The Deal: Rules and Derivatives Moves Helped Do In Summers
However, noise from the liberal wing of the Democratic Party about his role in a series of deregulatory efforts during the Clinton Administration's waning days were a key factor in pushing the former Treasury secretary to pull his name from consideration to run the central bank Sunday. Republican reservations didn't help Summers' cause either.
Summers appeared to be President Barack Obama's main choice for the job. However, repeated criticism of his actions in the late 1990s, first as deputy Treasury secretary and then later as Treasury secretary, all contributed to the end of his candidacy.
"The enemy of Larry Summers was Larry Summers," said Cornelius Hurley, professor at Boston University's School of Law. "While he had the progressive passionately against him over deregulation during the Clinton administration, he didn't have a lot of fans on the right either."
Opponents on the left repeatedly pointed with disdain to his support for a statute approved in 1999 that eliminated the 1933 Depression-era Glass-Steagall Act, which for more than 60 years kept commercial banks out of the investment banking business. Sen. Elizabeth Warren, D-Mass., an opponent of Summers on the key Senate Banking Committee, is pushing bipartisan legislation she introduced recently to reinstate the measure, which would force some big banks, such as Citigroup
The bill is unlikely to be approved anytime soon, barring another major bank meltdown. Her public support for Glass-Steagall in conferences and on Capitol Hill, however, helped fuel resistance to Summers.
Critics on the left also point to concerns over Summers' role in squashing an effort by the Commodity Futures Trading Commission in the late 1990s to regulate derivatives. The CFTC eventually lost that battle and instead Congress and the Clinton administration approved the Commodity Futures Modernization Act, which was later criticized for contributing to the 2008 financial crisis.
"If you believe that repeal of Glass-Steagall was a great idea, and if you believe the Commodity Futures Modernization Act was a great idea ... then Larry Summers is your guy," former Democratic Delaware Sen. Ted Kaufman said at a conference last week at George Washington University Law School that was co-hosted by left-leaning advocacy group Better Markets. The conference featured a keynote address by Warren and a few high-profile Summers opponents. "The fact that there aren't riots in the streets over the idea of Larry Summers being head of the Fed is an indication of how deep our problem is," Kaufman added.