The Reeducation of Larry Summers

Larry Summers had the rumpled, slightly sleepy look of a professor who has been up all night solving equations. President Obama's top economic adviser, the man mainly in charge of the immense government bailout, splayed himself on a sofa in the Roosevelt Room in the White House, beneath a portrait of Franklin Roosevelt, and did his best to be patient with two NEWSWEEK reporters. They were asking him to explain how he had changed—reeducated himself—since the freewheeling days of the late 1990s, when Summers had been part of a government that basically got out of the way of the financial markets as they headed for the edge of the cliff.

Summers responded by quoting John Maynard Keynes, whose economic theory calling for massive government spending became identified with Roosevelt's New Deal and is at the heart of the Obama administration's stimulus plan. "Keynes famously said of someone who accused him of inconsistency: 'When circumstances change, I change my opinion'," said Summers, raising his heavy-lidded eyes at the reporters as he quoted Keynes's kicker: " 'What do you do?' " The implication, not so subtle, is that smart people are not dogmatic—stuck in one narrow ideological groove —but rather open-minded, flexible and intellectually alert—able to change with the times.

Summers is the latter—he wants you to know. In truth, he was never a wild-eyed free marketer. As Treasury secretary at the end of the Clinton administration, he moved to regulate predatory lending practices, and he argues that credit default swaps—those weapons of financial mass destruction—barely existed back in the late '90s. "I don't think I was a great deregulator," he says, though he admits, "I'm not saying we had perfect foresight."

Summers acknowledges that he has responded to changing times and changed circumstances. Last spring and summer he began to see that government's normal machinery for stabilizing the economy—the ability of the Federal Reserve to raise and lower interest rates and print money—was not working to head off a crash. He began writing lucid op-eds in the Financial Times arguing for swift government intervention and—more important—giving smart briefings to Sen. Barack Obama, Democratic candidate for president. The briefings were so good—dazzling, all present agree—that, when the time came, Obama made Summers his chief economic adviser.

Summers, 54, is perhaps the brainiest of the best and brightest assembled by Obama. The president has assembled a team of Harvard and Yale types whose SAT scores have not been equaled since perhaps the Kennedy administration. JFK brought in the likes of McGeorge Bundy, who had been appointed dean of the faculty at Harvard at 34 and whom JFK made his national-security adviser. Bundy turned out to be smart but not always wise—he urged JFK, then LBJ, to become more deeply involved in Vietnam.

When LBJ's Canny old friend Speaker of the House Sam Rayburn heard about all the Harvards coming into the Kennedy administration, he muttered, "I just wish one of them had run for sheriff once." One wonders what Rayburn would have made of Summers, who went to MIT at 16 and later became the youngest professor ever to win tenure at Harvard (at 28). In Washington, Summers quickly became Robert Rubin's most trusted aide at the Treasury Department, ending in a brief stint as Treasury secretary himself. He went on to serve as president of Harvard for five years.