What Larry Summers should say

This weekend, I read the fascinating New York Times story by Louise Story and Annie Lowrey regarding Larry Summers’  baroque financial ties to prominent banks and Wall Street firms. I didn’t detect any disqualifying details. I’d bet that Summers—unlike most politicos–actually earns his money as a board member and consultant. He seems to be carving out a successful career in finance on the basis of intellect and genuine business insights, rather than simple insider connections.

He has the experience and brilliance to make a superb chairman of the Federal Reserve. I mean really: Who would you rather have at the helm in a bewildering world financial crisis?  The president obviously thinks the world of Summers, having gone to war alongside him on TARP, the auto bailout, and more. Summers’ policy values are also more progressive than many liberals would credit. (See, e.g., his fine book Understanding Unemployment.) See also Summers’ prior writings on global health and related matters.

Still, the millions of dollars and the complicated personal connections are more than an entertaining distraction. Especially now, in the aftermath of the housing bubble and the financial crisis, it behooves the next Fed chair to bring greater distance from an industry he would regulate, an industry whose depredations have so badly and so recently damaged the nation, and which has such excessive influence in Washington.

If I were Summers, I would call the president and say something like the following:

I am carving out a genuinely successful private-sector life that may move my personal wealth into the nine-figure range. At this delicate historic moment, I’m just too personally intermingled with the financial industry to step into the Fed slot. I am so grateful for your confidence in me, and for your willingness to entertain the possibility of me taking this role. Fortunately, we have a qualified person who is also pursuing the position, with whom I agree on most aspects of public policy. Let’s go in that direction. I have many ways to contribute to your presidency and to contribute beyond it. My stepping back at this moment is a good outcome for everyone.

There are many ways to serve. Sometimes, it’s important to lean in to fight for the brass ring. Other times, it’s important to lean back, and realize that other good people are available to do the job. Summers’ phone will ring again. It certainly should.

Author: Harold Pollack

Harold Pollack is Helen Ross Professor of Social Service Administration at the University of Chicago. He has served on three expert committees of the National Academies of Science. His recent research appears in such journals as Addiction, Journal of the American Medical Association, and American Journal of Public Health. He writes regularly on HIV prevention, crime and drug policy, health reform, and disability policy for American Prospect, tnr.com, and other news outlets. His essay, "Lessons from an Emergency Room Nightmare" was selected for the collection The Best American Medical Writing, 2009. He recently participated, with zero critical acclaim, in the University of Chicago's annual Latke-Hamentaschen debate.

25 thoughts on “What Larry Summers should say”

  1. See also Summers’ prior writings on global health and related matters.

    Is this one of those related matters that you are referring to?

  2. Nicely put…
    But to truly beard the smartest lion in the den…
    Don’t you think the word “humble” should appear somewhere?

    For example:

    I am grateful and humbled by your confidence in me…

    Or perhaps here:

    My stepping humbly back at this moment is a good outcome for everyone.

    1. I think the only way to get Larry Summers to do this would be to let him in on the ground floor of something really, really good. Beaucoup bucks.

  3. That would certainly be a good way to save face.

    But: there’s also an argument to be made that the mental gestalt associated with maximization of personal wealth/experience simply is not the appropriate one for running the Fed. National economies shouldn’t maximize, they should satisfice.

    Yes, I know, I’m mired in the old days when public service meant sacrificing one’s lifetime earnings potential.

  4. Harold has it right. Summers is an exceptionally able economic policymaker, though he has made bad mistakes as well as good calls. But Chair of the Fed is the wrong slot for a host of reasons, including temperament. Would Ike have made Patton his chief of staff?

    1. Maybe the US could tolerate someone as Fed chair with a history of causing needless offense; of poor reasoning; of overconfidence in an area where he has no expertise; and of intellectualized sexism. Maybe you’d make that trade-off if there were any evidence that he’d actually make a good Fed chair.

      But holy cow, people who defend his Harvard speech as not-entirely-ignorant need to get a look at the actual speech. I’m even willing to suppose that he’s not personally hostile to women, but how can I believe that the person who wrote this is some kind of genius?

      As best as I can reckon, Summers is a deep thinker the way that Scalia and Greenspan are brilliant in their respective fields. That is to say, not at all.

