By the time you read this, in all likelihood, Geithner will finally have unveiled his plan, developed with Summers, for rescuing the banks. The stakes could not be higher. To no small extent, Obama is betting his presidency on their ability to help him pull this off. Their skills, brains, and dedication are not in question; for all the brickbats being hurled their way, they are laboring tirelessly, even heroically, against a nightmare not of their making. The question is, will that be enough?
Not quite a year ago, Summers and I were chatting in the lounge of the Harvard Club in midtown, where he’d come to deliver a lunchtime speech on the state of the economy. The race for the Democratic nomination was still under way but Obama’s victory was likely and Summers (who, unlike most of the veterans of Bill Clinton’s administration, in which he rose to become Treasury secretary, stayed neutral rather than siding with Hillary) began musing about the presumptive nominee, whom he knew only in passing. “When I’ve heard him talk about economic issues—with the exception of NAFTA, where I just hope he doesn’t believe what he says—he seems intelligent and serious,” Summers told me. “I wouldn’t say I’m bowled over by the brilliance of anything I’ve heard, but everything has a kind of thoughtfulness to it that’s sort of impressive.”
Throughout his career—from becoming, at 28, one of the youngest tenured professors in Harvard’s history to his brief and inglorious tenure as the university’s president—much has been made of Summers’s abrasiveness and regard for his own candlepower. “Larry Summers is to humility what Madonna is to chastity,” The Wall Street Journal editorial-page editor Paul Gigot once wrote. But unlike most intellectual bulldozers, Summers enjoys people who fight back, even invites them to. He also has a fine sense of humor about himself. After reading Gigot’s gibe, Summers told his then-wife, “Well, it’s not as bad as it could have been: He could have said that I’m to chastity what Madonna is to humility.”
Even so, Summers tends to thrive around those who possess, shall we say, a healthy ego—which helps explain why he and Obama clicked from the start. Summers made his way into the campaign via Jason Furman, a former underling of his at Treasury who became Obama’s lead economic adviser. When the financial crisis hit in September, Furman put Summers in charge of doing the opening presentation on Obama’s economic conference calls, which took place daily (at least) during that pivotal time. “Larry was just brilliant on those calls,” recalls one regular participant. “And not just brilliant but inclusive and generous—he was very rarely as assholic as he had a reputation for being.”
After Election Day, Obama rapidly narrowed his options for Treasury to Summers and Geithner. Summers badly wanted the job; Geithner offered to stay in his post as president of the Federal Reserve Bank of New York. But the controversies that Summers aroused at Harvard with his impolitic, incendiary comments regarding the underrepresentation of women in the sciences made his confirmation seem riskier. Obama also heard from many Summers opponents. “The problem was, 50 percent of the people Obama asked about Summers said no fucking way—between the confirmation hurdles and the arrogance problem,” says this person, who was asked. “But everyone said he had to have Larry at the table. And Obama had really come to respect him. The funny thing is, Barack barely knew Tim; they’d only met a couple times, there was no relationship there.”
But Geithner, who’d grown up in Southeast Asia, been a Summers protégé at Treasury, done a stint at the IMF, and become president of the New York Fed in 2003, had a sterling résumé and a reputation as a consensus-builder that appealed to Obama. His firsthand experience working with Hank Paulson during the tumult of last fall—the collapse of Lehman, the rescue of AIG, etc.—struck Obama as an asset, not a deficit. And so did his cool, detached, ironic style, which mirrored that of the president-elect.
The decision would prove fateful. Whatever difficulties Summers might have encountered during the confirmation process, it’s hard to believe they would have been more acute—or lastingly debilitating—than the controversy that arose over Geithner’s taxes. To start with, Tom Daschle would likely have been able to survive his own l’affaire IRS. And perhaps more consequentially, the tax-compliance flyspecking that has made filling the senior posts under Geithner so difficult might have been avoided.
Summers got over his initial disappointment, consoling himself with the idea that proximity to Obama would enhance his influence and running the National Economic Council would give him wider latitude to range across almost every aspect of domestic policy, from health care to energy. The first major initiative on which he left his imprint was, however, strictly economic: the stimulus package. In meetings last summer with CEOs and financial types, Obama had debated whether he’d be able to push the envelope and propose a $100 billion stimulus past. By November, though, the economy was in free fall, and the mooted price tag of the bill had risen to $500 billion. But Summers decided that the number should be higher and, at a meeting in mid-December, persuaded his colleagues—some dubious that such a massive bill was necessary, others fearing that it would never get through Congress—to push for a $775 billion package.