Lawrence Summers Blast From the Past

This is the letter Lawrence Summers wrote about the financial benefits of more pollution. Summers penned this disaster when he was the chief economist of the World Bank. Clink the image to enlarge.

Lawrence Summers on The Social Network

Lawrence Summers talks about the portrayal of him in the movie The Social Network. I am no fan of Summers but I will give him credit for having a sense of humor about the less than flattering portrayal of him in the film.

Write A Caption: Yellen & Summers

This gif nicely sums up how much more qualified Janet Yellen is than Lawrence Summers is for the job of Federal Reserve chair.

Shocking News: Elizabeth Warren Doesn't Like Larry Summers

GottaLaff has some great quotes of Elizabeth Warren mocking Lawrence Summers. Warren shared her disdain for Summers with journalist Ron Suskind.

Warren criticized the Obama administration for not cracking down on big banks, and she compared his advisers — including Summers specifically — unfavorably to a country in South America that decades ago used government funds to try to prevent banks from going under.

“Tim [Geithner] and Larry’s whole plan is just like Argentina in the 1980s,” Warren told author Ron Suskind in September 2009, while he was working on “Confidence Men,” a book on the aftermath of the financial collapse. “There was this giant hole marked ‘Banks’ and the government just dumped money in that hole, as much as they had, while they lied about it. That’s what Larry thinks: that the US is Argentina!”

While Warren and Suskind were waiting at a terminal in Washington’s Reagan National Airport, Warren began to sing, “Don’t Cry for Me, Argentina.” Several started to applaud, and she modified the verse, with Summers in the role of Eva Peron.

“Why not?” Warren said with a laugh. “He might understand things better as a woman.”

Quote of the Day

""The policies he promoted as Treasury Secretary and in his subsequent writings led to the economic disaster that we now face." Dean Baker, economist, on Lawrence Summers.

Baker correctly predicted there there was a housing bubble in 2002. Banks continued to create risky mortgage-backed securities.

Summers pushed for the repeal of Glass-Steagall Act. This allowed investment banks to merge with commercial banks. The result was banks making bad investments with people's life savings. This nearly caused the banking system to crash.

I think we can safely say that Baker is a smarter economist than Summers.

Group of Senate Democrats Against Larry Summers at the Federal Reserve

Talking Points Memo report that Senate Democrats have sent a letter to President Barack Obama. These mostly undisclosed Democrats are against Lawrence Summers being appointed as chairman of the Federal Reserve.

"There's a lot of concern among a lot of Democrats about an appointment of Larry Summers to that long-term position as Fed chairman," Sen. Tom Harkin (D-IA), who signed the letter, told the Journal. "He was one of the architects of getting rid of Glass-Steagall, of getting rid of other regulations. There's real concern about his economic views not really being in line with Obama's views."

Sens. Dianne Feinstein (D-CA), Dick Durbin (D-IL) and Angus King (I-ME) are also confirmed to have signed the letter.

These groups of Democrats want Obama to appoint Janet Yellen as chair of the Federal Reserve. Sheila Bair, former chair of the FDIC, makes the case to appoint Yellen. Bair notes Yellen's resume and knocks Summers role in deregulation.

That could change if the heir apparent to succeed Ben Bernanke as Chair of the Federal Reserve Board, Janet Yellen, is nominated for the job by President Obama. Certainly, there is no better qualified candidate to fill Bernanke's shoes when he steps down in January. A noted economist, Yellen headed the Council of Economic Advisors for two years; led the San Francisco Federal Reserve Bank for six years; and has served ably as Bernanke's Vice Chairman since 2010. Unlike Larry Summers, Tim Geithner, and Bob Rubin -- minions frequently mentioned in the financial press as potential Bernanke successors -- she was not part of the deregulatory cabal that got us into the 2008 financial crisis. In fact, she had a solid record as a bank regulator at the San Francisco Fed and was one of the few in the Fed system to sound the alarm on the risks of subprime mortgages in 2007.

Bair and Ezra Klein report there currently a whisper campaign against Yellen's nomination. The question is who is behind the whisper campaign?

