Wednesday, September 29, 2010

Lawrence Summers never got it right.

As Larry Summers makes his way through the evolving door, readying himself to promote the next great disaster, Obama is left to find someone equally as incompetent to fill his shoes. Sadly though, Obama has a lot of ready candidates who carry these same character traits and flaws. And Washington is, after all, an equal opportunity employer, which, in substance, means they hire the mentally challenged without regard to their station in life.

Summers career in Washington is filled with so many misjudgments that the “science” he professes can be summed up with just two words --“VooDoo Science.” His legacy will be an embarrassment for two presidents, Clinton and Obama. Hopefully, he will retire from politics permanently, although it is doubtful. In Washington, the inept are rewarded with promotions and longevity.

In the view of Summers, both unemployment insurance and welfare payments are major contributors to unemployment. His position was an advocacy for their reduction.

This view is held by many economists today. However, their view is narrow and nearsighted. Unemployment and welfare payments do not contribute to or create unemployment; they only support those who are unemployed. But then no one has ever claimed economists are very bright.

As a perfect example, with 17- plus million Americans out of work, does Summers presume to think that by eliminating unemployment insurance they will suddenly find work?

Summers background was a perfect match for a government position as he has never gotten it right. And, after all, isn’t that how government really works? While at the World Bank in December 1991, Summers proposed dumping toxic waste in third world countries for economic reasons. Jose Lutzenberger, a Brazilian environmentalist, wrote to Summers that his proposal was “perfectly logical but totally insane” and showed how out of touch with reality economists are.

Summers, while in the Clinton White House, argued against American leadership in greenhouse gas reductions and against U.S. participation in the Kyoto Protocol. Summers also supported the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services. The Gramm-Leach-Bliley Act repealed key provisions of the 1933 Glass-Steagall Act, which has been acknowledged to have been the catalyst for the financial crisis.

Many critics, including President Obama, have suggested the subprime mortgage financial crisis of 2007 was caused by the partial repeal of the 1933 Glass-Steagall Act. Yet, Obama retained Summers in his White House staff. Even though Summers had discredited himself, Obama continued to use him as an advisor.

It was Summers, along with Arthur Levitt, (SEC) Chairman; Alan Greenspan, Fed Chairman, and Secretary Rubin, who together prevented all efforts to regulate the derivatives (Credit Default Swaps) that many blame for bringing the financial market down in Fall 2008. These derivatives are still wringing the financial necks of most U.S. Banks. So, to all these problems Summers has created, we now bid a fond ado. He will be sorely missed in Washington, but not by Main Street.