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Free Larry Summers

On a typical day, Larry Summers, the top White House economic adviser, sits in his office overlooking the Rose Garden and receives a near-endless succession of aides working on a stunning variety of issues. In a single, several-hour bloc, Summers might have meetings on housing, the auto industry, health care, technology policy, and the financial crisis, all of which he's exploring in subatomic detail. Summers is said to be fascinated with such off-the-beaten-path topics as the switch to digital television--he insists on understanding the physics behind the technology.

This image of Summers weighing bit rates and digital compression was somewhat daunting as I prepared to visit him on a recent Monday afternoon. All the more because Summers is known not just for his intellect, but for a bluntness that was legendary in his years as a Harvard professor. One former student recalls trying to explain his progress on a paper only to have Summers interrupt with: "So you're nowhere, right?" For days, I'd worried that Summers would dress me down like a frivolous undergraduate if I ventured something moronic.

It turns out I was hardly alone in this. Since the fall, when Barack Obama appointed Summers to head his National Economic Council (NEC), capital denizens have presumed the president's economic program will rise and fall on Summers's temperament, which some feared could undermine the administration's effectiveness. "Even Mr. Summers's allies," The New York Times wrote in December, wonder if he can "nurtur[e] the proposals of others." Much of the concern revolved around Summers's difficult tenure as president of Harvard, which ended amid controversy over his impolitic remarks about women.

When Summers trooped out to greet me, his shirt was still tucked in, but his pants had sagged several inches below their natural resting place. It gave him a vaguely grunge look—that is, if Nirvana fans preferred sleek brown slacks and salmon-colored ties. Summers eagerly shook my hand, then led me back to his wood-paneled office. Inside, he sank into an oversized yellow armchair. He is not exceptionally tall, but has a head out of proportion to the rest of his body. The longer we spoke, the more the chair seemed to swallow him up, until only the head remained. At a certain point I couldn't shake the impression it was just me and Summers's brain.

As at Harvard, Summers functions on exceedingly little sleep. (A former student told me Summers once praised his dedication after noticing he'd run a computation at 4 a.m.; the student didn't have the heart to tell him he'd queued it up at six the night before.) To power through the day, Summers relies on a punishing Diet Coke regimen. The combination of fatigue and extreme caffeine intake can produce the occasional verbal and physical tic: Summers is a chronic foot-tapper and sometimes turns over words and clauses like an engine that won't start.

Still, it was the contrast with Summers's graceless image that was most striking. On some level what I wanted from Summers was reassurance about the economy, and he seemed happy to oblige. When I asked about the differences between our current crisis and the Japanese "lost decade" of the 1990s, Summers soothingly explained that the Fed and the Obama administration had intervened much earlier and more aggressively than their Japanese counterparts, and that our bubble wasn't nearly as inflated. History suggests that "recovery doesn't come quickly and that the ultimate fiscal cost is high," he said, "but I don't think we are looking at the same set of challenges as Japan." When I wondered what steps he would take if there were no checks on his decision-making, Summers was deferential. "I think the right approach here is the president's approach," he cooed.

I'd gotten what I'd hoped for, in other words. Not a battering-ram but a warm, avuncular presence. Others have noticed this change, too. "Mindful of his reputation as an intellectual bulldozer, Mr. Summers is working hard to rein himself in," the Times followed-up in February. Newsweek recently found "signs that Summers really is learning to play well with others." And yet, once our interview was over, I felt strangely unfulfilled. Like I'd shown up for a deep- tissue massage, only to be rubbed down gently with pleasant-smelling oils. Without the pain and abrasiveness, how do you know it's really working?

At which point I began to worry: What if we in the press have gotten it wrong? Collegiality is all well and good. But, in this moment of global crisis, when indecision could be disastrous and a wrong decision even worse, shouldn't we want to unleash our hard-charging geniuses and get out of their way? Maybe the issue isn't whether Summers plays well with others, but whether Obama's economic effort should be led by a an ensemble cast or a single virtuoso performer.