Summers & Krugman On Canadian Panel

Lawrence Summers and Paul Krugman were on were in Canada in 2011 to talk about the slow recovery of the United States economy. Summers was slightly more optimistic thanKrugman about the recovery. Both Summers and Krugman agree that the recovery has been horrible.

Fall Out of Confidence Men

"Just read "Confidence Men." It's good. It's smart. It rings true. It's a tough read for Team Obama."

Journalist Marc Ambinder, on Ron Suskind's new book "Confidence Men: Wall Street, Washington, and the Education of a President."

The book portrays President Obama as weak in handling conflicts with his staffers and getting steamrolled by his Lawrence Summers, Tim Geithner and Rahm Emanuel. This was told to Suskind by staffers on-the-record and with the cooperation of the administration. Team Obama is now trying to do push back. The problem is Suskind has these conversations on tape. Anita Dunn denied she claimed the White House was sexist towards women. Suskind revealed a tape to the Washington Post that made Dunn's original on-the-record quote even more damning.

"I remember once I told Valerie [Jarrett] that, I said if it weren’t for the president, this place would be in court for a hostile workplace,” Dunn is heard telling Suskind. “Because it actually fit all of the classic legal requirements for a genuinely hostile workplace to women."

A White House that gives complete access to a well-known muckraking reporter and then have staffers show incredibly poor message discipline. This is not a smart administration.

Suskind appeared on Morning Joe to discuss a meeting female staffers had with the President about sexism from Summers and Emanuel. Obama told them he wouldn't fire them because he needed them. I have yet to figure out what positive things did Summers and Emanuel do in the Obama administration.

Summers was such an egomaniac that he was telling people in the administration that he was smarter than Obama.

According to Orszag, Summers says, "You know, Peter we're really home alone. There's no adult in charge. Clinton would never have made these mistakes." Later, Orszag says to Suskind, "Larry just didn't think the president knew what he was deciding. Was this [obstruction of the president's wishes] outright and willful?" In other words, asks Orszag, was Summers saying, "I know more than the president flat-out? That strikes me as ... likely."

Joy-Ann Reid tweeted me that I just attacked Summers because I hated him. I tweeted her the Summers quote. Reid never tweeted me back. The thing about Obamabots such as Reid is they never want to talk about the substance about the criticism.

Why I Don't Like Lawrence Summers

Lawrence Summers blamed unemployment insurance for causing increased unemployment.

To fully understand unemployment, we must consider the causes of recorded long-term unemployment. Empirical evidence shows that two causes are welfare payments and unemployment insurance. These government assistance programs contribute to long-term unemployment in two ways.

First, government assistance increases the measure of unemployment by prompting people who are not working to claim that they are looking for work even when they are not. The work-registration requirement for welfare recipients, for example, compels people who otherwise would not be considered part of the labor force to register as if they were a part of it. This requirement effectively increases the measure of unemployed in the labor force even though these people are better described as nonemployed—that is, not actively looking for work.

All those people unemployment right now really aren't looking for work. If they stopped living like fat cats off of unemployment checks corporations would not have to pay for insurance.

Obama could have appointed anyone to his first director of the National Economic Council and he chose Summers. Sad.

Tax Cuts Update

Visit msnbc.com for breaking news, world news, and news about the economy

Democrat Chris Van Hollen said the House Democratic caucus will not support the estate tax. House Democrats intend to pass a different tax bill than the Senate. Van Hollen said the bill will go to the floor for a vote in the lame duck session.

***

Paul Krugman said he can not support the Obama-McConnell tax cut compromise.

The actual stimulus in the plan comes from the other measures, mainly unemployment benefits and the payroll tax break. And these measures (a) won’t make more than a modest dent in unemployment and (b) will fade out quickly, with the good stuff going away at the end of 2011.

The question, then, is whether a year of modestly better performance is worth $850 billion in additional debt, plus a significantly raised probability that those tax cuts for the rich will become permanent. And I say no.

