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The comeback of Lawrence Summers

Two years after relinquishing helm at Harvard, former Treasury chief plays to his strength to win a key economics position under Obama

By Tracy Jan and Keith O'Brien
Globe Staff / December 4, 2008
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In mid-September, in the midst of the growing financial crisis, Lawrence Summers sat in a box seat down the third-base line at Fenway Park, nibbling on a hot dog and fielding call after call on his cellphone.

Outside the confines of Fenway, Lehman Brothers was set to file for bankruptcy protection the next day, Wall Street was spiraling toward crisis, and Summers was once again in the thick of it. The calls he kept getting, often forcing him to walk away from his seat, were not about the score of the game. They were from Barack Obama's top advisers in urgent need of help.

The former Harvard University president, cast into exile just two years earlier after several public and embarrassing tiffs with the faculty, was back. He was not only advising Obama about how to handle the financial meltdown, according to one senior Obama aide, but he had worked his way into Obama's inner circle of economic gurus. And with the candidate's victory came a presidential appointment for Summers: director of the National Economic Council, a vital White House post at a dire economic time.

The position, with a West Wing office, is one that seemed unlikely just a few years ago, given the controversy that Summers generated during his brief and troubled stint as Harvard's president. In the months after resigning the post, Summers slipped off the radar screen, remaining on the faculty as a professor while living a relatively quiet life in Brookline.

But the always opinionated and sometimes controversial Summers did not stay quiet for long. He rededicated himself to teaching and to his first love: economics. He began writing a much-read column for the Financial Times. He identified the problems of a changing global economy and laid out solutions.

And when the financial meltdown rattled Wall Street this year, there Summers was, poised, prepared, and ready for his comeback.

"I spent the last several years thinking about a range of the issues," Summers said in an interview yesterday, "from globalization to the financial crisis to American healthcare and energy policy. I'm glad to be in a position where I can use some of that thinking to help shape public policy."

Summers, Treasury secretary under President Clinton, was hired for the highest-profile academic post in America in 2001. But, nearly from the start, the world-renowned economist managed to alienate faculty with his autocratic management style. And then, in early 2005, he struck the match that ignited the firestorm. In suggesting that women lacked the same "intrinsic aptitude" for science as men, Summers opened a path for his eventual ouster.

In a February 2006 meeting, two weeks before Summers resigned, professor after professor stood to tell him they lacked confidence in his leadership. Not a single one rose to his defense during the two-hour meeting.

Reluctant - and, according to some, angry - Summers agreed to step down. Any sense of failure, though, was coupled with relief, colleagues say. Just days after submitting his resignation, friends organized an impromptu pizza dinner at Elmwood, Harvard's presidential manse, hoping to cheer him up. But their sympathy was apparently not needed. For the first time in months, Summers appeared at ease, friends said, laughing and joking, as though a burden had been lifted.

"When he left the Harvard presidency, when he closed the door to his office and to Elmwood, he was already onto the next thing," said Richard Zeckhauser, a Harvard professor of political economy and a friend of Summers's. "He's the most optimistic person that I know about himself, his performance, and where he'll go."

That overwhelming self-confidence, a quality that critics said detracted from his presidency, served him well in the wake of his Harvard resignation. A little perspective helped, too. The 53-year-old Summers, who survived Hodgkin's disease as a young man, said he never dwelled on how his time as president ended.

"Maybe it's because I had a fairly serious illness when I was young," he said. "I believe in just looking forward and thinking about the opportunities that are open to me. There's never been a moment, whether working in the government or being Harvard's president or being a Harvard faculty member when I just haven't felt extraordinarily fortunate."

Free to do what he wanted, Summers began "running around like an intellectual vacuum cleaner," Zeckhauser said, diving into policy debates and slowly reconnecting with the community that once turned against him.

In May 2007, about a year after he left the presidency, Summers made a surprise appearance in a class on morality and taboo taught by law professor Alan Dershowitz and psychology professor Steven Pinker. The goal, Dershowitz said, was addressing Summers' gaffes - and Summers was game.