Personality aside, Summers has long been associated with a certain tactical and strategic brashness. "I'm somebody who wants their errors to be of trying to do too much rather than trying to do too little," he told Portfolio magazine last September. One early outlet for this instinct was the college debate circuit, which Summers joined while an undergrad at MIT. Policy debate was a labor-intensive activity. The best college programs—Georgetown, Northwestern, Harvard—had professional coaches and up to two dozen debaters. The teams would spend hundreds of man-hours in the library each week researching proposals they would defend in tournaments. (The national-championship-winning proposal in 1974: a cap-and-trade program for limiting sulfur-dioxide emissions.) MIT was, by comparison, a relatively small program with only intermittent coaching. Unlike their rivals at other schools, who could take less demanding classes, the students' course loads often limited their prep time. Nonetheless, Summers was able to make himself into a top-flight debater.

Summers was known in debate circles for two qualities. The first was his unusual pace. Elite debaters in those days spoke at dizzying speeds so as to cram as many arguments and data points as possible into their allotted time. To the untrained ear, a matchup between top debaters would be an incomprehensible hum of varying pitches. But Summers spoke about 25 percent slower than most of his rivals. "He was not a speed king," says Tom Rollins, a friend and debate contemporary. This left Summers at a critical disadvantage, since, according to the rules, an unanswered argument is a conceded argument. It also elevated the importance of the second feature of Summers's debating style: a tactical sophistication that often allowed him to overcome his deficit of verbiage.

In one semi-famous episode, Summers and a partner appeared in the final round of a tournament at the University of Redlands. As usual at this stage of a competition, Summers was overmatched speed-wise—the opposing team had put forth several arguments in support of a plan to feed the starving masses. "Larry obviously saw that, if the round was judged conventionally, it would have been a wholesale slaughter," recalls Greg Rosenbaum, a friend who was in attendance. So, rather than rebut each argument, Summers simply ignored them. Instead, he alleged that they all relied on a key misinterpretation of an academic article, thereby collapsing the debate to a single question. Summers was, in effect, challenging the entire case against world hunger on a technicality. Amazingly, it half-worked. "The judges came to the conclusion that Larry was right, there was only one argument," recalls Rosenbaum. "They just happened to conclude he lost that one."

Summers's audacity succeeded more often than not. He was, for example, a feared practitioner of the so-called "business confidence disadvantage," or "biz con." The idea was to show that the other team's proposals were so radical they would send panic through the stock market and trigger an economic collapse. "He would force the debate onto his terms," says John Graham, another debate contemporary. One minute a debater would be arguing for a minimum wage or consumer-product regulation; the next, Summers would make him answer for a second Great Depression.

During his senior year of college, Summers was considering graduate school in both theoretical physics and economics. For weeks, he anguished over whether to pursue his passion (physics) or the family business (in addition to his economist parents, Summers has two uncles—Paul Samuelson and Kenneth Arrow—who won Nobel prizes in the field). After he finally decided on the latter, he explained his thinking to Rollins: "What does a bad theoretical physicist do for a living? He walks into an office, sits at a desk, and stares at a plain white sheet of paper." "But," Summers added, "there's a lot of work in the world for a bad economist."

Summers, of course, would go on to be one of the top economists of his generation. Several of the papers he wrote as a Harvard graduate student redefined whole swaths of the discipline, and they remain influential to this day. Summers would accept an assistant professorship at MIT long before submitting his dissertation and, three years later, win a tenured position back at Harvard. (At 28, he was among the youngest ever to achieve that status at the university.)

If Summers had one fault as a debater, it's that he was sometimes too unorthodox. "There were times I tried to convince him he should debate a little more from conventional wisdom," recalls Dallas Perkins, who coached Summers his senior year. But what was a weakness in the insular world of college debate drove Summers's success as a scholar. One paper he wrote as a grad student overturned economists' long-standing belief that the social costs of unemployment were low. The assumption had been that most people are out of work only briefly; Summers and a colleague found that a significant number went without work for long periods of time.

Other Summers papers chipped away at the idea that stock markets are efficient (that is, that prices move in response to real-world developments rather than investor psychology) and at the concept of "Ricardian equivalence." The conceit was that, under certain circumstances, cutting taxes or raising government benefits has little effect on people's spending habits. Because parents know their kids will eventually face higher taxes to close the deficit, they save the additional income and pass it down. Summers thought the idea was a stretch--that parents were far more greedy and self-serving than many economists assumed. He helped design a study showing that parents don't bequeath wealth to their kids for altruistic reasons; they bequeath it as a way to manipulate them into visiting more often.

