Larry Summers is, or soon will be, officially out. The shouts from liberals and progressives are as deafening as the groans from Summer's Wall Street pals. The troika of Summers, Treasury Secretary Timothy Geithner, and Robert Rubin, the other top Obama economic advisor, are reviled and condemned for giving away the taxpayer store to the big bankers and Wall Street houses. Or spun the bank's way, for shoring up a tottering financial system and preventing total collapse.
In any case, Summer's departure means that President Obama will have to scramble to fill the void. The signs aren't good if you think that Summers represented all that is wrong with the Obama's deference to the big money crowd. His seemingly forced repeated plea that he's not anti-business sounds more like penance for his having the temerity to mildly challenge the financial giants on reform. There are strong hints from the White House that he'll pick someone who's a business oriented executive as a sop to the financial industry. The names floated as Summer's replacement, Ann Fudge, former chairman and chief executive of Young & Rubicam Brands, Laura Tyson, a former economic adviser to President Bill Clinton, Summers' deputy Jason Furman, General Electric Chairman Jeffrey Immelt and Richard Parsons, chairman of Citigroup would pass muster with the corporate and financial biggies.
Summers, Geithner and Rubin deep ties to Wall Street are beyond question. Geithner's circle of advisors during his stint as New York Fed Chairman read like a who's who of Wall Street's power brokers -- Goldman Sachs, Merrill Lynch, J.P. Morgan Chase, and a bevy of corporate executives, and banking and commerce officials. The $29 billion loan that Geithner brokered to help grease the wheels for Chase's takeover of Bears Stearns raised an eyebrow or two. It was also revealed that a close associate of Geithner who also sat on the New York Fed that Geithner headed ran J.P. Morgan Chase. It got the Bears Stearns liquidation loan.
Volumes have been written about how Bush and the Republicans eagerly cut sweetheart deals with financial industry lobbyists to gut lending and stock trading regulations, winked and nodded at the banks and brokerage houses as they engaged in an orgy of dubious stock swapping, buys, and trading, conned millions of homeowners into taking out catastrophic sub-prime loans and watered down the oversight powers of government regulatory agencies.
Their financial free wheel and dealing couldn't have happened without a huge policy change that Summers and Rubin engineered during the Clinton years. As Clinton's Treasury Secretaries, Summers and Rubin lobbied Clinton and Congress in the late 1990s to scrap most of the provisions of the decades old Glass-Steagall Act. The Act was the 1930s Great Depression era measure that kept federally insured banks out of the go-go world of stock trading, exotic lending and financial speculation. It also set rigid standards for mortgage lending and strict oversight over banking practices.
This was only part of the financial deal cutting between the banks and Clinton and Congress. A year later Summers in tandem with then Texas GOP senator and Chair of the Senate Banking Committee Phil Gramm rammed through another "financial modernization" measure. This one took the wraps off government regulations that checked banks, insurance companies and brokerage houses from dumping billions into financial swaps (speculation) on commodities such as oil and food staples. The rationale was the same as that given for getting rid of Glass-Steagall and that was to keep the financial institutions as full profit centers with minimal to no government oversight accountability or investor, depositor and shareholder accountability.
The predictable quickly happened with the regulatory gloves off commercial banks, brokerage firms, hedge funds, institutional investors, pension funds and insurance companies could do whatever they wanted when it came to investing in each other's businesses and marching in lock step with each other's financial operations.
The implosion of Wall Street directly resulted from the questionable policies that Summers and Rubin rammed through, and Geithner backed. Even in the face of the financial crisis, the troika gave no sign of backing away from their belief that failing financial institutions must be propped up with massive amounts of taxpayer dollars, that the industry can police itself, and that Wall Street still hold the key to economic recovery. The final financial reform law reflects much of that thinking.
The harsh criticism of Geithner and company's prescription for sustained recovery haven't shaken President Obama's resolve to stay their course. And the drumbeat attack on him from the GOP and rightwing bloggers, talk jocks, and tea party leaders as a closet socialist have made him even more cautious about doing and saying anything that can even remotely be construed as anti-business.
The call for Geithner and Rubin to go, though, will continue loud and long. The real and perceived misery level of the middle-class appears likely to continue to rise and the clamor for Obama to be even more aggressive in tackling the economic malaise will rise too. Geithner and Rubin could be the next to go.
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