Larry Summers: Professor Pants-on-Fire
by William Greider
How can I say this nicely? Larry Summers is a clumsy public liar. His noxious, condescending manner helps explain why he failed as president of Harvard. But it is the crude mendacity that ought to bother people now. The man is President Obama's top economic adviser.
Watching Summers befog the mild-mannered interviewer on the PBS NewsHour the other night, I found myself yelling back at the TV. It takes real arrogance for the former Harvard professor to imagine he can get away with such evasions and falsehoods. I lost count on the fibs. If this is how Summers explains the financial mess to the president, maybe that's why Obama has been a reluctant reformer.
Banks "made mistakes" or "errors." That is as far as Summers would go in his critique. Instead of bailing out "too big to fail" banks, he was asked, why not just limit the size of the banks?
Bad idea, Summers said.
"Most observers who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to try to serve large companies, and hurt the competitiveness of the United States.... They believe it would actually make us less stable because the individual banks would be less diversified.... dealing with the simultaneous failure of many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment."
Say what? If Obama has other sources of information, like reading the newspapers, he can quickly determine that every element in Summer's statement ranges from dubious to flat-out false.
Summers's claims about what caused the banking crisis were, likewise, aggressively misleading to plain deceitful. "Regulators didn't have the specific mandate for the consumer." Wrong. The Federal Reserve and other agencies had plenty of legal authority to protect consumers. They chose not to use it. Their dereliction actually occurred on Summers's watch, when he himself was Treasury secretary under Bill Clinton.
"Regulators didn't have authority in a comprehensive way to monitor the derivatives market." This is a flaming lie. The principal regulatory agency--the Commodity Futures Regulatory Commission--was actually preparing to impose stricter oversight on derivatives in the late 1990s when Larry Summers stopped it. Summers and Republican allies intervened in 2000 with legislation that castrated that agency and prohibited it from acting further. Derivatives exploded thereafter.
When Summers was finally asked about his own responsibility for encouraging the dangerous financial instruments, he responded with a mouthful of double talk. "You know, the situation's changed hugely.... So people were actually focused on a very different set of issues." Summers even tried to make it sound like he personally had wanted to tighten the oversight, but was blocked by "Congressional opposition."
Liar, liar, pants on fire. If Obama wants to have an economic adviser so loose with the truth, that's his choice. But if the president wants his own words to be taken seriously, I suggest he keep Larry Summers off television.
© 2010 The Nation
William Greider is national affairs correspondent for The Nation. He is author of "Secrets of the Temple: How the Federal Reserve Runs the Country" and, most recently, "Come Home, America: The Rise and Fall (and Redeeming Promise) of Our Country."
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