When Summers took issue with a colleague's work, he would strafe them with questions from a seat in a seminar room, a style not uncommon in economics. "Isn't it obvious that the assumption on which your whole analysis rests is unrealistic?" he once demanded, in the presence of a Boston Globe reporter. And yet, for all his apparent gruffness, Summers's interaction with students had undeniable warmth. At any given moment, there might be a handful of students waiting outside his office. Some didn't even attend Harvard. An adviser at MIT or Yale had given up on their project and, in a final act of desperation, sent them to the young oracle on Massachusetts Avenue. Summers would briefly inspect the student's work, then start spewing ideas while the supplicant scribbled frenetically. "He'd say, 'Here's why what you're thinking is wrong. Here's what you should think instead,'" recalls MIT's Jonathan Gruber. The people on the receiving end are now some of the most prominent economists in the world. But many still credit Summers for the fact that they have a Ph.D. "Larry was basically the inspiration for [my dissertation]," says Gruber. "I was floundering."

Even as a young professor, Summers would attempt to restrain his own worst impulses, sometimes in poignantly ham-handed ways. Alan Krueger, an economics professor at Princeton, once earned a rare A-plus on Summers's public-finance exam. (After Krueger and I spoke, the administration nominated him to be assistant Treasury secretary for economic policy.) When Krueger got the test back, he noticed that Summers had written him a note. "You've clearly mastered the material," it said. "I'd be interested in having you work for me." But the words "having you work for me" had been crossed out. In their place, Summers had written "working with you on a paper this summer."

In truth, Summers had an ulterior motive for courting so many students. Perhaps ironically for someone so worried about stock-market bubbles, his research style could best be described as "highly leveraged." That is, Summers was most comfortable thinking up big ideas, then partnering with capable students and colleagues to execute them. Among other things, this methodology helped him publish more than 100 academic papers in roughly 15 years--an output that exceeds the entire life's work of many lesser economists. (More than one Summers protege joked to me about initially being flattered by his invitations, then learning, as one put it, that "Larry will work with anybody.")

By the late 1980s, Summers was brushing up against the limits of his ability to leverage himself. Jonathan Gruber recalls co-writing a paper not long after that came back from a journal with a number of proposed revisions. Many of the points were just wrong, prompting Summers to tell the editor, "Now I understand why guys of a certain age stop sending stuff to journals. It's annoying when people who don't know what they're talking about decide on whether your paper should get published." To get his ideas out, Summers still had to deal with all manner of scholarly bureaucracy—what Gruber calls "the stuff of life"—and it was beginning to create a bottleneck.

Around the same time, Summers made his first foray into politics. In the late '80s, an acquaintance introduced him to Robert Rubin, then a top executive at Goldman Sachs and a major Democratic donor. Rubin eventually helped pull Summers into the Dukakis campaign as an unpaid economic adviser.

Summers was a well-intentioned flop. He sometimes pushed the kind of proposals academic economists love—say, raising gasoline taxes or eliminating the minimum wage for teenagers—and which drive political hands batty. But the experience did, for the first time, cast his worldview in a more overtly political light. At the broadest level, Summers was a moderate liberal: deferential to markets when feasible (as in international trade), but convinced they fail with some regularity (hence his foray into behavioral finance). He believed the government should provide opportunity (especially educational) to those who lack it, in addition to cushioning the business cycle. Over the long term, he felt, a country's budget should balance and take up a modest, stable percentage of GDP.

Years later, the left would deride Summers as a crypto-conservative in part because of his coolness toward regulation during the go-go '90s. But this imputes far more ideology to Summers than he actually has. Unlike his friend Alan Greenspan, whose faith in markets has been near-theological, the source of Summers's hesitation was practical and intellectual. Summers believed financial market innovation was creating vast new efficiencies. He was fond of comparing it to the arrival of the jet engine, which spurred economic growth but made the inevitable crash much deadlier. The solution, he told The New Yorker's John Cassidy, was to lengthen runways, not limit travel. The elegance of such analogies clearly led him astray. (Summers jettisoned his earlier skepticism as the breadth of regulatory failure became apparent in recent years.)

