How Larry Summers Paid for Obama’s Sins

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This really could have gone a lot better. Photo: Jason Alden - WPA Pool/Getty Images)

The revolt against Larry Summers — which built steadily over the summer, and culminated in the surprising withdrawal of Summers’ Federal Reserve Chairman candidacy – represents the most potent exercise of liberal opposition power of Barack Obama’s presidency. Liberals have spent a great deal of time complaining about Obama’s lack of personal attention, or threatening to withhold votes. But in the end, only Republicans or centrist Democrats have actually exercised an effective veto. Liberals stopped Summers.

In some ways, Summers made a bizarre target for the liberal mutiny. He may not have been an ideal candidate for the Federal Reserve – I plunked myself on Team Yellen – but Summers wasn’t a bad one. He was well qualified, and ideologically pretty close to liberal monetary thinking, if not perfectly in tune. What’s more, members of Congress, and people in general, tend not to get very agitated about Federal Reserve nominations. Four years ago, Obama nominated Republican Ben Bernanke for that post, with nary a peep of protest. If that event passed by without a peep, Obama surely expected the nomination of lifelong Democrat Larry Summers to do the same.

But the insurrection against Summers arose from good and sound reasons. Two broad currents of discontent fed the strengthening current against his candidacy. One was a frustration with Obama’s record on gender. It was not Summers’ fault that he is a man. (He made some loose comments at Harvard seven years ago that provoked a furor, but the furor always struck me as overblown.) But Summers is Obama’s man, and Obama’s record on female appointments is bad. By all appearances, he feels more comfortable with men, surrounds himself with men, and has produced an administration more heavily male at top levels than the last Democratic one.

It’s slightly unfair for any particular male nominee to bear the brunt of backlash against this overarching trend. But you can’t really stop it without stopping some nomination in particular. Summers is as good a candidate as any, given that he was the apparent choice over a more qualified female.

The second source of indignation is the administration’s record on financial regulation. This is much more of an ancient grievance against the Clinton administration, which allied with Republicans in the nineties to stifle financial regulation, and which bears some responsibility for the financial crisis. Summers played a notorious role in those episodes.

Summers did rethink his anti-regulatory stance, and the Obama administration takes a much tougher line on regulating Wall Street than did the Clinton administration. But that line is still not tough enough. This long Bloomberg story on Commodity Futures Trading Commission chairman Gary Gensler’s struggle against the Obama administration to crack down on the derivatives market is a sobering read. Obama did pass a major regulatory reform in Dodd-Frank. But he has failed to harness the anti-Wall Street backlash, which he could have turned into support for stronger regulation, but which instead fed mindless Tea Party rage.

All this, again, is not Larry Summers’s sole responsibility. His culpability in Obama’s mediocre financial reform record is mixed – Noam Scheiber has a judicious take – but the connection is not imaginary. Financial regulation, like gender balance, is a legitimate terrain for liberal complaint.

What’s more, Summers's candidacy is a rare opportunity for liberals to stymie Obama without committing political suicide. Withholding their votes on legislation simply allows Republicans to prevent any bill at all from being passed – that’s why liberals never had any leverage to push bills like the stimulus or Obamacare leftward. Likewise, if liberals joined with Republicans to block contested nominees for the cabinet or other posts, it would simply help the GOP keep those posts vacant.

But Republicans aren’t willing to completely obstruct the workings of the Fed – business wouldn’t allow it. The collapse of Summers’s nomination is thus the rare case where liberal opposition can result in a more liberal outcome. The Summers saga may look messy. (“Maybe Republicans don't have a monopoly on disarray after all,” jeers David Graham.) It is actually a well-conceived and perfectly targeted use of liberal counter-organizing.