Who Is Larry Summers?
Summers is now the Charles W. Eliot University Professor at Harvard University President John F. Kennedy School of Government. He is a director of hedge fund D. E. Shaw, has worked for Citigroup, and is on the board of two start-ups.
Summers contributes to the Financial Times and the Brookings Papers on Economic Activity.
Summers was Obama's Director of the National Economic Council (NEC) from 2009-2011. However, many blamed Summers for political infighting among Obama's economic team, which could be one of the reasons he left in 2011. Summers was also criticized for underestimating the amount of stimulus needed for the Economic Stimulus Package.
The NEC is part of the Executive Office of the President. It was created in 1993 to be the top advisory clearinghouse for the President on economic issues. It has four functions:
- Coordinate policy-making for economic issues.
- Coordinate economic policy advice for the President.
- Ensure that policy decisions and programs are consistent with the President's economic goals.
- Monitor implementation of the President's economic policy agenda.
Members of the NEC come from numerous department and agency heads within the administration, whose policy jurisdictions impact the nation's economy.
The NEC has its own staff of policy specialists. The next Director of the NEC was Gene Sperling, who was Director under President Clinton. Obama replaced him in 2013 with former OMB Deputy Director Jeffrey Zients.
Why Was Summers Controversial?
Summers was President Clinton's choice for Treasury Secretary from 1999-2001.
During his tenure, Summers oversaw the repeal of the Glass-Steagall Act. This Act was established during the Great Depression to prevent commercial banks from investing depositors' funds in risky derivatives. He also advocated further deregulation of derivatives trading. Many experts blame the repeal of this act and deregulation for the banking credit crisis and resultant recession.
Summers also sided with Ken Lay and Enron during the California energy crisis, even after some economists raised concerns about market manipulation. (Source: Daily Kos, Handy Comparison Chart Janet Yellen vs Larry Summers, August 7, 2013)
Summers is not above name calling. He said the current Governor of the Reserve Bank of India, Raghuram Rajan, was a Luddite in 2005. That's because Rajan correctly warned about the dangers of the 2008 financial crisis at an annual Symposium of central bankers.
Would Summers Have Make a Good Fed Chair?
Summers had a lot of hands-on expertise in both the domestic economy, through his experience in the Treasury Department, and the global economy, through his World Bank tenure. Treasury Secretary Tim Geithner was Summers' protege at the Treasury Department before he took over as Chair of the New York Federal Reserve.
Summers has never held a position within the Federal Reserve itself. Since it oversees bank regulations, there was concern that he would not be willing to enforce them on companies that he used to consult with, such as Citigroup. In fact, he opposed the Volcker Rule that is a critical element of the Dodd-Frank Bank Reform Act.
Summers was the 27th president of Harvard University from 2001-2006. He was criticized for remarking that one of the important reasons that women were not prevalent in well-paying science and engineering positions was that men had more natural aptitude. The uproar over this apparent sexist statement led to his resignation from Harvard in 2006.
On the plus side, Summers has been tested in dealing with financial crises while holding key public offices. Second, he would favor boosting the economy to reduce unemployment over fighting inflation.
Third, he was responsible for the success of the Economic Stimulus Package, which did end the recession in July 2009.
Summers' Early Career
Summers has been a professor of economics at both Harvard and MIT. In 1988, he served as an economic adviser to the Dukakis Presidential campaign. From 1982-1983, Summers was on the Council of Economic Advisers under President Reagan. A nephew of Nobel prize-winning economist Paul Samuelson, Summers received his bachelor of science degree from the Massachusetts Institute of Technology in 1975. He received his PhD in economics from Harvard in 1982.
In 1983, he became a tenured member of the Harvard University faculty -- one of the youngest in recent history. Summers became the first social scientist to receive the Alan T. Waterman Award of the National Science Foundation (NSF) in 1987. In 1993, he was received the John Bates Clark Medal, given every two years to an under-40 economist. He was Chief Economist of the World Bank from 1991-1999.