The Reeducation of Larry Summers

Today Summers would like to make the case that all his abrasive behavior is also ancient history. On a personal level, he says he has "mellowed." "I suspect over time there's maybe a little less of the brusqueness that people experienced when I was younger," he says. "That's probably not an uncommon thing as people get older. It may also be the seriousness of the issue and the problems lead to a greater sense of uncertainty on everybody's part."

Some of his new colleagues in the Obama administration tend to agree. "You could never call Larry Summers humble," says Christina Romer, chairwoman of the Council of Economic Advisers. "But there is a difference in him in the sense that, when he starts to make a comment, he says, 'Now, I could be wrong but …' I feel the old Larry would not say, 'I could be wrong.' That's a nice change. That also goes for his economics ideas. There is a sense that things are hard and we could be wrong." Romer says that Obama likes to rib Summers over some of his old habits—like applying a somewhat fanciful certainty to his ideas. "One of the things you can't help but notice is that the president clearly really likes Larry," Romer says. "He enjoys teasing him about Larry's tendency to put numerical estimates on things, like 'I'm 83 percent sure that such and such …' The president likes to play with that: 'Are you 83 or 82½ percent sure?' Then someone else will say, 'I'm going to channel Larry and say I'm 77 percent sure'."

Summers can afford to be magnanimous. He has daily access to the president, and he is widely viewed as a more substantive (or at least more convincing) Big Picture economic adviser than Treasury Secretary Tim Geithner. Summers and Geithner are good friends and tennis partners, and if there is any friction between them, it hasn't surfaced. President Obama appears to be mindful of Summers's reputation for dominating the room, and he wisely created a separate advisory panel under former Fed chairman Paul Volcker, the old sage who solved the last major economic crisis, in the '70s and early '80s. Summers welcomes the Volcker panel as advisors, but he observes, with a hint of Larry-like disdain, that it is not going to be making policy.

Which makes one wonder: has Summers really changed? Joseph Stiglitz, who was chairman of Clinton's Council of Economic Advisers and then World Bank vice president, has his doubts. Back in the '90s, Stiglitz fought some epic battles against Summers. Stiglitz wanted more controls over the flows of capital around the globe, and Summers mostly argued for the Rubin-Summers-Greenspan free-market approach. "He ignores arguments he doesn't like," says Stiglitz.

Stiglitz contends that the Obama administration is dominated by such old Rubin protégés as Mary Schapiro, chairwoman of the SEC, and Gary Gensler, who's awaiting confirmation this week as head of the CFTC, who have been identified with weak regulatory policies in the '90s. While some economists have advocated even greater government intervention to solve the current crisis, including nationalizing troubled banks, Summers seems to be trying hard to avoid swinging back too far toward overregulation. "He's very much a market man. He'll come out more on the side of lighter regulation," says political consultant David Gergen, an old friend.

The "new Larry" may turn out to be like the "new Nixon."