Does Larry Summers have too much baggage to be Treasury Secretary?
My thinking is no. But since it's a question that a lot of people may be asking over the next few days, it is worth exploring. Summers was an awfully controversial guy a couple years ago. And the things that made him controversial will all be revisited if he has to sit through a Senate confirmation hearing.
Here's a quick run-through of the Sins of Larry:
1. He's a loose cannon. Summers has a long history of saying what's on his mind, regardless of whether others might find it offensive. The thing about women and science was only the most infamous. There was also that memo he signed about exporting toxic waste to the developing world. And here's a story Summers himself told on his occasional boneheadedness as Harvard president, recounted in by Thomas Neff and James Citrin's You're in Charge -- Now What?:
A student came to see me and said she was from the choir. I asked, 'Why is it important for the university to have a choir?' I was asking because I truly wanted to understand the reason, but the student took my questions as a challenge to the existence of the choir.
Still, Summers behaved perfectly respectably during his last stint as Treasury Secretary. He is capable of keeping his mouth shut if the job requires it. What's more, he seems to have a habit of promoting the careers of people who are willing to contradict him and take him on (Andrei Shleifer and Tim Geithner spring to mind). Also, Washington wonks aren't quite the delicate flowers that Harvard students and professors are, and having somebody running Treasury who is willing to challenge the existence of long-established financial and economic institutions might be a really good idea over the next couple of years.
2. He's loyal, to a fault. One of the main things that turned Harvard's faculty against Summers was the case of his protege Shleifer. Shleifer ran a Harvard-affiliated, USAID-funded office in Moscow in the 1990s that advised the Russian government on economic reform. The U.S. government later sued Harvard and Shleifer, charging that the operation was overrrun by conflicts of interest. Summers recused himself from direct dealings with the case, but in his epic dissection of the saga for Instititutional Investor, David McClintick charged that Summers did try to shield Shleifer. Harvard and Shleifer lost the suit, and Harvard had to pay $26.5 million in damages and Shleifer $2 million. I can't get as worked up about this as some people (if we could force Harvard to give the government even more money, maybe Barack Obama wouldn't have to raise your taxes), but I also know and like Andrei Shleifer, so I'm really not the best judge.
3. He's a callous right-winger. Summers' academic mentor was conservative economist Marty Feldstein, and he worked for Feldstein at Ronald Reagan's Council of Economic Advisers in the early 1980s. Paul Krugman worked there too, so that really isn't saying much. For most of the 1980s, in fact, Summers was an outspoken skeptic of financial markets and their ability to set prices rationally and steer investment wisely. As he rose to positions of power in Washington in the 1990s, though, he became a leading defender of the Washington consensus--the idea that free financial markets, free trade and fiscal discipline would bring prosperity to the world. Lately Summers has been partially reconsidering that stance in his columns for the Financial Times. If you're favorably disposed to him, as I am, you could say he's been pulling a Keynes: "When the facts change, I change my mind." But I guess if you're not so favorably disposed, you could call him a closet right-winger, a closet left-winger, or a slave to fashion.
Anyway, I'm sure Larry Summers would make a very good Treasury Secretary. Again.
I'm not so sure, though, that the President-elect is going to want to spend his transition period and the early days of his administration dealing with the inevitable public hassle that would be attached to a Summers appointment.
Update: Oh, and by the way, I forgot to gratuitously mention that he used to go out with Laura Ingraham ...
Update 2: The headline for this post on the TIME.com homepage is "The Pros and Cons of Larry Summers." I've mostly written about cons here, so I'm thinking maybe I ought to mention The Big Pro: Summers is really, really smart. He melds his academic brilliance with Washington experience and savvy in a way that no one else can. And he's been positively bursting with creative, helpful ideas over the past few months. Like this one.
Update 3: More on Summers here.