    2. You’re absolutely right. He would have been a lousy chief of staff. But then Don Corleone wouldn’t have considered Larry Summers for the job of consigliere, either. A capable, loyal adviser is one whose advise is largely untainted by personal greed and ambition. Larry Summers might be the smartest guy in the world, but he sold out every man or institution foolish enough to trust him. Integrity is just as important as temperament and Larry Summers is sorely lacking in both categories

    3. I think we’re all familiar with most of the mistakes and poor economic policies Summers has advocated. You say he made some good calls. What were these goods calls that Larry Summers supposedly made and how sure are you that it wasn’t just a case of the highest bidder being right?

    4. “Summers is an exceptionally able economic policymaker, though he has made bad mistakes as well as good calls. ”

      I would say that those two clauses are in conflict; ‘exceptionally’ able means that he shouldn’t have made any bad mistakes worth mentioning.

      Let alone helping to crash the world economy.

  5. Defenses of Summers remind me of defenses of Robert E. Lee: Each, on the Big Issue of his time, chose the wrong side and each bore direct responsibility for the resulting calamity. Almost nothing else matters.

    If Summers repented – if he’d said that in retrospect the non-regulation of derivatives was a bad idea – then I think it might be reasonable to trust him with a position of responsibility in a matter related to financial regulation. Clinton himself has done that, as have many others.

    Summers hasn’t. And, in fact, he’s on the record doing the reverse: saying, utterly preposterously, that failures of derivative regulation weren’t at the heart of the real estate bubble and the resulting crash.

    I suppose there are worse choices – the Republicans are remarkable for their ability to turn even the worst Democrats into lesser evils. But why would anybody who cares about the United States want a guy like Summers in a position like that? Because he’s done some good work in academia? Please …

    1. Except that if Summers was Lee, he’d also have been a major policy point person in favor of secession.

      I may have said this before, but James’ assessment of Summers is in line with *all* favorable assessments of the man: [unsupported claim of brilliance] + [maybe a token admission that he’s not (yet) God] + [absolutely no dealing with Summers’ public record of disaster]

  6. What Larry Summers should say is that that he is sorry for having corrupted and dirtied every institution with which he’s been associated and that he is giving back to the people the tens of millions of dollars he made by betraying their trust.

  7. He has the experience and brilliance to make a superb chairman of the Federal Reserve.

    But not the tact and diplomatic skills.

    1. If (and it must now be a remote contingency) Summers is still appointed Chair of the Fed, what are the odds on a mutiny in the FOMC?

      1. Surprisingly, it would appear that you are mistaken. Yesterday, Felix Salmon linked to a Bloomberg article that said there was a still a 65% chance of Summers getting the appointment. Apparently, Obama himself still believes that Summers is the right man for the job and is prepared to go to the mattresses if there’s any Congressional opposition.


  8. The country has three hundred millions of people in it, and, God knows, more economists per capita than any other realm on earth. Why in the name of headhunting is this guy even in the running?

  9. Larry’s 2005 speech is a good example of what I call “expert disease” — after many years of being a widely-hailed expert in your field, you gradually come to think that you are capable of having useful insights on any topic at all, just off the cuff. He was actually also a knee-jerk climate change denier for quite a while.

    Which brings me to a question that I have for the RBC that is relevant to Larry’s candidacy for the Fed — what was the role of Glass-Steagall repeal in the great recession? I have read economists who argue all different sides of this (caused it, didn’t cause it, actually helped mitigate it), but everyone I’ve read has done so in the context of a specific spot on the ideological spectrum. Have any of youse economists read anything that you consider dispositive on the subject, that you can point me to? Thanks.

    1. Carter, you say “I have read economists who argue all different sides of this (caused it, didn’t cause it, actually helped mitigate it)” but now you want somebody here to tell you where to find the true answer?

      Good luck with that.

      (BTW, I feel sure that I know the true answer, but I’m tired of arguing about it with the dimbulbs who disagree with me.)

  10. This reminds me of the other convo on judicial discretion. The thing about judges is, you want someone smart, yes. But that’s not nearly enough. They should have a strong sense of justice and fairness, and an even temperament. The ability to see all sides. The ability to question themselves. You need at least those. Smart is nice but not nearly enough. So if that’s the best someone can say of this guy, he’s not the right choice.

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