Krugman correctly believe the stimulus doesn't have enough for the $850 billion price tag. The one year extension of unemployment benefits and Social Security payroll tax cut only keeps things from getting worse. What is needed is a national jobs program. The best stimulus is giving people gainful employment. The Obama economic team though throwing stimulus dollars at the private sector would suddenly increase jobs. Lawrence Summers predicted the stimulus would drastically reduce unemployment. The White House now hopes to get unemployment down to 8.5 nationally before the 2012 election. The reason why Obama's original stimulus failed because there wasn't enough funded for job creation. Another factor is Obama and Summers compromised with Mitch McConnell on tax cuts that failed to justify their cost.

Senate Republicans seek to slash income and corporate tax rates as well as the overall level of spending in the bill. "We need to sober up here and take a look at what we're doing," said Senate GOP leader Mitch McConnell, R-Ky.

Summers said Obama wants to keep his tax cuts but will consider other changes. He said "Buy American" provisions for U.S. manufacturers could "send a protectionist signal."

The president "has been prepared to walk a long mile for bipartisan support," Summers said. In the end, he said, Obama wants the best possible package delivered to his desk by Feb. 16.

Obama and Summers caved. The stimulus had $237 billion in tax cuts. Republicans didn't vote for the stimulus bill and the economy still sucks. Obama and Summers are essentially using the same failed policy.

Poor Will See Tax Increases Under Obama Tax Cut Deal

The St. Petersburg Times editorial board rules that President Barack Obama got played on the tax cuts deal.

Another example: The president and congressional Republicans agreed to a 2 percent cut in payroll taxes for one year. While every working American would enjoy some benefit, those making $106,800 or more in 2011 would get the maximum $2,136 tax cut. A cut in payroll taxes can stimulate the economy, but it should have been targeted to middle- and lower-income households who are more likely to spend the money. It makes no sense to cut payroll taxes for all and deprive the Social Security system of the money just as the president's deficit commission and fiscal conservatives are focused on shoring up the program's future solvency.

The Tax Policy Center made this chart. Under the "Make Work Pay" tax cuts if you make under $10,000 you receive a $315 tax cut. The payroll holiday tax provides only a $118 tax cut for that bracket.

Obama let his "Make Work Pay" tax cuts sunset. In exchange, Obama got the payroll holiday tax cut. Republicans get to bleed Social Security and Medicare. In return, Obama raised taxes on the three lowest brackets. Those making between $10,000 to $20,000 will see their taxes increase by $173. The St. Petersburg Times is right. Obama got played.



Update: Lawrence Summers admits to Politico that taxes for those making under $20,000 will go up.

Obama Ready to Cave On Bush Tax Cuts

According to Politico, Nancy Pelosi told Obama House Democrats will not back tax cuts for those earning over $250,000. Obama know Reid backs extending all the Bush tax cuts. Obama told Reid, in front of Pelosi, to work on his own tax cut package. Short answer: Obama caved on high end tax cuts that poll badly with the American people.

Tim Geithner and Lawrence Summers were at the meeting with Obama, Pelosi and Reid. Want to take a wild guess on if they support extending the Bush tax cuts for those making above $250,000?

A CBS News poll found 56 percent support letting the tax cuts for $250,000 and above earners expire. A NBC News/Wall Street Journal poll gave respondents four choices. Letting tax cuts for top earners was the most popular choice.

Eliminate all the tax cuts permanently: 10

Eliminate the tax cuts for those earning more than $250,000 per year, but keep them for those earning less than that: 39

Keep in place all the tax cuts for everyone for another year to three years: 23

Keep in place the tax cuts for everyone permanently: 23

This maintains my premise that Obama is not a policy wonk. The deficit commission was merely a bad dog and pony show. Obama used the defict commission so he could make claims of being bipartisan and and wanting to reduce the deficit. Obama's deficit commission reads like a horrible policy paper from the Cato Institute. (I should know since I have forced myself to read too many nutty papers.) Obama can't truly be interested in reducing the deficit if he allows the tax cuts for top earners to continue.

Update: Greg Sargent reports that Steny Hoyer backs holding a vote extending tax cuts for the middle class during the lame duck session. Ways and Means Committee chairman David Camp plans to block a middle class-only tax cut vote. It would be political suicide for Republicans to vote for tax cuts for the rich and then say they are doing this to jump start the economy. House Democrats understand this is good politics. Obama either doesn't understand the politics or silently backs tax cuts for top earners.