Summers was living in Washington for a stint as the World Bank's chief economist when Bill Clinton ran for president in 1992. After Clinton won, Summers opted to place himself in consideration for a top economic job rather than return to Harvard in 1993. As Gruber puts it, a policy job was the perfect solution to Summers's bottleneck problem. In the academy, students were too inexperienced to flesh out the finer details of his papers, while colleagues would have been insulted by the suggestion. But, in Washington, you could give a staffer an assignment and ask them to report back in six months. Not only were they being paid to do it--they would be delighted by the attention.

In the end, Summers left the academy for the same reason he decided not to pursue theoretical physics: because he wanted his ideas to have broad reach. Another former student recalls Summers once telling him he'd consider a paper they were writing a success if it inspired 100 other economists to work on the same topic. The student had never heard someone so ambitious about influencing the profession.

Summers initially had his heart set on becoming chairman of the Council of Economic Advisers (CEA)--the White House's in-house think tank--like his mentor Martin Feldstein. (Feldstein had held the position under Reagan.) But liberal opponents torpedoed his chances by releasing a memo he'd signed during his World Bank days. The document, a provocative thought experiment about environmental policy, earned Summers the ire of Vice President Al Gore, who blocked his ascension to the post. (Thereafter, recalls one White House aide from the early '90s, "[Summers] would avoid the vice president like the plague. At meetings together, he would keep quiet.") Instead, Summers found himself at Treasury as undersecretary for international affairs.

Early on, Summers's political skills were raw. His unfailing directness, endearing to many in Cambridge, could be downright jarring in Washington. Bill Barreda, then a senior official on Treasury's international side, recalls preparing a memo for the new undersecretary. Summers began reading it in his presence, and, before finishing, opined: "You really like [topic] sentences." When testifying before Congress, Summers often wore a pained expression, as if somehow surprised by the quality of the questioning. In 1997, Summers famously complained to reporters that the evidence behind the GOP's argument for repealing the estate tax was "about as bad as it gets." "When it comes to the estate tax," he added unhelpfully, "there is no case other than selfishness."

And yet, whatever his liabilities, Summers was highly effective from the get- go. In December of 1994, the Mexican finance ministry alerted Summers's assistant secretary, Jeff Shafer, that the country was nearing a currency crisis. During the early '90s, Mexico had started down two paths that, together, proved unsustainable. First, the country ran large trade deficits. To pay for all the goods it was importing, Mexico needed dollars, which meant it had to sell government bonds. This led to the second problem: To appease all the foreign investors who worried the peso would lose value, Mexico issued certain short-term bonds--called "Tesobonos"--that were linked to the dollar.

This worked fine for a while. Foreign money flooded in as investors snatched up the Tesobonos. But, as the years passed, creditors began doubting that the government would pay off its bonds at the fixed exchange rate. Many began withdrawing their money, forcing the Mexicans to redeem the bonds for dollars. By the time Treasury tuned in, in late 1994, the dollars had almost run out and the government could no longer defend the peso-dollar exchange rate. The imminent decline of the peso would make Mexico's foreign debt more expensive and raise the risk of a default.

Worse, Treasury itself was in limbo. Then-Secretary Lloyd Bentsen had announced his retirement, but Bob Rubin, his successor, had yet to replace him. It fell to Summers--whose team included Shafer and a young deputy assistant secretary named Tim Geithner--to figure out the consequences of a Mexican collapse. By January 10, 1995, the Summers group had a tentative answer: The fallout could be several hundred thousand U.S. jobs and a 30 percent spike in illegal immigration. If Mexico infected other emerging markets, it could wind up shaving a point off U.S. GDP growth.

That same day, Summers accompanied Rubin to his Oval Office swearing in. Once President Clinton administered the oath, Rubin recalls in his memoir, the new Treasury secretary turned to the president and urged a massive loan package. He then gave the floor to Summers, who briefed the president and concluded that something on the order of $25 billion would be necessary. Surely he meant twenty-five million, George Stephanopoulos interjected. No, Summers said, "billion with a 'B.'" Clinton swallowed hard and, after weighing every angle, signed on.

The initial response from congressional leaders was also favorable. But the rank and file was hostile. Vermont's then-congressman, the socialist Bernie Sanders, told Rubin to "go back to your Wall Street friends [and] tell them to take the risk and not ask the American taxpayers." A freshman Republican named Steve Stockman accused Rubin of arranging a bailout to protect the investments he'd made while a partner at Goldman Sachs. Soon, even the once-supportive leaders were either quietly backtracking (Senate Majority Leader Bob Dole) or railing against the package outright (Banking Committee Chairman Alfonse D'Amato). It was what High Noon might have looked like if Gary Cooper had played a policy wonk.

