By Steve Weissman, Reader Supported News, 27 August 13
Say what you will, the combative Harvard economist Larry Summers is a brilliant apostle of John Maynard Keynes and a strong advocate of using government spending to stimulate faltering economies and create jobs. He also understands – and has shown mathematically with Berkeley economist Brad deLong – why inflation does not become a threat in a severely depressed economy.
But, for all his smarts, Larry Summers has one major crime on his rap sheet. He helped orchestrate the Clinton-era deregulation that ended up fueling the crash of 2008, killing economies, jobs, growth, and hope across the globe. President Obama should not name him to head the Federal Reserve, which would only encourage him to kill again.
Like it or not, the Fed remains Washington’s most powerful regulator of the financial sector. As one of the most destructive deregulators of our time, Larry Summers is exactly the wrong fox to guard the henhouse. Close to Wall Street, for whose firms he sometimes works, Summers also profited personally from the deregulation, but he is far more dangerous than a hired killer. He believes in what he does.
This comes through clearly in an October 2009 Frontline documentary called “The Warning.” It is available online, as are the transcript and full-length interviews, from which I’ve taken most of what follows.
“The Warning” takes us back to the Bill Clinton boom of the late 1990s and tells of a very personal clash over how best to manage America’s rapidly expanding financial sector. Should we stick to the regulatory approach that had guided the American financial system with relative safety since the New Deal? Or should we let the “free market” – or to be more precise, Wall Street – regulate itself, even in the case of fraud?
Backing self-regulation stood Summers, who had become deputy secretary of the Treasury, along with two financial titans – his mentor and former head of Goldman Sachs, Treasury Secretary Robert Rubin, and the long-time Fed chairman Alan Greenspan, a disciple of the über-capitalist Ayn Rand and an ideologue with an almost mystical faith in free markets….
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