We’re not at the point where people who Got It Right are empowered to make things better, but they are nonetheless important bellwethers. 

Krugman:

Time magazine famously named Mr. Greenspan, Robert Rubin and Lawrence Summers “The Committee to Save the World” — the “Three Marketeers” who “prevented a global meltdown.” In effect, everyone declared a victory party over our pullback from the brink, while forgetting to ask how we got so close to the brink in the first place.

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[O]nce the economy is on the road to recovery, the wheeler-dealers will be making easy money again — and will lobby hard against anyone who tries to limit their bottom lines. Moreover, the success of recovery efforts will come to seem preordained, even though it wasn’t, and the urgency of action will be lost.

So here’s my plea: even though the incoming administration’s agenda is already very full, it should not put off financial reform. The time to start preventing the next crisis is now.

The incoming administration obviously thinks Larry Summers is so very brilliant that he’s worth the price of his political baggage.  I’m less concerned with his famous lack of tact than I am with his role in creating the current mess. 

Naomi Klein refers to the bailout as "Bush’s Final Pillage."  Here she is on Democracy Now, talking about the legacy of the intellectual dishonesty of the left who tried to pretend that all problems could be sourced to the misdeeds of the Bush administration:

Obama said again and again during the campaign that the crisis on Wall Street represented the culmination of an ideology of deregulation and laisse-faire trickle-down economics that had guided the country for the past eight years.

The truth is, it was not just eight years, they guided them under Reagan and also under Clinton.  That is where Larry Summers comes in because he was the last treasury secretary under Clinton. He along with Alan Greenspan and Robert Rubin were the key architects of the policies of deregulation that created the crisis that we’re living now. And those key policies are the killing of Glass-Steagall that allowed a series of very large but mergers that created these institutions that are too big and too intermingled to fail we’re told again and again.

The deliberate decision to keep the derivatives out of the reach of financial regulators- that was also a Summers’ decision. And also allowing the banks to carry these extraordinary levels of debt. 33 to 1 in the case of Bear Stearns.

Now, in my book the Shock Doctrine I started chapter with a quote from Larry Summers in the context in which he says it was 1992 and it was when he was making World Bank economic policy as it related to Russia, in the midst of a financial crisis. What he said and this is why I quoted him because it really shows the extent to which he is truly an ideologue and a follower of the very ideology- not just a follower but a propagator of the very ideology that Obama ran his campaign against. And here’s the qoute. This is Larry Summers in 1992: “Spread the truth. The laws of economics are like the laws of engineering. One set of laws works everywhere.” And then he laid out those laws a little bit later.

He referred to the three “ations”, and those were privatization, stabilization, and liberalization. So he has been preaching the doctrine. He is by no means an innocent bystander. He is a dyed-in-the-wool privatizer, free trader. And he along with Tim Geithner, his deputy play key roles during the economic crises.—along with Timothy Geithner.

They preached more deregulation, more privatization and economic austerity to disastrous results. I think this is really troubling. One thing that Obama said is that Larry Summers set the terms of the debate for this financial crisis and that once again is very worrying.

As Mark Ames says, "Summers was one of the key architects of our financial crisis–hiring him to fix the economy makes as much sense as appointing Paul Wolfowitz to oversee the Iraq withdrawal." I understand that you need the cooperation of Wall Street go get out of this situation every bit as much as you need the cooperation of the military to get out of Iraq, and having people in charge who make them comfortable is critical to that effort.  

Still, let’s not kid ourselves.  This is Larry Summers’ mess.

Related posts:

  1. Larry Summers Aide Luring Veal Pen with Donor Cash at Common Purpose Meeting
  2. Larry Summers Explains His Approach to Financial Regulation
  3. Robert Greenwald’s Message to Virginia And Not Larry Sabato
  4. Obama’s Weekly Address: The Consumer Financial Protection Agency
  5. Krugman: The Public Option and Why the Reagan Zombies Don’t Die