Those actions set the stage for the crisis that devastated middle-class home owners and working people generally.
Summers was an over-confident cheerleader posing as superior intellect. People called him “the smartest man in the room,” and Summers definitely believed it. As Treasury secretary during Bill Clinton’s second term, Summers personally did the knife work that cut up Brooksley Born, the brave regulator earnestly trying to impose meaningful limits on the explosive derivatives market. He still owes Born—and the country—an apology.
Summers got bounced as president of Harvard for his derogatory remarks about women as scientists. He dissed black professors as inadequate scholars. Personality defects aside, the Democratic party has a huge stake in this decision—whether the money-friendly “New Democrats” who have controlled the party since Bill Clinton will continue to dominate the party’s agenda and smother any attempts to embrace true reform.