Tell Larry Summers, Don't Delay!

On Wall Street, Summers will be greeted like a conquering hero. Never
have so many financiers been made so rich because of the actions of one
man. Plus, he can go back to that genius Wall Street salary. When he
worked for one world's largest hedge funds, D.E. Shaw, he worked one day a week and
earned $5.2 million before being picked by Obama to head the National
Economic Council. Ka-ching! There will be plenty of time for him to
teach a class Harvard (although you can be sure they won't let him
anywhere near that endowment again.)

A Resume Only Wall Street Could Love

Summers has a long resume that makes him an ideal candidate for a job
on the Street. For years, he promoted the concept of "a post-industrial
age" where manufacturing takes a back seat. An expression he was fond
of repeating was, "Financial markets do not just oil the wheels of
economic growth. They are the wheels." And has he worked very hard his
entire career to grease those wheels.

Between 1992 and 2001, Summers held various positions in the U.S. Treasury Department,
including that of Treasury Secretary from 1999 to 2001. Summers has
described the 1990's as a time when "important steps" were taken to
achieve "deregulation in key sectors of the economy" such as financial
services. He has also said that during this period, government officials
and private financial interests collaborated in a spirit of cooperation
"to provide the right framework for our financial industry to thrive."

Role in the elimination of Glass-Steagall: Along with Robert Rubin and Alan Greenspan, Summers brought about elimination of key U.S. financial regulations, including the Glass-Steagall Act.
Summers argued for elimination of the Glass-Steagall Act by saying it
imposed "archaic financial restrictions. "Our leadership of the world's
financial markets would be enhanced. And consumers would see the
benefits in the form of greater innovation and lower prices." That
"innovation" led directly to the formation of "too big to fail firms"
that were allowed to gamble in the securities market like never before,
and which were a key contributor to the collapse of the global economy.

Role in killing derivatives reform: Summers was
particularly aggressive in his efforts to block regulations of
derivatives, regulations that might have prevented the 2008 economic
meltdown. While he was at the Treasury Department, his enthusiasm for
financial deregulation conflicted with the views of Brooksley Born,
Chair of the Commodities Futures Trading Commission (CTFC). Born had
extensive experience working as a lawyer in the derivatives area, and
was concerned about the lack of transparency in this multi-trillion
dollar financial market. Summers collaborated with Alan Greenspan,
Robert Rubin, and Arthur Levitt to block Born's efforts to regulate this
burgeoning market.

According to New York Times reporter Timothy O'Brien,
"They were all part of a very concerted effort to shut her up and to
shut her down. And they did, in fact, shut her up and shut her down. Bob
Rubin is not a guy who likes confrontation. He's confrontation-averse.
But he understands that you need someone in there who can swing a heavy
axe, and that person was Larry Summers. He was the enforcer."

Former CFTC attorney Michael Greenberger has recounted how Summers
called Born personally to accuse her of risking a major financial crisis
with her proposal to bring transparency to the derivatives market.
Summers echoed the concerns of the "13 Bankers"
who were in his office at the time he made the call to Born, a
conversation that gave birth to the title of Simon Johnson's great book,
13 Bankers, about the history of the financial crisis.

Role in the Enron Crisis: When he was about to take office as Treasury Secretary, Summers received a congratulatory letter from Ken Lay, the President of Enron
Corporation. The letter was addressed "Dear Larry." In his response
addressed to "Ken," Summers promised, "I'll keep my eye on power
deregulation and energy-market infrastructure issues." And he did.

During California's energy crisis in 2000, Summers rejected the idea
that energy companies like Enron were manipulating the market and
gouging consumers. He opposed Governor Gray Davis' plan for government
intervention with price controls, claiming "This is classic supply and
demand. The only way to fix this is ultimately by allowing retail prices
to go wherever they have to go."

Role in Harvard's Financial Losses: Summers became
President of Harvard University in 2001 and resigned under a cloud in
2006, leaving behind a ticking time bomb of interest rate swaps that he
helped negotiate in 2004. According to Bloomberg,
"the swaps, which assumed that interest rates would rise, proved so
toxic that the 373-year-old institution agreed to pay banks a total of
almost $1 billion to terminate them."

Role in the Bailout and Stimulus: Summers had a key role in determining the size of the federal bailout of the financial services industry (all government programs add up to $4.7 trillion)
and of the economic stimulus package the Obama administration submitted
to Congress ($787 billion). The stimulus package was much smaller than
what was being recommended by many economists, and as a result, the U.S.
has been stuck at near double digit unemployment for almost two years.
Last year, economist Paul Krugman warned that while cutting the size of
the stimulus might get more Republican votes, it would fail to
significantly reduce unemployment. This failure would then be blamed on
the Democrats and be used to argue that government spending does not
work. Krugman's prediction has held true.

Today, Wall Street is bouncing back with healthy profit margins and
even healthier bonuses, while Main Street is still mired in the Great
Recession. Because Obama is seen as doing too little for the middle
class, Democrats are likely to suffer steep losses this November.

The sooner Obama replaces Summers with a competent economist, the
better. There's a high-speed Acela train leaving for Wall Street at 2:00
p.m. today, perhaps Vice President Biden will be kind enough to show
Mr. Summers the way?

This article was based on the original research by the Center for Media and Democracy in our Sourcewatch Wikipedia.