Surely President Obama Is Joking About This 'Have Larry Summers Run The World Bank' Thing!
The hot scoop of the day, where emeritus members of the Committee To Save The World are concerned, is that President Barack Obama is mulling naming former White House economic adviser Larry Summers to head the World Bank, replacing outgoing Robert Zoellick, whose term will end midway through the year. (This cuts against the previous hot World Bank scoop from last year, where Secretary of State Hillary Clinton was rumored to be in the running for the position.)
But, hey! Larry Summers! How does that grab you? And more importantly, does it grab you in a way that threatens to cut off the circulation of blood to your brain?
Nearly everyone in the world says Larry Summers is a brilliant economist. And it's certainly possible to take a glancing look at his recent record in the Obama administration and extract the portrait of a happy warrior for the White House. He argued reasonably against the debt-ceiling default hostage crisis in the face of mounting oppositional insanity and a media that had decided that said insanity was just an interesting side of an important debate. He repeatedly made the case for additional stimulus at a time when that quest was fairly quixotic. And earlier this year, Summers gave some voice to the concerns of those who feel that the age of austerity is being balanced on their backsides, writing, "[A]t a deeper level, citizens of the industrial world who believe that they live in progressive societies are right to wonder why increasingly affluent societies need to roll back levels of social protection."
And everyone agrees that Summers is brilliant ... just brilliant! So much so, that it seems that whenever anyone has to begin a monologue about Larry Summers, the first few cubic milliliters of breath are always expended on behalf of testifying to that brilliance. Once that's out of the way, however, what follows is often several paragraphs explaining how Summers is terribly unpleasant to be around and often inexplicably wrong. Just the sort of person you want helping Third World nations restructure their debt and Europe survive its calamitous fiscal crisis!
In his recent book, "Confidence Men: Wall Street, Washington, and the Education of a President," Ron Suskind rather relentlessly depicts Summers as the pre-eminently dysfunctional cog in the Obama White House's financial crisis decision-machine. This is, on one level, not too terribly surprising -- what the Obama administration inherited wasn't so much the aftermath of the previous administration's policies as it was a decades-long litany of financial deregulation and bad decisions that had Summers' fingerprints all over it. As "Inside Job" director Charles Ferguson put it, "I found Summers everywhere I turned."
Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy treasury secretary and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial industry. He also successfully fought attempts by Brooksley Born, chairman of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that caused so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.
So when Summers joined the Obama administration to ostensibly help the country recover from all of this, it couldn't have been a particularly happy task to wade into all of the wreckage he'd authored. And that comes through, again and again, in Suskind's account. Adam Moss, who (along with Frank Rich) mounted a deep extraction of the book's major plot points, singled Summers out from a dyspeptic wrecking crew that also counted Tim Geithner and Rahm Emanuel, and in so doing, provided one of the more excellent distillations of how Summers was portrayed:
You think the portrait of Geithner is more devastating than the one of Summers? I guess. In that instance you cite, Obama asks to put the dissolving of Citibank on the table, and Geithner simply ignores him, "walking back" the decision, in political parlance. More insidiously, he creates the framework, borrowed from Hippocrates, of "first, do no harm," which effectively cuts off any bold reforms for fear of their potential effects on the market. But Summers is portrayed as an egotistical nut job, single-mindedly determined to get Bernanke's job; when he doesn't get it, he goes bananas. He is supposed to be a conduit for the collective advice of the team, but undermines his colleagues, only passing along advice and information that supports his positions. I was kind of stunned how many officials were willing to go on the record against him.Peter Orszag relays this eviscerating quote that Summers said to him about Obama during the worst of the economic distress. According to Orszag, Summers says, "You know, Peter, we're really home alone. There's no adult in charge. Clinton would never have made these mistakes." Later, Orszag says to Suskind, "Larry just didn't think the president knew what he was deciding. Was this [obstruction of the president's wishes] outright and willful?" In other words, asks Orszag, was Summers saying, "I know more than the president flat-out? That strikes me as ... likely." In an amazing memo, Pete Rouse, who would replace Emanuel temporarily as chief of staff, recommends firing Summers for "Larry's imperious and heavy-handed direction of the economic policy process." Romer says Summers made her feel "like a piece of meat."
