24 January 2012
I watched Channel 4 News’ Krishnan Guru-Murthy interview US economist Larry Summers with mounting disbelief last night.
The first half of the 18-minute interview focuses on the stimulus vs. austerity debate and Monday’s release of secret memos detailing advice given by Summers to President Barack Obama.
But what I found more interesting was the extraordinary exchange that starts about seven minutes in. In this, Summers effectively washes his hands of any responsibility for precipitating or fuelling the global financial crisis.
Summers, recognised as one of the chief perpetrators of the regulatory free-for-all dissected in Charles Ferguson’s Inside Job, is one of the worst abusers and financial beneficiaries of the “revolving door” between academe, government, and Wall Street (indeed he still seems to straddle two of these disciplines given his dual role as a part-time managing director of global hedge fund group D.E. Shaw and a professor at Harvard University and Harvard Business School).
As Treasury secretary under President Bill Clinton in 1999-2001, Summers championed the deregulatory policies that were brilliant news for Wall Street in the short term, but which in the longer term crippled America’s economy (and ours!).
The reason that, alongside former Federal Reserve chairman Alan Greenspan, Summers must be considered one of the chief architects of the global financial crisis is because he personally pushed for the deregulation of OTC derivatives 1999 and endorsed the Gramm-Leach-Bliley Act, which formally unwound Glass-Steagall and removed the separation between investment and commercial banks, and was passed in 1999.
The first of these moves opened a Pandora’s box of untrammelled global financial speculation while the second paved the way for banks to become “too big to fail”.
Unlike Greenspan, however, Summers reveals himself in this astonishing and weakly pugnacious interview to remain 100% in denial and uncontrite about any of this.