Update: this chart created by the Washington Post illustrates the stark differences between the Republican and House Democratic tax proposals. The bigger the dot the bigger the tax cut.

The Case Against Neoliberalism

What do all these names have in common?

Dick Gephardt
Chuck Robb
Sam Nunn
Bill Clinton
John Breaux
Dave McCurdy
Joe Lieberman
Evan Bayh
Tom Vilsack
Harold Ford

The answer is all these men served as chair of the Democratic Leadership Council. Ask yourself if you want John Breaux, Harold Ford, Joe Lieberman, Evan Bayh or Dick Gephardt to be deciding the direction of the Democratic Party.

The DLC calls themselves New Democrats. They are too terrified to call themselves neoliberals. The DLC was extremely hawkish about the Iraq war. The DLC attack Howard Dean for being against the Iraq war.

So what does the Bull Moose think of the donkey? In the early primaries, I thought Karl Rove had induced a mass brainwashing of the Democrats as they flocked to Howard Dean. If the Deaniacs had seized the party, the Bush-Rovian dream of realignment might have been realized. Dean was their dream opponent -- a socially liberal, anti-war candidate from Vermont. However, the good centrist sense of the Democratic rank and file prevailed.

The DLC got their wish of John Kerry. How did that work out?

The DLC actively placed corporate interests ahead of unions. Rick MacArthur explained to Amy Goodman what happened in the 90s.

Well, this is the legacy of the Clinton administration, that the Clintons persuaded enough members of the Democratic Party that labor unions were finished. And they were, I think, largely right. Labor unions were finished as an important source of votes and power, or that they could be taken for granted. They were going to vote for the Democrats anyway, because they had no choice, and the place to raise money and to expand influence with the party was in corporate America. And Clinton says to these people, through Terry McAuliffe and all his friends, Gene Sperling, the corporate Democrats who came out of the Democratic Leadership Council, "Look, you can’t argue with results. I got elected president twice, and we almost had fundraising parity with the Republicans in the ’90s."

Current DLC chair Harold Ford has a history of being anti-abortion and against gay marriage. Ford voted for the Federal Marriage Amendment - barring gays from marrying. Ford supported an amendment that forbid gays from adopting in the District of Columbia.

Noted neoliberal economist Lawrence Summers has been a longtime advocate for deregulation. In the Clinton administration, Summers fought the Commodity Futures Trading Commission over financial derivatives. Summers was a champion of the Commodity Futures Modernization Act. The law barred derivatives from being regulated.

President Bill Clinton signed the Gramm-Leach-Bliley Act. The law abolished the Gless-Steagall Act. The latter separated commercial and investment banks. The neoliberal economics drive for less financial regulation helped create the climate for the Wall Street meltdown of 2008.

A person who as described himself as a New Democrat (code for neoliberal) is Barack Obama. This is why Obama promised to veto any bill that allows Medicare to negotiate prices with drug companies. Obama never backed universal health care or a ban on offshore drilling because he believes corporations should benefit from public policy. Nevermind that the health care bill is riddled with hole that won't lower the cost of health insurance. That was never the point of health care reform. Obama could have given a populist message on how no one who currently has health insurance should not be dropped after he or she gets sick. Obama instead mandated Americans to buy health insurance. If Republicans passed such a proposal progressives would be outraged.

Who Will Replace Summers?

Excuse me if I don't get excited about Anne Mulcahy replacing Lawrence Summers as director of the National Economics Council. The business community feels more comfortable with Mulcahy because she is the former CEO of Xerox Corp. Mulcahy has also served on the Board of Directors of the Washington Post, Johnson & Johnson, and Citigroup. She certainly has an impressive business resume. However, there are bankers and economists who have a better nuts and bolts understanding of the economy.

President Barack Obama is not going to select a progressive. Laura Tyson is on the shortlist. Tyson is an economic realist. In Bob Woodward's book "The Agenda," Tyson was not afraid to bring up bad news in the Clinton White House. Obama doesn't another NEC director more conserned with access and politics than good policy. Tyson would be a good fit for the job. The question is does Obama want to hear what Tyson has to say.

