Policy: Economy

The top three reasons liberals don't like Larry Summers

By |
Barack Obama,PennAve,Joseph Lawler,Economy,Federal Reserve,Ben Bernanke

Liberals have made it crystal-clear over the past week: They don't like Larry Summers.

After reports that President Obama favored Summers to replace Federal Reserve Chairman Ben Bernanke in January, left-wing Democrats revolted.

Twenty liberal senators, led by the populist Sherrod Brown of Ohio, dashed off an unprecedented letter to Obama endorsing Janet Yellen, the current Fed vice chair thought to be Summers' top competitor for the job.

But, as the Washington Examiner's Susan Ferrechio reported, when Rep. Ed Perlmutter, D-Colo., spoke against Summers in a closed-door meeting with Obama, the president responded with a "tongue lashing" for Perlmutter and a defense of Summers. After the meeting 37 female Democratic representatives endorsed Yellen, another implicit rebuke of Summers.

Why are liberals hung up on Summers? Three main factors:

1. He's a 'deregulator' who helped spark the Great Recession

Summers in the 1990s joined Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert Rubin to block government efforts to restrict the trading of over-the-counter financial derivatives — complex investments based on the value of underlying assets. As Treasury secretary, Summers help guide through Congress the Commodity Futures Modernization Act, which effectively protected those same derivatives "from virtually all regulation or oversight," according to the government's official report on the crisis. He was also instrumental in repealing the Depression-era Glass-Steagall law, which prevented commercial banks from making risky bets with depositors' money.

The value of over-the-counter derivatives boomed from $3.2 trillion in 2000 to $20.3 trillion in 2008. University of Chicago economist Raghuram Rajan warned at a 2005 conference that the derivatives were increasingly risky, but Summers dismissed his criticism, calling Rajan's "slightly Luddite premise ... largely misguided."

Many liberals say that string of events, with Summers at the center, led to the 2008 financial collapse. And they were further angered when, after the collapse Summers continued to preach deregulation and delay efforts to enact the Volcker Rule, which recreates some of Glass-Steagall's restrictions.

2. He botched Obama's stimulus package, exacerbating the financial crisis

Obama entered the White House with plans to revive the economy by injecting it with billions of dollars in new federal spending and Christina Romer, who would lead his Council of Economic Advisers, suggested spending up to $1.8 trillion. But as the New Republic's Noam Scheiber reported, Summers intervened to ensure that Obama spend no more than $800 billion, the amount that was ultimately approved and a total liberals believe was far too small to counteract the recession.

Summers was also instrumental in gaining congressional approval in 2009 for a second tranche of funds from the Troubled Asset Relief Program, a program intended to bolster banks, by promising Democratic lawmakers that the administration would provide $50 billion to $100 billion in foreclosure relief for homeowners. Banks got the money, homeowners did not.

3. He is just plain sexist and mean

Summers caused a national uproar in 2005 when, as president of Harvard University, he publicly suggested that the lack of women in the academic sciences may reflect that women don't have the same innate abilities as men in those disciplines.

Summers' colleagues consistently characterize him as abrasive and arrogant, and there is no shortage of stories about Summers behaving impolitely. Bloomberg's Hans Nichols reported that Summers resented being passed over for the chairmanship of the Federal Reserve in 2010 and so he demanded that the White House provide him with a personal driver and a seat at the president's cabinet meetings.

Even the movies aren't kind to Summers. The 2010 film "The Social Network" portrayed the Harvard president as brusquely dismissing the Winkevoss twins when they complained that Mark Zuckerberg stole their idea for Facebook. Summers doesn't actually object to the portrayal.

"One of the things you learn as a college president is that if an undergraduate is wearing a tie and jacket on Thursday afternoon at three o'clock, there are two possibilities," he said of that meeting with the Winkevoss twins. "One is that they're looking for a job and have an interview. The other is that they are an a--hole. This was the latter case."

View article comments Leave a comment