In the end, nobody's talking to Summers — not even his crony Geithner. Furious that Geithner didn't recommend him for Bernanke's job, he stands Geithner up at a dinner for all the former Treasury secretaries -- Summers is the only living former secretary not there. Geithner says, "Larry would rather be in Davos than at dinner with me." At least according to Suskind, the only person who could stand Summers was Obama, which -- in Suskind's telling -- was a misjudgment that had a rather profound effect on the first chunk of Obama's presidency.
Yes, that hits Suskind's depiction of Summers pretty squarely -- at a time when the nation's middle class was in crisis, Summers spent his time grousing about his own blunted ambitions, gumming up the decision-making process, serving as inter-office underminer, and, of course, not going to dinner with Timothy Geithner. (That's a real garter-popper, where Beltway cocktail etiquette is concerned.)
Of course, Suskind's account has come under fire from some quarters, and Summers has denied the book's account of what happened in the White House, but as Dan Froomkin points out, "we don't have to take Suskind's word for it."
Simply read the White House's own extraordinary February 2010 "annual review" memo, which top Obama adviser Pete Rouse prepared for the president. Suskind excerpts it in the book and the White House has not challenged its authenticity:"First there is deep dissatisfaction within the economic team with what is perceived to be Larry's imperious and heavy-handed direction of the economic policy process.
"Second, when the economic team does not like a decision by the President, they have on occasion worked to re-litigate the overall policy.
"Third, when the policy direction is firmly decided, there can be consideration/reconsideration of the details until to the very last moments.
"Fourth, once a decision is made, implementation by the Department of the Treasury has at times been slow and uneven. These factors all adversely affect execution of the policy process."
If Summers' querulousness was driven principally by the fact that he didn't end up at the Federal Reserve, one can view his possible appointment at the World Bank as a sort of "make up call." And who knows, maybe the prestige of that position would be sufficient to mine a previously untapped well of sunny disposition. That's not something that I'd bet on, and the third and fourth paragraphs of Felix Salmon's piece begging Obama not to make this appointment goes to the root of why this is a critical thing to consider in making your World Bank appointment:
The only way to be an effective World Bank president is to be an effective diplomat. Like all CEOs, the head of the Bank reports to a board of directors -- but at the World Bank, the board of directors which meets twice a week. And they’re not friendly hand-picked board members, either -- they’re political appointees who fight their geographical corners, who live full-time in Washington, and who work full-time out of offices within the Bank itself. If you want to get anything done at the Bank, you need to persuade the board to leave you alone and not micromanage every decision you make.You also need to be an almost superhuman manager. The World Bank has more than 10,000 employees from over 160 countries, with offices in more than 100 countries around the world. The range of cultural expectations they bring to their jobs is truly enormous, and the amount of political jostling and mutual incomprehension which results is entirely predictable. In order to manage this rabble, you need a very high level of cultural and interpersonal sensitivity.
That need for a "very high level of cultural and interpersonal sensitivity" reminds me of the last time the words "Larry Summers" and "World Bank" found themselves inextricably linked. In 1992, Summers, then serving as the bank's chief economist, famously penned a memo that asserted, "I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that." As you might imagine, this caused something of a "furor," and Summers' damage control response was to say that he was intending to be "sarcastic." (I guess there was just something about Larry's personality that prevented his satiric pollution memo from being received in the spirit it was intended?)
At any rate, it seems pretty clear that his prickliness, his record of being a source of dysfunction, and that teensy little thing where the policies he supported helped wreck the economy would all disqualify Summers from a position that you can apparently suggest Bono might adequately fill without getting laughed out of the room. Naturally, you don't have to take my word for it, just ask a woman. (Speaking of, I can't remember how to say "Oh, for f-ck's sake" in French, but I have to imagine that anyone who happened to be standing within earshot of Christine Lagarde when she heard this news learned it.)
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First Posted: 01/18/2012 6:19 pm Updated: 01/18/2012 9:28 pm