As it became obvious that cooperation from Congress wouldn't be forthcoming, Rubin and Summers began to consider plan B. Back in 1934, Congress had given Treasury a pool of money called the "Exchange Stabilization Fund" (or ESF) to help smooth out exchange rates. Sixty years later, the fund stood at about $35 billion, and Treasury lawyers believed they had the authority to draw on it. And so, on January 30, with no congressional help in sight, Summers, Rubin, and Clinton's top White House aides decided to tap the ESF to the tune of $20 billion.

Still, even this amount was unlikely to restore confidence in Mexico. The only other source of money was the International Monetary Fund, and here's where Summers's occasional bullying actually served him (and the country) well. To help cajole what eventually became a $17.8 billion contribution out of managing director Michel Camdessus, Summers pushed and prodded relentlessly. "I remember late the night that this unfolded, in the early morning, Larry was in an adjoining office in rather strong terms telling the IMF they had to step up to the table here in a major way," recalls one former colleague.

By early March, the first U.S. installment of the nearly $40 billion package was flowing. By mid-May, there were signs it was working. By early '97, the Mexican government had completely paid off the loan--three years ahead of schedule.

When Summers emerged as a leading candidate to be Obama's Treasury secretary, the biggest obstacles were lingering questions from his searing experience at Harvard. Summers's remarks about the underrepresentation of women among scientists received most of the headlines. But it was his constant warring with the faculty over an ambitious reform agenda that probably did him in. (His rapport with the students, on the other hand, remained exceptional throughout. Even after he resigned, Summers would stop by pizza parties and dorm gatherings, according to the Times.)

As it happens, Summers's problem at Harvard wasn't his lack of political skill per se. It's that he'd misunderstood the kind of institution he was running. Summers had assumed Harvard was a pure meritocracy—where ideas win out on the basis of their strength and little else. His own experience as a professor there had taught him as much. When he proposed, say, revising the undergraduate curriculum to focus more on basic knowledge than on the latest intellectual fashions, he was prepared to defend the logic of the plan, not sweet-talk professors who felt threatened by it. But, as Summers told ProPublica's Paul Steiger early last year, "I just didn't fully appreciate the extent to which the university ... was a political kind of institution."

In truth, Summers's political aptitude had steadily risen throughout his tenure at Treasury. By the end of the Clinton administration, he'd mostly learned to check his legendary bluntness. He'd even let his playful side out. As a way of bonding with his charges, he once trekked to the Secret Service training facility in Beltsville, Maryland, where he learned to perform the so-called "J-turn"—a 180-degree maneuver at 60 miles per hour. (The Secret Service was one of the many agencies Treasury oversaw at the time, along with Customs and the ATF.)

Nowhere was the progress more evident than his dealings with Congress. The Summers who once rolled his eyes at questions from members was now catering to their every need. Summers traveled to Representative Charlie Stenholm's rural Texas district to talk Social Security reform with local farmers. He visited Representative Jim Kolbe in Arizona to inspect Customs enforcement procedures, a subject close to Kolbe's heart. When the administration asked Congress to re-up its IMF contribution, Summers painstakingly explained the issue to Representative Sonny Callahan of Alabama. "He learned to focus on how to make it very local, very specific to person X, madame Y, congressman Z," says Linda Robertson, a longtime Treasury legislative aide. "[Like] why someone like Sonny Callahan from Mobile, Alabama would care about the IMF being able to utilize some of its gold, replenish its resources--the fact that, okay, he's got manufacturing ... that translates into exports."

These skills served Summers well when he succeeded Rubin as Treasury secretary in 1999--as they did at the outset of the Obama administration. On December 16, Obama gathered his top advisers in Chicago to set the broad parameters of the stimulus plan. In addition to Summers, chief of staff Rahm Emanuel attended, as did Treasury Secretary Tim Geithner, budget director Peter Orszag, environmental czar Carol Browner, and a handful of other senior aides. The early discussions had centered on a measure in the neighborhood of $500 billion over two years, perhaps slightly higher. But, the week after Thanksgiving, Christina Romer, Obama's choice for CEA chair, had produced numbers suggesting the economic deterioration was much worse than expected.

