The Plutocrats Are Living It up: Larry Summers' Gilded Path to Money and Power
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Summers joined major banking and political elites on Hamilton’s Advisory Council and appeared at many Hamilton events. During a discussion of the financial crisis in 2008, Summers was asked about his role in repealing Glass-Stegall, the law that forbade commercial and investment banking mergers like Citigroup. “I think it was the right thing to do,” he responded, noting that the repeal of Glass-Stegall made possible a wave of similar mergers during the recent financial crisis, such as Bank of America’s takeover of Merrill Lynch. He was arguing, in effect, that financial deregulation did not cause the financial crisis, it actually solved it. “We need a regulatory system as modern as the markets,” said Summers — quoting Rubin, who was in the room. “We need a hen house as modern as the food chain,” said the fox.
A year after co-founding the Hamilton Project, Rubin was named Co-Chairman of the Council on Foreign Relations (CFR), another policy discussion group as prestigious as Brookings but bipartisan and internationally focused, replacing CFR chair Peter Peterson and cementing Rubin’s dominance in the top echelon of policy elites. Rubin’s son Jamie, became a major Wall Street fundraiser for Obama during these years — Wall Street was Obama’s biggest source of early cash — and although Rubin tepidly endorsed Hillary Clinton in 2007, many of Rubin’s proteges, including Summers, became top advisors to Obama’s presidential campaign and later to his administration. Rubin continued to hold a top position at Citigroup up until the bank almost went bust from its subprime mortgage investments but was saved by a government bailout engineered by the Bush administration and candidates Obama and McCain in September 2008. Michael Froman, a close friend and advisor to Obama who had worked as Rubin’s chief of staff for many years, was also a top executive at Citigroup at the time of the bailout.
Better than the Great Depression
“An awful lot of thoughtful people think … if you project out twenty years … the period that we’re in right now is going to look like the deterioration of the American economy, both in absolute terms and relative to other parts of the world.”
—Robert Rubin, The Politics of Message, 1989
Summers, Froman, and other Rubinites from the Clinton team — including Tim Geithner, Gene Sperling, Jason Furman, Neal Wolin, Jack Lew, and Gary Gensler — reunited in the Obama administration, as countless writers have documented in detail. Other Obama officials from outside Rubin’s network also came from Wall Street. Together, and in collaboration with their contacts in the private sector, they crafted an economic recovery plan that quickly restored financial profits through backdoor bailouts, and eventually corporate profits more generally, but failed to remedy the jobs and housing meltdown:
|Bank profits||128 billion||367 billion*|
|Corporate profits||1.25 trillion||1.66 trillion*|
||21 million||25.7 million|
|Foreclosures since 2009||-||3.4 million|
|* annualized from Q3 2010|
As Obama’s top economic advisor, Summers was responsible for much of it, and he became iconic of a White House that made frequent populist odes to change but rehired all the old Wall Street cronies and operated by Wall Street’s “out of touch” logic from day one. That defenders have been forced to measure Summers’ success against the Great Depression is indicative of his unpopularity as well as the administration’s tone deafness to the deepening economic insecurity of the middle class, much of which is experiencing a depression.
In a bigger sense, the decades-long dance of Rubin and Summers in and out of Washington has become emblematic of a second Gilded Age that wouldn’t even measure well against the first one from a century ago. Much of the public has come to view the Obama Administration as the latest round in a quickening game of musical chairs, played by the same old politicians who owe their fortunes or their careers to the same financial institutions that destroyed the economy, each round further consolidating their unaccountable power, each round bringing fresh disillusionment.