There’s Something About Larry
Lawrence Summers is frighteningly good at surviving his failures. Not quite as good as Alan Greenspan, who had a knack for disappearing before the failures even surfaced, but close. Among a certain group of politically calculating neoliberals, Larry Summers has a good chance of being appointed Federal Reserve Chairman. It’s breathtaking that he’s even being considered, but Larry has a kind of zombie ability; a can’t-be-killed-cat with at least nine lives despite catastrophic performances throughout his career.
1999 alone should have doomed him. That was when, during the Clinton administration, Summers helped convince Congress to repeal the Glass-Steagall Act of 1933. That’s the economic equivalent of lighting a fuse to a stick of dynamite. For decades the Glass-Steagall act successfully forced banks to keep their commercial and investment activities separate. The idea was that banks that hold customer deposits insured by the FDIC (namely us, the American taxpayer) should not be making wild bets with that money. Repeal of the law allowed commercial banks to get into the mortgage-backed securities market that came crashing down during the financial crisis. To put this more bluntly, Summers lit the fuse to the dynamite that helped blow up our financial markets. Not something you would normally reward.
And he learned nothing from the experience. Holding fast to deregulation and ‘free market’ principle, even in the wake of the 2008 fiscal disaster, Summers was the “most vocal internal opponent” of the Volcker Rule, a watered down Glass-Steagall in principle, which forbids banks from making risky bets with taxpayer money, according to Mother Jones magazine. In 2009 and 2010, as Congress was drafting up the Dodd-Frank financial reform law aimed at preventing another financial collapse—the Volcker Rule was seen as key. Three years after Dodd-Frank passed, the Volcker rule has yet to be finalized because Wall Street is waging an all-out war against the law—and Larry Summers is on their side.
Additionally, Summers was hostile to a proposed addition to the Dodd-Frank law that would have broken up mega-banks into smaller banks. Summers objected to the measure because, he said, it would mean smaller banks “would be at greater risk of failing.” But if they aren’t small enough to fail, they are too large to fail, and tax payers have to foot the bill. And we’ve all seen what success our economy achieves when banks are too large to fail.
Also unfortunate, while he was president at Harvard University between 2001 and 2006, Summers invested billions of dollars of the school’s money in a risky mix of stocks, bonds, hedge funds, and private equity. As a result, when the financial crisis hit, the university ended up losing 27 percent—or $1.8 billion—of its $6 billion in cash assets.
All of this goes without mentioning his utter political tone deafness. Remember the abstruse warnings Greenspan gently prodded fund managers with, that wonderfully subtle phrase, ‘over exuberance’ or Bernanke’s coyly playing around with positive growth estimates? There’s a reason for that. The Fed Chairman holds the heart of Wall Street in his/her hands; when the Fed whispers, Wall Street swoons.… But, alas, Larry is anything but subtle. He’s a bull in the bull market, so to speak. Or the bear in the bull market.
During his tenure at Harvard he managed to piss off approximately half the human race by insisting that women couldn’t really make top-tier scientists. Summers told a meeting about the status of women in science that “three broad hypotheses” could explain the “very substantial disparities regarding the presence of women in high-end scientific professions…”
With his usual panache, he explained that women don’t like the “80-hour work-weeks”, that small differences in average math or science aptitude translate into a large disparity at the intellectual level needed to do world-class science, and finally that girls and young women are socialized away from science and engineering into ‘softer’ disciplines.
No mention, of course, of male hegemony or male preferential treatment, because why would that ever enter into it?
A little tone-deaf, like I say, such that he managed to provoke his own public denunciation from the Harvard faculty. On March 15, he received a no-confidence vote from the faculty of arts and sciences, apparently for the first time since the Great and General Court of the Massachusetts Bay Colony spawned Harvard in 1636.
But he is a cat with the proverbial nine lives. After he was an insensitive clod at Harvard, Larry Summers moved on to become an insensitive cad at the World Bank. On December 12, 1991, he authored a memo that has since become infamous, arguing that the less developed countries [LDC] should essentially service the waste from the first world because their health costs were lower. “From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. 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.”
He also goes on to note sadly that, “I’ve always though that under-populated countries in Africa are vastly UNDER-polluted…” As if pollution were a ‘fixed’ cost of doing business and if you wanted to be all grown up, you needed to go out and get yourself some.
And besides, he added, his third bullet point of impeccable logic, poor people don’t really live that long.
“The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is 200 per thousand.”
If you’re reading this and thinking that Larry Summers is a moral troglodyte, you’re not alone. After the memo became public in February 1992, Brazil’s then-Secretary of the Environment Jose Lutzenburger wrote back to Summers: “Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in… If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said… the best thing that could happen would be for the Bank to disappear.”
Sadly, Mr. Lutzenburger was fired shortly after writing this letter.
Mr. Summers, on the other hand, was appointed the U.S. Treasury Secretary on July 2nd, 1999, and served through the remainder of the Clinton Administration.
And so it goes.
But in some ways, maybe Larry Summers has done us a favor. He embodies all that is wrong with the nexus of our political and economic system in one man—no small feat. If he’s chosen for the Federal Reserve Chairmanship it will become infinitely easier for historians to pinpoint at least one of the missteps that led to our national decline.
Only our usual cartel of Wall Street players, neoliberal acolytes and a few lazy historians would applaud his appointment, the rest I should think would look to the alternative candidate, Janet Yellen (whom Elisabeth Warren has recently endorsed), and hope she gets the nod.
The scary part is, no one really knows how many lives Larry has left.