It was Summers who concluded that the bill would have to be larger. "He was very, very focused on the macro impact--job creation, the magnitude of fiscal stimulus in 2009, the magnitude of fiscal stimulus in 2010," recalls one White House aide. The group accepted Summers's recommendation for up to $775 billion--then a very large number with few historical precedents--after four hours of deliberation. No one was bitterly opposed, but several questioned whether a stimulus of that size was truly necessary. Some wondered if it could survive Congress, and if it was even possible to spend so much so quickly. In the end, Summers helped persuade his colleagues that "doing too little poses a greater threat than doing too much," as he later explained in a Washington Post op-ed.

Summers's political touch was even more visible in his dealings with Congress. In early January, he trekked to the Hill to unveil the stimulus plan before the full complement of Senate Democrats. The meeting did not go well. The senators were exercised over Obama's proposed job-creation tax credit, which they said would be a windfall for companies already hiring, and the stinginess of its allocation for energy. "Not to overdramatize it, but he got an earful," recalls one Senate aide. Summers took it all in cheerfully. He pledged to take the senators' ideas back to the White House and, says the aide, remained in "listening mode" throughout. By the time Summers returned a few weeks later, the mood among the senators had lightened considerably. Summers, Emanuel, and White House congressional lobbyist Phil Schiliro had decided to drop the controversial tax provision and add more energy money (after Emanuel got a green light from the president). The Democratic senators were grateful for the responsiveness.

Within the administration, Summers also appears to be something of a political success. He and David Axelrod, Obama's top political adviser, are by all accounts mutual fans--Axelrod is regularly among the aides who prep him for Sunday talk shows. (In an e-mail, Axelrod raves about Summers's ability to talk "about the plight of the middle class, and how most people judge the economy, not by arcane economic formulas, but by how far their paychecks go.") Summers also remains close to Tim Geithner, his one-time special assistant. He spent much of February 10, the day Geithner announced the outlines of his widely panned Financial Stability Plan, on the phone heatedly defending the secretary to any reporter who would listen. (Summers insisted Geithner had been a victim of unfair expectations-setting in the press.)

At first glance, Summers might appear to have less to contribute on the bank and credit-market front, the most dangerous part of the current situation. His exposure to Wall Street over the years has been limited, and, in his scholarship, he has written only sparingly about financial crises and depressions. But, as a professor, Summers was often preoccupied with these phenomena in his endless banter with students and colleagues. The way Summers saw it, the Great Depression had been a problem of "multiple equilibria" gone awry. That is, he believed the economy could just as easily have been booming as shrinking. All it took was for everyone to believe that everyone else would start producing again, and they would too. But, since everyone believed everyone else would stay idle, they had no incentive to produce anything either. There was no good reason the economy should have been in this rut. But, once there, it was spectacularly difficult to get out.

Jim Hines, who was a grad student in those days, recalls Summers grappling with this idea at length. He'd often compare it to the market for men's suits, which are typically sold in even sizes but not odd ones. "How did we settle on forty, forty-two, forty-four?" he'd ask, "and not thirty-nine, forty-one, forty-three?" Summers could think of no explanation. But what was evident was that, once everyone had settled on 40s and 42s, almost no off-the-rack manufacturer would make a 41. "Larry likened that"--being stuck in a world of even sizes--"to the Great Depression," Hines recalls.

In 1991, Summers collected some of his thoughts on the subject in an informal paper for a volume edited by Martin Feldstein. At the time, the economics profession was still consumed by the market crash of October 1987--the largest one-day percentage drop in stock-market history. Perhaps more importantly, many economists wondered why the crash hadn't triggered a recession. Some suggested that the link between Wall Street's performance and the economy's performance--so devastating in the pre-war era--had been severed by modern policymaking.

Summers countered that it would be a mistake to draw confidence from 1987. He spent part of the paper constructing a nightmare scenario: In the run-up to a boom, regulators approved "mini-stock market futures contracts" that allowed investors to control $35,000 worth of stock with just $2,000 in cash. "Lawyers and dentists explained to one another that investing without margin was a mistake," Summers drolly observed. Then came the crash, which, in an eerily prescient detail, ensued "after a poorly supervised trader lost $500 million ... in the newly developed foreign-mortgage-backed securities market."

