Finally! The announced departure of Lawrence Summers as the president's top economic adviser is welcome news. Harvard's loss in taking back its $586,996-a-year professor and "president emeritus," who is also paid millions by Wall Street on the side, is the nation's gain. Maybe now Barack Obama, who hopefully will also push out Summers' protégé, Treasury Secretary Timothy Geithner, will begin to provide an authentic populist alternative to those tea party Republicans who totally absolve Wall Street of responsibility for the economic collapse. But the early signs are not fully reassuring.
As I stated in my column last week, for the umpteenth time urging Summers' dismissal, I expected the president to have kind words for a man who deserved none if he were to be fired. But Obama's effusive praise on Tuesday went well beyond the requirements of professional pink-slip courtesy and suggests that he is still in denial over the role of key Democrats like Summers in getting us into this mess:
"I will always be grateful that at a time of great peril for our country, a man of Larry's brilliance, experience and judgment was willing to answer the call and lead our economic team."
A parsing of that one sentence will reveal much of what is rotten in our political system and distorted in the president's response to the economic crisis he inherited. There is simply no serious accountability when Summers is lionized for his disastrous service and Wall Street's high rollers are bailed out after their stark disgrace. By what standard would one judge as "brilliant" the abysmal performance of Summers both as treasury secretary in the Clinton administration and more recently as a top economic adviser for Obama?
The "great peril" for our country that Obama referred to was a direct result of the radical financial deregulation that Summers helped make law when he worked for Bill Clinton. He led the effort to destroy the career of Brooksley Born, the Clinton-appointed head of the Commodity Futures Trading Commission who had the prescience to sound the alarm in the face of a dangerously spiraling market in suspect mortgage packages. Her sensible suggestion in a "concept release" for a study of the risks in those newfangled financial gimmicks horrified Summers, who told a Senate committee:
"In our view, the Release has cast the shadow of regulatory uncertainty over an otherwise thriving market--raising risk for the stability and competitiveness of American derivatives trading. We believe it is quite important the doubts be eliminated."
They were eliminated when, at Summers' instigation, Clinton signed off on the Commodity Futures Modernization Act, which summarily banned any regulation of those derivatives under any existing law or by any agency.
Ever one to fail upwards, Summers was rewarded for his betrayal of the public trust with an appointment as president of Harvard, where his dismissal of the scientific competence of women was his most noted achievement. That did not stop candidate Obama from selecting him to be a key economic adviser in his campaign. Nor was the fact that Summers received almost $8 million in consulting and lecture fees from Wall Street firms during the time he advised the Democratic candidate a deal-breaker for Obama.
Obama had absolutely nothing to do with the causes of the financial meltdown, but he wasted two precious years being misled by Summers and Geithner as to how to respond to it. The key error, and it is not too late to rectify it, was the failure to force the bailed-out Wall Street titans to give back something significant to the public in the way of mortgage relief. A temporary moratorium on mortgage foreclosures at a time when 11 million homeowners are "underwater," at risk of joining the almost 4 million who have already lost their homes, is a must to recharge the economy. That is what Obama should have initiated when he first came into office, and I hope it will be done now that the dead hand of Summers has been lifted.
Perhaps at Harvard Summers will have time to reflect on the dismal arc of his split tenure in government service. Thanks to the banking debacle he did so much to initiate back in the Clinton years, the nation now has more people living in poverty, 43.6 million of them, than ever in our history. Americans have witnessed the disappearance of $11 trillion of their net worth, $1.5 trillion in the second quarter; the debt has risen alarmingly; unemployment is stuck at 9.6 percent; and trillions of dollars in toxic pools of housing stock are still held by the banks to be thrown into the housing market fire sale anytime home prices promise to edge upward. Behold what brilliance has wrought.