THE STASH OCTOBER 4, 2009
Ryan Lizza has some fascinating biographical details in his must-read profile of Summers in the forthcoming New Yorker. First, he solves a mystery I'd chewed over but never figured out when profiling Summers myself:
M.I.T. hired him as a professor in 1979, then Harvard offered him tenure in 1982, when he was just twenty-seven. He was one of the youngest people to receive tenure in the university’s history. According to a friend of Summers’s, Harvard had wanted him earlier that year, but the university’s rules required him to have a Ph.D., and although he had finished his graduate work in 1979, he hadn’t yet turned in his doctorate, something that mystified his colleagues. “They had to get him to turn the thing in pronto, and have his committee pass him, so that they could move forward on the process,” the friend said. “This is a guy who published like a fiend, especially in those days. So why three years to get his Ph.D.? Well, his uncle Paul’s dissertation got Paul the Nobel Prize. And his uncle Kenneth’s dissertation got Kenneth the Nobel Prize. If you’re Larry, it’s pretty hard to turn in that dissertation.”
You rarely hear about the ways Summers's eminent family members loomed over him, even though it would have been impossible for them not to. This helpfully sheds some light on that, I think.
Also, Ryan has some great backstory on how Summers ended up in his current position:
But Obama faced a dilemma: how to exploit Summers’s intellectual energy while avoiding his managerial weaknesses. As several Obama advisers put it, Obama “wanted Larry’s brain.” Summers ended up in a contest with Geithner for the Treasury Secretary post. The two men bumped into each other at O’Hare Airport, on November 16, 2008. They sat together in an airport lounge for an hour before heading downtown for back-to-back interviews with the President-elect. “I know it’s not the conventional wisdom, but I am of the personal view that you would make a good Treasury Secretary,” Geithner joked to Summers. During his interview, Geithner, who had previously worked for Henry Kissinger’s consulting firm, Kissinger Associates, told Obama something that the former Secretary of State had once said about Summers: “They should just make Larry a permanent White House adviser to the President.” ...
Obama and Emanuel then devised a plan to bring Summers into the White House, as the head of the N.E.C. But, Emanuel told Obama, “The only way we’re going to do this is you’ve got to talk to Larry.” Obama called Summers and reminded him that the country was in the midst of an unprecedented economic crisis, and said that he needed him in the White House. He told him that he wouldn’t take no for an answer. Still, Summers said that he wanted to think about it. The next morning, he met with Emanuel for an hour in his office on Capitol Hill. By the end of the conversation, Summers had agreed to join the team. His decision surprised some. “How many former Secretaries of the Treasury would come in not as Secretary of the Treasury?” Vice-President Biden said to me. He added, “And he’s the smartest son of a bitch.”
If I have just one minor quibble with the piece, it's with this paragraph:
This insight formed the basis of the Obama Administration’s understanding of the crisis, especially the debate over nationalization. The nationalizers thought that the banks were insolvent—that the toxic assets were worthless. But Summers and Geithner, though they disagreed on some aspects of the stress tests, agreed that the asset prices were simply under attack from the liquidation vicious cycle, and that recapitalizing the banks and restoring confidence would stem the panic and restore some value to the bad assets.
My sense is that, to varying degrees, both men thought liquidity and insolvency were problems--that prices were coming under attack because of panicked selling, but also because some of the banks' assets were damaged in fundamental ways. (See, for example, this item, where a Treasury official explains this to me.) Still, there's no question that liquidity loomed pretty large in their thinking, as Ryan points out.