It is true that Summers moderated his deregulatory zeal after the financial crisis, and has been a vocal critic of austerity since leaving the White House, but his checkered history still poses a political risk for the White House.
The White House continues to fend off criticism from within its own party over one potential nominee for Chair of the Federal Reserve: the oft-maligned former Obama Economic Advisor Larry Summers.
Obama followed up a Capitol Hill meeting in which he scolded Congressional Democrats for their criticism of Summers, with a press conference last week telling reporters, “I think the perception that Mr. Summers might have an inside track simply had to do with a bunch of attacks that I was hearing on Mr. Summers preemptively, which is sort of a standard Washington exercise that I don’t like.”
But even after the scolding from the White House, Senate Majority Leader Harry Reid remained highly skeptical of Summers as Fed Chief, telling Salon’s Joan Walsh, “ultimately, it will be so divisive within the caucus, it may not be worth it.” And a new Bloomberg poll of economists that finds a majority believe Federal Reserve Vice Chairwoman Janet Yellen —not Larry Summers—would be the best pick for the job. Senate Democrats are currently circulating a letter supporting Yellen.
Summers is haunted by a sexist comment he made as president of Harvard, where he implied that women have a lower “intrinsic aptitude” in math and sciences. But Summers was also a leading proponent of deregulation while serving in President Bill Clinton’s Treasury Department. Summers teamed up with mentor Bob Rubin to block regulation of the derivatives market, and successfully pressured the White House and Congress to repeal Glass-Steagall—a depression-era law separating the activities of commercial and investment banks. Summers had politically motivated battles with other members of the Obama economic team in 2009 over the size and scope of the Recovery Act (Summer’s proposed $1.2 trillion package, while more than the final $830 billion package, was less than colleague Christina Romer’s $1.8 trillion proposal).
Yellen, on the other hand, warned early on of the potential for a housing bubble and credit crunch in the mid-2000’s. A recent of economic prognosticating among Fed policymakers gave Yellen the highest ratings.
It is true that Summers moderated his deregulatory zeal after the financial crisis, and has been a vocal critic of austerity since leaving the White House. However, given his checkered history on economic policy and famously churlish personality, it’s surprising that the White House is investing precious political capital in Summers.