Three Reasons Summers Didn’t Get the Job

Larry Summers’ failed bid to succeed Ben Bernanke as chairman of the Federal Reserve came down to three things: politics, policy and personality

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J. Scott Applewhite / AP

Lawrence Summers arrives for the tax cut extension bill to be signed President Obama during a ceremony at the Eisenhower Executive Office Building in the White House complex, Dec. 17, 2010

There are three sides to Larry Summers’ failed bid to succeed Ben Bernanke as chairman of the Federal Reserve: politics, policy and personality. Given the hurdles Summers faced in all three areas, it’s a testament to his intelligence and the esteem in which President Obama holds him that Summers got as close as he did to achieving his life-long goal before withdrawing from contention Sunday afternoon.

The politics were always bad for Summers. The architect of Obama’s 2009 crisis management as the President’s first director of the National Economic Council, Summers’ nomination to head the Fed would have been a referendum on the sufficiency of the country’s economic recovery. A Wall Street Journal/NBC News poll released this past week found 52% of Americans disapprove of President Obama’s handling of the economy, not a national mood the President would want to highlight via lengthy on-air debate between Senators and Summers about what he and Obama might have done differently.

(MORE: Larry Summers Withdraws His Name for Fed Chairman)

On policy, Summers is regarded as brilliant even by those who consider themselves to be his enemies, and having handled crises as both Treasury Secretary for Bill Clinton and NEC head for Obama, he is clearly qualified to run the Fed. Back in 2009, then Treasury Secretary Timothy Geithner, who worked for Summers under Clinton, told TIME that “[Summers’] solutions tend to be government-led, progressive structuring of the market for what he perceives as the greater social good.” It was that approach that clearly attracted Obama, but could have rankled more-conservative Federal Reserve governors.

And the management of other Fed governors is no small issue. Mixed messages from either the Board of Governors or the Federal Open Market Committee spook markets and Main Street investors alike. Which is why Summers’ famously “abrasive” personality (even allies use that adjective) was not a secondary issue in his chances to lead the Fed. Fed governors regularly speak on the record with the media and how they frame and discuss disagreements among their number moves markets like few other interactions. Managing some of the smartest and most powerful economists and bankers in the world isn’t just a matter of good manners at the Fed: it’s crucial to the functioning of the markets.

Ultimately that may have been the deciding factor for Obama on Summers. As much as he may agree with his policy outlook and as much as he may trust and respect his intelligence, there’s no getting past Summers’ famously difficult personality. It’s one thing to have that problem inside the White House, where the President is always the boss. It’s quite another to have it at the Fed where power is much more a matter of consensus.

MORE: Be Happy Larry Summers Sits on the Board of Lending Club

27 comments
SpikeLee
SpikeLee

Massimo Calabresi forgot to discuss policy in this piece.

There is nothing in this article about Larry Summers shifting positions on regulation, or his distaste for QE near the zero bound, or anything about monetary policy.  It seemed to be replaced with a second-hand vague description about his fiscal policy.

I hope in the future TIME has writers write about subjects they understand, and hires writers who understand subjects that TIME wants to discuss.  Maybe once Time, Inc. is spun off?

MrBenGhazi
MrBenGhazi

...politics, policy and personality...

That's technically two things: politics (1), and policy and personality (2). The correct usage would be "...politics, policy, and personality." You are a writer, you are supposed to get it right! 

ALM
ALM

US stocks Monday followed global markets higher, rallying on Larry Summers’s withdrawal as a candidate!  Thanks Larry you finally did something right!

StephenSwain
StephenSwain

And let's don't forget his politically incorrect statements at Harvard ..., er, the ones that got him fired.  He may be brilliant, but his people skills seem to get in the way of his genius.  Perhaps a little time off would help him.

shepherdwong
shepherdwong

"...he is clearly qualified to run the Fed".

How does "having handled crises," qualify one for running the fed. The fed is about establishing monetary policy to keep inflation in check and to reduce unemployment. Please explain what accomplishments exist on Larry Summers' resume that qualify him for those mandates. Jesus, I don't think most Beltway journalists could write a paper that would get a C-grade in a decent high school Econ class. 1) helps explain why people keep electing economically-illiterate pols and 2) doesn't really commend J-school, does it?