Other candidates on the shortlist Diana Farrell and Ann Fudge.

Update: Brad Delong proposes that Tyson become Treasury Secretary and Tim Geithner become the director of the NEC. Delong also gives Summers underserved praise. Summers is Delong's mentor.

Why Geithner & Summers Should Be Fired

I wrote this post on Twitter about John Boehner calling for President Barack Obama to fire Tim Geithner and Lawrence Summers.

@thereidreport Boehner asking for Geithner to be fired would have progressives press for a more Left-leaning Sec o Treasury.

Geithner backed executive bonuses for AIG bonuses. AIG CEO Edward Liddy told Congress Geithner knew about the bonus money executives were going to reward themselves. Time reported the New York Federal Reserve informed Geithner of the bonuses before the March 10, 2009 date Geithner gave Congress.

Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG's impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned "full details" of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG.

Dodd tells CNN that the Treasury Department told him to take out amendment limiting executive bonuses.



As head of the New York Federal Reserve, records show Geither told AIG to take out references to key deals from regulatory filings. This is extremely unethical for a public servant to do. At the New York Federal Reserve, Geither negotiated the AIG bailout plan. Geithner is more aware than most of the financial troubles AIG is facing. Geither placed protecting AIG above the American public.

Geithner used AIG to funnel bailout money to cover Goldman Sach's naked credit default swaps losses. Goldman Sachs played a significant role in the mortgage meltdown. Goldman Sachs betted against the housing industry and attempted to collect on the CDS. AIG was too extended to pay when the 2009 Wall Street meltdown occurred. Both AIG and Goldman Sachs did a nose dive and the taxpayers were left with the bill. Geithner's response has been to protect these institutions from oversight.

Jon Walker of Firedoglake explains why firing Geithner and Summers is bad politics for the Republican Party.

House Minority Leader John Boehner (R-OH) has recently called on President Obama to fire Treasury Secretary Tim Geithner and Director of the National Economic Council Larry Summers. Now I don’t know how Boehner’s mother raised him, but where I come from, that behavior would be considered downright rude. Where is the gratitude? I think John of Orange owes them an apology. Trying to get the two individuals whose actions played a major role in assuring that Boehner will be promoted (to the position of Speaker of the House after Republicans win big this November) fired is just bad manners in my book. If it weren’t for Summers’ terrible economic projections and horrible advice, combined with Geithner’s equally bad counsel, consistently putting the prosperity of Wall Street over main street while horribly mismanaging the HAMP program, Boehner would not be close to measuring the drapes for the Speaker’s office.

Summers favors the current banking monopoly and urged Bill Clinton to sign the Gramm-Leach-Bliley Act. As President of Harvard, Summers made the sexist statement that women do not have the same "aptitude" as men to succeed.

Unfortunately, Geithner and Summers hold too much sway over the President. It is ashame because this maybe the only time I will ever agree with Boehner.

Half A Loaf

Use cars salesmen and Henry Kissinger both know when going into negotiations the best tactic is to give an inflated high offer. The other side will attempt barter down the offer. The person making the offer gets most of the concessions he originally wanted. The Obama administration's idea is to start with half-a-loaf and then let everyone saw the loaf to pieces. Case in point is the stimulus.

Romer had run simulations of the effects of stimulus packages of varying sizes: six hundred billion dollars, eight hundred billion dollars, and $1.2 trillion. The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis, deeply informed by her work on the Depression, suggested that the package should probably be more than $1.2 trillion. The memo to Obama, however, detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection.

The Obama administration ends up with a stimulus too small to achieve all of their policy goals. The White House feared being labeled tax and spenders. Obama cut middle class taxes and pushed a smaller stimulus to stop a potential depression. The result was being labeled a socialist.

Other result about the White House internal stimulus debate is Obama continues to listen to Lawrence Summers. The latter assured Obama to go after the smallest stimulus possible and stressed how this will keep unemployment under 10 percent. This is a perfect example of the blind leading the blind. The stimulus was needed but the one backed by Obama was too small.