Before long, banks were failing, credit was contracting, and bodies were piling up faster than in an '80s slasher flick. "The result was the worst recession since the Depression," Summers wrote. And none of it had required a leap that was implausible in the early '90s or today. The only way to avoid this gruesome fate, Summers concluded, was for the government to take quick, bold steps to restore confidence.

As head of the National Economic Council, Summers should be well-situated to impose this vision. Though the traditional role of the NEC chairman is to synthesize all the economic options that bubble up from various corners of an administration and present them dispassionately to the president, no one pretends that Summers's NEC much resembles this model. Thanks to his vast intellectual range and the urgency of the moment, Summers has thus far taken a leading role in the housing plan, the auto industry rescue, health care, and energy, in addition to the stimulus. But, when it comes to the bank bailout, the consensus is that Summers has scrupulously respected Geithner's turf. It's not that Summers doesn't have opinions of his own, or that he doesn't share them with Geithner. But, to the extent the two disagree, it's Geithner who gets his way. This is perhaps one reason why the bank bailout seems, in terms of its aggressiveness and boldness, the least Summers-like of all the administration's economic plans.

In July, when he was still a civilian, Summers argued in the Financial Times that the government should use its "receivership power" over Fannie Mae and Freddie Mac to wipe out holders of regular and preferred stock and certain types of bonds, "conserving cash for the benefit of taxpayers." He said it should run the companies until the financial crisis passed--perhaps a period of several years--before selling off certain components to the private sector. "It is a time for decisive action," Summers wrote.

As the financial crisis has deepened, many economists have proposed something roughly analogous for the country's largest commercial banks. Geithner has so far resisted. The Treasury secretary has opted instead to bolster the balance sheets of hard-up banks with capital from last fall's bank bailout, and to provide government financing for investors interested in purchasing depressed assets. In fairness, there are any number of reasons why someone might support nationalization for Fannie and Freddie but oppose it for large banks, whose balance sheets and business models are far more complex. Still, one can't help wondering if the administration might now be inching toward some version of Summers's FT approach had he been in charge at Treasury. (Summers declined to comment on hypotheticals.)

There is surely real value to Summers's respect for institutional boundaries. And no one thinks Larry Summers has suddenly become Sally Quinn. Colleagues say he remains fiercely opinionated in meetings; his humor is sometimes cutting.

Still, the question arises: If the Obama administration fails to revive the economy, will it be because Summers is too influential over economic policy, or not influential enough? If not for the Harvard flap, Summers might be running Treasury, which, owing to its size, can bring far more infrastructure to bear on the economic crisis than NEC. But the Obama administration reportedly feared a difficult confirmation battle, making the White House post more attractive. (To be sure, there were other reasons Summers didn't get the job, like Obama's desire for a fresh face.)

Of course, even if Summers had overcome concerns about his abrasiveness and ascended to the Treasury job, he would face still another set of hurdles. There is, for example, the lesson Rubin shares in his book--"the difficulties our political processes have in dealing effectively with issues that involve technical complexities, shorter-term cost to achieve longer-term gain, incomplete information and uncertain outcomes, opportunities for political advantage, and inadequate understanding." Which is to say, it's not clear our political system is even equipped to deal with economic crisis. With the financial markets teetering and Congress refusing to give the administration another cent to save the crumbling banking system, one could be forgiven for thinking the lesson still applies. Even the stimulus, bold when it was conceived, no longer looks sufficient. But Congress is unlikely to part with more money any time soon.

When I asked Summers about Rubin's worry, he was mostly at ease. Then I reminded him that he'd once expressed similar concerns himself. In the scenario he'd cooked up for his article in 1991, Congress had insisted on cutting the deficit in the middle of the crisis, taking money out of the economy at the very moment it was needed most. Political leaders feared that "increases in budget deficits would have disastrous consequences for business confidence," Summers had written. "Spending was cut, and even some minor taxes were increased." The effect was to push the country into the abyss.

Summers thought for a minute and conceded the point: "There are times when it would be far easier as an economist to make a recommendation and move forward." Then he added, quite diplomatically, "But checks and balances, including the give and take with Congress, are an essential part of democracy, and we are far better with the process we have in place than without."

Noam Scheiber is a senior editor at The New Republic.

Editor's Note: This piece has been slightly updated since it came out in print.