ParthaNeogy
ParthaNeogy

No mention of Summers' role in dismantling Glass-Steagall, nor of hectoring Brooksley Born against regulating the derivatives market?

RonRobinson
RonRobinson

The only reason Summers was rejected is because Obama had to appease the far Left in his Far Left Party.

arvay
arvay

Summers is a seasoned veteran of the Oligarchy and worked hard for the One Percenters. Obama will replace him with someone similar, who is a bit less  nastly-mouthed. Obama is a true heir of Reagan, Clinton and Bush -- deregulators who are responsible for the collapse of 2008. 

bixx1k
bixx1k

Summers was part of the collapse, it was made possible when majority shareholder's dump stocks at precisely the same time. This theory know as the _______ causes the market to flux, or drop dramatically. Then climb if money is put back into the market at a fast enough rate.

jmac
jmac

He's so "brilliant"  he didn't see the crash coming (others did and warned about it),  he lead the charge in deregulating the derivatives markets ( a key reason the 2008 crisis happened)  and he was instrumental in repealing provisions of Glass-Steagall that separated traditional banking and risky securities trading, along with pushing for a smaller stimulus. 

Good job, Brownie!   Nothing in that was for the "greater social good".  

Also - where's the comment about the fourth Democratic  Senator on the banking committee (Tester) saying he's a no?  Obama was going to have to lean on Republicans.   His aide stated that Republicans should want Summers because the alternative would be less to their liking.   Surely the Republican-on-the-economy Obama can pull out another Summers and tell Democrats to take a hike.   

LairdPopkin
LairdPopkin

Wow this article completely missed the reason that most people outside of the beltway opposed Summers, which is because he's got a track record of being horribly wrong on economic policy, because he's one of the key players that advocated the policies that lead to the global economic collapse, and then, because he was too close to the situation, was unable to see or acknowledge his errors, and thus was fundamentally unable to correct his mistakes. He's hardly a government activist - the problems he cause came from failures to regulate markets effectively, allowing abuses to grow into outright corruption which destroyed the credibility of the markets, and did $trillions of damage to the global economy. It was glaringly obvious that Obama never should have picked him for any role in his administration to start with, which is why there was so much opposition from economists and progressives to his initial selection. His track record of bad policy since then only generated more opposition, and the threat of him being given even more power to be wrong on even more broad a scale was too much for people to allow.

The politics and personality are minor issues compare to his consistent policy failures - if he'd been advocating effective policy instead of making things worse, he wouldn't be a political hot potato, and if you're good enough at your job you can get away with being a jerk. But apparently being consistently wrong for decades finally caught up with him. Which is a relief - occasionally the system works.

chokingkojak
chokingkojak

"Three reasons summers didn't get the job."

Maybe because he's a d-ck.  Plenty of better Jewish guys (or gals) for the job than that colon blow...

MrBenGhazi
MrBenGhazi

...the politics were always bad....

On policy, Summers is regarded....

Consistent tense is also apparently too much to ask for! 

PerryWhite1
PerryWhite1

@shepherdwong Evidently "Botched everything he's laid hands on" is the Beltway equivalent of "having handled crises."

greyngold
greyngold

@RonRobinson What?? No, he had to appease the far right in the far right party. Larry Summers was a big-government progressive, if somewhat myopic in his view of the poor. 

gysgt213
gysgt213

@arvay He sure will replace him with someone similar.

shepherdwong
shepherdwong

@jmacNot only that, he blew the economic analysis (political analysis aside) about how much stimulus was needed in response to the derivatives crisis by about half. Brilliant!