Update: E.D. Kain has a good post on why the stimulus is was too small. I agnostic on his proposal on the federal government taking over Medicaid from the states. Kain's proposal would mean state governments would no longer fund Medicaid.

Lawrence Summers Hearts Big Banks

Lawrence Summers is the director of the White House National Economic Council. Summers was interviewed by NewsHours. He came out strongly against limiting the size of the nation's biggest bank. Summers makes the hysterical argument that having most of America's money tied into a few banks is good. Summers spun a tale of pure bullshit.

LAWRENCE SUMMERS: That was the approach that America took to lending in the thrift sector before we had the S&L crisis.

Most observers who study -- who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies and hurt the competitiveness of the United States.

But that's not the important issue. They believe that it would actually make us less stable, because the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven't profits in one area to turn to when a different area got in trouble.

And most observers believe that dealing with the simultaneous failure of many -- many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment.

Summers argues in favor of a monopony banking system. America broke up monopolies, such as Bell System, to protect cunsumers. During the Depression, the Glass–Steagall Act was signed into law by President Roosevelt. The law forbid commercial banks could not merge with investment banks. The Gramm-Leach-Bliley Act repealed the law prevent commercial and inventment banks from merging. Former President Bill Clinton admitted signing the Gramm-Leach-Bliley Act was a mistake. A fun little fact is Lawrence Summers was one of the people telling Clinton to sign Gramm-Leach-Bliley Act. The too-big-to-fail banks have a friend in Lawrence Summers.

Stimulus Package Caution

Kevin Drum makes a poor defense for the stimulus package.

Still, isn't the bill just a hodgepodge of unrelated spending? Sure. What else could it be? There's no way to spend $800 billion on infrastructure over the next two years, so most of the money has to be spent on other stuff. But so what? Employing clerks or crossing guards or home care workers counts every bit as much as employing backhoe operators or engineers. Spending money on contraceptives does as much for the economy as spending money on rebar. An unemployment check gets spent on food the same way a paycheck does.

I don't argue that there is a sense of urgency. The economy is bad. I disagree with Jim Johnson on two points. The economy will be bad past 2009 and we don't need to spend right away. The Obama administration needs to best use this money to jump start the economy. They won't get another chance.

Obama has wars in Iraq and Afghanistan. Obama intends to increase troops in the latter. Iraq has shown security improvements. However, it would be foolish to make predictions of the withdrawal date. The wars and deficit will cause the U.S. government to continue to borrow money. The alternative is unemployment continues until 2011.

David Gregory of Meet the Press told Lawrence Summers economists said the stimulus package would fail, because it wasn't big enough. Summers dodges the question.

GREGORY: So let’s talk about that, and that is the stimulus or the recovery plan that the president has proposed. In December, this is what you wrote: “In this crisis, doing too little poses a greater threat than doing too much.”

That was an op-ed piece you did. In that same piece, you said at that time that the economy was headed to a position where it was underperforming, where it was falling short of capacity to the tune of a trillion dollars. Now, there are other economists that I’ve spoken to say actually that’s optimistic, that it’s actually falling short to the order of $2 trillion.

So why a stimulus plan that’s only 825 billion?

SUMMERS: David, this is the largest stimulus plan in the country’s history. It’s the largest investment in the backbone of our economy since the interstate -- since the interstate highway system. It’s going to double renewable energy. And it is only one phase of the approach that the president is taking.

The president has made clear that there will be strong action to address the terrible problems in our housing sector, that he will be using additional funds for a substantial financial recovery plan to get the flow of credit going. This is one component of our strategy to bring about expansion. And the president has also made clear that going forward we’re going to be leaning forward and that he is prepared to do what is necessary.

GREGORY: It is big, even...

SUMMERS: And so we believe this -- we believe that this is a properly sized approach to move the economy forward. You know, economists from several private firms have now corroborated our incoming CEA chairman Christina Romer’s estimate that the plan will create...

Contraceptives (which I support) or sod for the National Mall will stimulate the economy. A stimulus package should do what it claims. The alternative is just just as bad. Future generations are gonna be paying the bill.