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"Also, Washington wonks aren't quite the delicate flowers that Harvard students and professors are, and having somebody running Treasury who is willing to challenge the existence of long-established financial and economic institutions might be a really good idea over the next couple of years."
as well as not getting run over rough shod by Wall Street CEOs
"For most of the 1980s, in fact, Summers was an outspoken skeptic of financial markets and their ability to set prices rationally and steer investment wisely. As he rose to positions of power in Washington in the 1990s, though, he became a leading defender of the Washington consensus--the idea that free financial markets, free trade and fiscal discipline would bring prosperity to the world. "
Off topic but this prompted me on my own pet peeve of I wish we could get more people to be more bi-economic (sorta like bipartisan
). Free markets, free trade, etc all better than existing alternatives (command and controle economies, closed trade etc), but they have many flaws/failures too. You guys do some nice items from time to time on these things, but in general people are either rabidly (and ignorarntly) either pro-market or anti-market. Just wish we had a lot more nuanced opinions in the mass media/political landscape. -
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TAD
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Agreed. Nuance would be nice to have in our complex policy discussions.
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Justin, on Summers, I don't know if he fits with the meme of bringing change. What is he specifically proposing to do? Further, I would be very leary of bringing in too much Clinton era baggage...Rahm, Summers....what's next Reno and Lewinski?? No, but seriously, we just need some fresh approaches to how we deal with our problems in D.C. The same old ideas just don't seem to be advancing the ball.
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Further, that Time.com article has me worried about deflation. Once delfation becomes entrenched it seems that the Government (short of negative interest rates) is almost powerless to stop it. No??? -
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Larry Summers is a classic workplace bully, a terrible person. He was forced to resign from Harvard NOT because of his clueless statements about women but because of his bullying, condescending behavior.
Even senior level deans were bullied and humiliated in front of their colleagues. He was frequently "less than fully truthful", i.e., he LIES.
Unfortunately, it became clear that his flaws were ..."not a matter of style or personality, but of CHARACTER. His behavior resulted in "loss of senior administrators and high turnover at all levels of administration of FAS in general and the college in particular."If this were politics as usual it would maybe be understandable. But not in a Obama administration! JUST SAY NO!!!
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I could forgive that other stuff, but dating Laura Ingraham is going too far.
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I'm growing fonder of Lawrence Summers. I liked his stimulus proposals, and on Fannie and Freddie he talks sense, as well as about implicit government guarantees and hybrid government creations:
"President-elect Barack Obama has said little about his plans for Fannie Mae and Freddie Mac, but a top adviser and contender to Treasury Secretary already has a plan to break up the companies.
http://blogs.wsj.com/economics/2008/11/06/obama-adviser-summers-has-plan-for-fannie-freddie/
Lawrence Summers, Treasury Secretary at the end of the Clinton administration, believes the firms should be divided into their “government” and “private” functions after the financial crisis subsides. The private-sector components should then be sold off in many pieces, with the proceeds used to fund government affordable housing programs.
“With this approach, the government would be in a position to support the housing market in the years ahead without encouraging dubious financial practices or denying financial reality, as is the case today,” Summers argued in in July.
He laid out his vision in twin editorials in the The Financial Times and The Washington Post that were striking for their prescience about the firms' fate. If market confidence in the companies does not improve, he said the government should throw them into receivership and run them as public corporations “for several years.” Just weeks later, the firms were seized jointly by Treasury and their regulator."
Here's my comment:
“In a 2007 Financial Times editorial, Summers counted himself as “among the many with serious doubts about the wisdom” of the firms' implicit government guarantees.”His understanding that these implicit government guarantees are a major problem recommends him to me.
“Summers believes the firms' public-private business model should be scrapped. “These fuzzy line arrangements…have shown themselves to be deeply suspect,” he told the House Budget Committee days after the companies' seizure. “I think we'll have to move beyond that. We need to move beyond the ‘heads I win, tails the public loses' model in which we've operated.”
Absolutely. These hybrid arrangements are trouble. Scrap them.
I would date Laura Ingraham, but do everything in my power to keep her from influencing our government. It would be a good deal for both of us, and the country.
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Wouldn't it be ironic for a man who has faced discrimination and been underestimated purely because of his race, to be advised by a man who doesn't think women are capable of math and science! I hope that Obama makes a wise decision.
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If your listing his negatives why not mention his support of the policy of minimal government oversight of derivative trading when this was being debated.
See
http://query.nytimes.com/gst/fullpage.html?res=990CEED7103EF932A25751C0A9669C8B63
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