A heck of a job, Larry.
You would think years and years of public service would have encouraged the growth of a political instinct in Larry Summers. Sadly, The AIG debacle demonstrates Summers and his gang that can't shoot straight haven't the faintest feel for politics. Wasn't this gang supposed to be the team that brought competence back to Washington? Well, if this is competence, it's hard to see the difference from Republican incompetence. It's almost painful to watch the debacle that is unfolding, a debacle that the Obama administration can't blame on Bush. This is a mess of their own making.
Worse, this surely make it harder to pass all the changes this country needs: universal health care, meaningful regulation of a host of industries (food, drugs, environment, financial). All these changes would have required a fierce political battle in the best of times. Now, Obama has taken a direct political hit from the sheer incompetence of his economic team. This is what you get when you hire people who were key intellectual players in establishing the regulatory environment that led to this staggering economic crisis. What chance was there that Larry Summers, who has been a deregulatory advocate all his life and worked glove-in-hand with the banking, investment and financial industries, was suddenly going to be able to repudiate or even WANT to repudiate that mindset? Slim to none. His instinct is always to watch out for the bankers' backs and interests. When AIG comes and says, "our hands our tied," Summers accepts it. He refuses to engage in a fight that would have forced those bankers to sue for their bonuses. He refused to force AIG to call the bluff. He refused to draw on political pressure and public outrage that would have surely been on HIS side if AIG had broken the contracts and dared the bonus bankers to sue. Think about if this guy had any political skill and he had gotten ahead of the tidal wave by coming out publicly and forcefully against this months ago! I think it's very likely AIG would have been forced to abandon the bonuses. But now, he and Treasury look as flat-footed, fumbling and hypocritical. Instead, he said, "OK, go ahead, the lawyers say we have to do it" (are these the same lawyers who sold their expensive opinion letters blessing the legality and soundness of all the financial instruments that have tripped up the global economy?). Instead, he spent time fighting against the executive pay limits that were passed by Congress only last month, limits that even in the form that it was passed were filled with loopholes but that he thought were too tight!
Summers stonewalled: he and Treasury and Fed decided the best policy was to lay low and hope it would pass under cover of night. They gave cover to AIG for months now when AIG refused to disclose its counterparties, to say where PUBLIC money was going. The Fed agreed with AIG's specious argument that how PUBLIC money was spent was "proprietary" information! Are we going to get the same cover when AIG resists disclosing the name of the bonus recipients? Is Treasury/the Fed/Summers going to back AIG up when it tries to keep that information private? All signs ominously point to yes. It's Andrew Cuomo who has to do their job. You would think that having shot off one foot, Summers would be extremely careful to protect his other. But so far, the evidence that matters, which is action, not the easy outrage expressed on a Sunday morning chat show, is distinctly missing. There are no reports of Summers, the Treasury or the Fed pushing AIG to disclose the bonus information. The silence coming from them is deafening and suggests little to nothing has been learned by Obama's economic "Dream Team." Instead of a push for transparency, we get hang-wringing about the "sanctity of contracts" and smarmy lectures about "we are a nation of laws" and fears about driving away the "best and brightest" from financial jobs. Ha!
It is so frustrating to have to watch valuable and precious political capital draining away from the Obama administration because of a needless and self-inflicted wound. Obama said he "gets it", that he understood the public outrage at the bailout. The behavior of Summers, the Fed and Treasury say that understanding has not permeated down from the top. Enough of the faux outrage, Mr. Summer. We don't need your mea culpas. WE need a change your goddamn fucking behavior and attitude. Stop being a stooge and apologist for the financial industry! Do your freakin' job and watch out for the PUBLIC interest. The line "What's good for GM is good for the country" used to be said ironically, to show up the hubris of the car company but Summers appears to believe it hook line and sinkers. What's good and profitable for financial industry workers is good for the country. Um, no.
And while Aaron Ross Sorkin has always been a financial industry drone, ready and able to swallow and regurgitate every self-serving, absurd argument, there IS a business columnist at the New York Times who gets it and can see through the garbage and rubbish. Read David Leonhardt's column punching a hole in the absurd arguments in favor of "retention" payments.