And, like most centrist insiders, he doesn't seem to really give a rat's @ss about the millions of unemployed and under-employed.

gysgt213
gysgt213

@jmac Brilliant,  wicked smart , razor-sharp smarts are all terms that should give you pause. For example:

"Kathleen Parker, National Review: "[Bobby Jindal has] the kind of intellect that makes Vulcans uneasy. Often referred to as the smartest man in the room, Jindal's mind can wrap around anything but the idea of repose.":

"American Thinker: "The 'diversity' of conservative Republicans stretches into other constituencies. There is one Native American in Congress: Tom Cole, a conservative Republican. Bobby Jindal and Nikki Haley are both, as the left loves to tag people, 'persons of color.' Both are also razor-sharp smart"

No one having the chance to observe these people over the last few years can think any of the descriptions are remotely accurate.

http://www.bobbyjindal.com/index.php?option=com_content&view=article&id=129&Itemid

PerryWhite1
PerryWhite1

@LairdPopkin Bingo. Just about everyone outside the Beltway who knows anything about economics was outraged that he was even being considered. But INSIDE the Beltway, he's one of the good ole boys and an automatic choice. Awful.

Openminded1
Openminded1

@chokingkojak Yes why do they always have to be jews, is it because of there love of money or how tight they are with money/ I wonder which. Birney Madeoff was good with money too, of course it was other peoples money and it was only good for him, but what the hell, were's birney now.

MrBenGhazi
MrBenGhazi

And the management of other Fed governors is no small issue.

We learned in middle school not to begin sentences with "and." 

shepherdwong
shepherdwong

@PerryWhite1  They tend to seem to favor: "wrong about everything," as well.

At this point, you have to figure there's an elite conspiracy to cover each others' @sses across the board, lest the entire edifice of meritocracy come crashing down. 

DeweySayenoff
DeweySayenoff

Really Open?  Did you flunk English?  Or is your hatred of Jews blinding you to your grammatical errors and misspellings?  The man's name was Bernard, "Bernie" Madoff.  That's how it's spelled.  A question should be ended with a question mark.  You blew that one twice.  "There love of money" is supposed to be "their love of money", and that's a patently racist statement.

If you're going to use someone as an example of their race, how about Hitler for all Whites?  He was the offspring of a secularist and a devout Catholic, if you want to go there.  Or, if you want to go with fraud and billions lost, how about Ken Lay of Enron?  White as can be.  He died before the appeals were done so all charges were dismissed since it was moot.  He was a Baptist, by some accounts.

Race has nothing to do with criminal activity, and whites are great at being criminals just as much as any other race.

In fact, race has as much to do with criminal activity as your handle has to do with actually being open minded. There is a rock calling your name.  Please go crawl back under it.

debussy0
debussy0

@Openminded1 @DeweySayenoff Financial gain (ill-gotten or not) does not equate moral or ethical success. Bigotry is bigotry, no matter how you clothe it. 

Openminded1
Openminded1

@DeweySayenoff Ps dewey did not flunk english, i was even on the debate team 124 wins never a loss. you knotice i did not use capital E for english or a Capitol D for dewey because i do not give a f-ck. You know Dewey you must be a snob that is all you have going for you. Me I am happy retired now for almost 12 years, travel take two cruises ayear put to great kids thru college ,been married 35 years and live in a3500 plus sq foot condo over looking Miami beach and drink fine wine and dine in real fine dining establishments and even know how to order the best of wines and what fork to use how about that. not bad for a kid from the streets who worked at the same job for 30 years and retired at age 51. So i guess my ugly writing style did not hurt me financially . It is really beautiful 32 floors uo over looking the ocean and skyline of miami in the distance.

Openminded1
Openminded1

@DeweySayenoff Dewey baby you did not seem to have a problem understanding the misspelled words or the punctuation and got the jest of my post. let me enlighten you i type 125 words a minute do not take the time to proof read and do not use spell check or unlike you take 45 minutes to think about my words and double check them. This is not grammar school moron and you are not a teacher on this post. just give your opinions like everyone else. i am not mr. PC I leave that to people like you the phonys of the world just like politicians ,they use PC too and we know how much they lie. and who gives a f-uk if bernards name was spelled wrong you knew who I meant and the dirt bag jew is where he belongs. i understand you defending jews since you are one, it is what jews have to do defend themselves from most of the world i wonder why? see i used a question mark. You bleeding heart liberal moron. You would never survive the real world on the streets past a week.