"I have no idea why you'd want someone like me to lecture in a course like this," Summers said jokingly, according to Pinker and Dershowitz. Students chuckled.

"That's the problem," Dershowitz recalls replying. "You don't have any idea," drawing an even bigger laugh.

Summers smiled, pointed toward him, and said, "Touché."

For the next 90 minutes, Summers spoke frankly about his mistakes, acknowledging he never should have made the comments on women in science, according to those in attendance.

In the spring of this year, he began coteaching his own course on globalization, inviting students to lunch and even to his house.

But Summers did not just re-engage with people; he returned to his strength: economics. He gave lectures around the world, hobnobbing with international finance ministers and corporate executives. In October 2006, he was hired to be a part-time managing director at D.E. Shaw & Co., a New York-based hedge fund management firm.

That same month, Summers began penning columns for the Financial Times. The columns were significant, friends and fellow economists say, not only because they were prescient - Summers predicted a recession before others did - but because they revealed that Summers's own views were changing with the times.

Once a "Clintonian neoliberal, a strong believer in free trade and free markets," Pinker said, Summers was now acknowledging the problems associated with globalization, namely, that some people were being left behind. Long concerned about inequalities, Summers hammered at the issue now, arguing that in a "time of plenty" too many folks were not benefiting and, in fact, were worse off.

"Summers recognized that," said Jared Bernstein, a senior economist at the Economic Policy Institute, a left-leaning think tank in Washington, D.C. "It may not sound like a reach to most people, but a lot of economists were in denial about that for a long time. And it's to Larry's credit that he not only recognized the problem, but recognized that this issue had to be at the center of any policy that was going to be welcomed by the electorate.

Summers said he wasn't using his columns to position himself for anything.

"I was trying to just explain as clearly as I could what I thought the important economic forces were and what I thought would be most constructive in solving the problems that we face," he said.

What's clear is that the Obama campaign was listening. By July, the campaign invited Summers to join other economists in a weekly conference call to discuss economic policy. Along with other advisers, Summers attended a meeting with Obama in late July.

When the economic crisis hit in September, senior aides say, Obama quickly ushered Summers into his inner circle. The two spoke at least a couple of times a week.

"Senator Obama just knew he needed to consult not only the brightest minds, but those that had experience and positions managing past economic crises," said Gene Sperling, an economic adviser to the Obama campaign who served as director of the National Economic Council under Clinton. "And Larry Summers is at the top of that very small list."

In this way, Obama's decision to bring Summers to the White House hardly comes as a surprise, and plenty have praised the president-elect for it, including high-profile women like Wendy Kopp, chief executive and founder of Teach for America.

But Summers has his critics. Believing that Obama was preparing to nominate him for Treasury secretary last month, some women's advocacy groups lined up to fight the fallen Harvard president all over again. One nonpartisan group, The New Agenda, said appointing Summers to that top Cabinet post would be a "grave mistake."

Although Obama sidestepped this potential controversy by naming Summers director of the council, a position that does not require Senate confirmation, a few still expressed dismay.

At an Obama fund-raiser in August on Cape Cod, more than 200 people filled the deck at Adrian's Restaurant in North Truro, sipping sauvignon blanc and eating Wellfleet oysters, cod cakes, and pan-seared duck.

Obama was not at the event, but it hardly dampened anyone's spirits. The weather was perfect.

From the deck, donors had a view of Cape Cod Bay, and there were a few high-powered Democrats in attendance, including Alan Solomont, head of Obama's New England fund-raising efforts, who was slotted to speak to the crowd.

The concern, said event organizer Ray Elman, was over a different speaker: Lawrence Summers, who wore a hand-scrawled name tag just like everyone else and worked the crowd in an orange and white pin-striped button-down shirt.

A few people, Elman said, "were kind of standoffish" to him. Some, he said, privately voiced concerns about Summers's presence at the event.

But when it was Summers' turn to talk, the crowd fell silent.

Everyone wanted to hear what he had to say.

Tracy Jan can be reached at tjan@globe.com. Keith O'Brien can be reached at kobrien@globe.com.

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