The End of Summers

Even in announcing that Summers has withdrawn his name from candidacy for the Fed chair, the media consistently avoid mentioning the Harvard-in-Russia mess and Summers's role. David Warsh recapped it last night.

As a journalist, part of my job has been to keep alive the memory of Summers’s role in Harvard University’s Russia scandal.  In that strange affair, Shleifer and his wife were caught trying to go into the Russian mutual fund business for themselves in 1996, while leading a Harvard team advising the Russian government on market design on behalf of the US Agency for International Development. Summers, their close friend, was deputy secretary of the Treasury at the time and, sson thereafter, Secretary. Harvard defended Shleifer to the hilt, both before and after Summers returned to the university as president. (At a certain point, Summers recused himself from the matter.) In 2004 a federal judge ruled that both Harvard and Shleifer had breached their contract to provide disinterested advice.  He ordered the university to return its fees. 

By now, even the most casual reader of newspapers will have noticed that Harvard’s Russia scandal doesn’t come up in most discussions of Summers’s fitness to lead the Fed. Only theWSJ, which originally reported the story, has kept up with it. The New York Times and The Washington Post didn’t cover the fracas, so they have no fistful of clips from which to reason now. The Financial Times, which hired Summers as columnist after he was forced out of Harvard, has likewise given the story a good leaving-alone. So have the authors of many books on the privatization of the economy of the former Soviet Union during the 1990s, none more conspicuously than Strobe Talbott, onetime Time magazine Moscow correspondent, in The Russia Hand: A Memoir of Presidential Diplomacy, his account of his years as Deputy Secretary of State from 1994 to 2001.  Today Talbott is president of the Brookings Institution. It’s this very invisibility that, to my mind, is the best argument against letting Larry Summers anywhere near the Fed.

(We actually know when Summers is claimed to have recused himself: June 18, 2001, a few days before he officially became Harvard's president but months after he had been chosen as president and started giving orders.) But today, the New York Times explains Summers's problems this way:

Mr. Summers’s reputation for being brusque, his comments about women’s natural aptitude in mathematics and science, and his decisions on financial regulatory matters in the Clinton and Obama administrations had made him a controversial choice.

The Wall Street Journal puts it this way: "opposition from liberals and women's groups—and, importantly, from some Senate Banking Committee Democrats—had been mounting." The last part is certainly true--Tester's opposition marked the beginning of the end. But why did Tester decide against him? Was it really mainly that Summers favors deregulation of banks?

The Washington Post attributes the decision simply to "an intensifying uproar of liberal Democrats and left-wing groups opposed to his nomination," going on to report, 

“It was just a perfect storm of bad timing,” said one person close to the White House, who requested anonymity in order to speak candidly about private deliberations. “It would have been absolute war, and the president would have had to spend all of his political capital. Larry decided not to drag him through it.”

And perhaps, in that war, a question would have been asked about conflicts of interest in a forum where Summers could no longer give an evasive answer. It is, in a way, too bad that with the spotlight off Summers and with his ambitions for high public office finally at an end, we may never know the whole backstory on Shleifer, Summers, and Rubin and the Harvard-in-Russia mess. I'll bet there is yet a good story for some investigative journalist to pursue. For example, people familiar with this area of law have told me the feds would likely have lost interest in Harvard if it had divided its case from Shleifer's--was it only Summers's protection of Shleifer that resulted in the disastrous and costly litigation against both Shleifer and Harvard, or was something worse going to come out if Harvard did not defend itself? Alas, Summers may no longer be a sufficiently consequential figure to repay the journalistic effort that would be needed to dig out the whole truth.