Ron Suskind’s new book is getting some attention for the gossipy tidbits it uncovers, like this one.
According to the book, Summers sought to derail Obama’s push on several policies, including a financial transactions tax.
At one point, Orszag delivered a private report to the president, at his request, about what might happen if the government did not act to rein in the long-term federal budget deficit. Summers was outraged that Orszag would communicate with the president without going through the National Economic Council.
“What you’ve done is immoral!” Summers shouted.
Orszag told Suskind, according to the book: “Larry just didn’t think the president knew what he was deciding.”
Meeting over dinner at the Bombay Club one night, Summers told Orszag that “we’re really home alone,” according to the book. “I mean it,” Summers said. “We’re home alone. There’s no adult in charge. Clinton would never have made these mistakes.”
I actually laughed out loud when I read that last part. Because the seeds of the Great Recession were planted while Clinton was “the adult in charge” — at the urging of none other than Larry Summers (and his partner in crime, Robert Rubin). And now, the Big Dog admits listening to those guys was a big mistake.
“On derivatives, yeah I think they were wrong and I think I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency,” Clinton told me.
But it’s not just the deregulation of derivatives where Clinton erred:
Endorsing the Republican agenda of financial industry deregulation, reversing New Deal safeguards, President Clinton pursued policies that in the long run created more damage to the American economy than any other president since Herbert Hoover, whose presidential tenure is linked to the Great Depression. [...]
Clinton signed off on the reversal of the Glass-Steagall Act, the legislative jewel of the Franklin Roosevelt administration designed to prevent financial institutions from getting too big to fail. In signing the Financial Services Modernization Act, which broke down the barrier between high-rolling Wall Street investment firms and consumer banks carrying the deposits of ordinary folk, Clinton gushed in 1999, “Over the [past] seven years we have tried to modernize the economy… And today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority.” [...]
A year later a variation of that same word appeared in the title of the Commodity Futures Modernization Act, which Clinton signed and which exempted from government regulation all of the collateralized debt obligations and credit default swaps that would later prove so toxic. That legislation led to the explosion of the market in unregulated mortgage-based securities, the key source of the financial-sector “dealmaking” that Clinton now bemoans.
But to Summers, apparently, none of those were “mistakes.”
Unfortunately, Obama may never recover from appointing people like Larry Summers and Tim Geithner in January 2009. As Atrios tweeted,
@Atrios: my mild obama leaning during the primary was due to desire to lessen clintonite influence #ohwell