When will Larry Summers apologize?

April 30, 2009

Simon Johnson has a close reading of Larry Summers’s speech on the crisis, and notes what is conspicuous by its absence:

There was not even an indirect mention of political economy. Summers’ public narrative for the crisis is essentially that there was an accident: stuff happens. This narrative matters.

Johnson puts this in a context of asking Summers for a mechanism to avoid regulatory capture in the future — which is certainly important. But there’s another reason why it’s important for Summers to admit that government policies were part of the cause of the crisis: we’ve had virtually nothing in the way of apologies for screwing up the global economy, and it would do us all a lot of good if people who both caused and benefitted from the financial-services boom would man up and admit to their mistakes.

Top of the list, just by dint of his present importance in the government, is Larry Summers. In his tenure as a senior Treasury official during the Clinton years, Summers was intimately involved in laying the regulatory and philosophical foundations for the bubble. Johnson, who’s been following Summers’s thinking for some time, says that it has evolved in interesting ways, especially as regards the over-reliance on the financial sector for economic growth in the 1990s. It’s not a giant leap from that evolution to a simple admission from Summers that he made mistakes at the time. Except there’s the whole problem of Larry’s massive ego, which makes it hard for him to ever admit being wrong.

Of course, Summers isn’t the only person who should be apologizing: I very much look forward to reading or watching something similar from Bob Rubin, who managed to compound his errors at Treasury with further massive blunders at Citigroup. And the list goes on. Greenspan would be nice, but he’s already admitted being wrong on some fronts, and has at least engaged substantively with his critics on most others. Ken Lewis and Stan O’Neal and Sandy Weill and Dick Fuld, of course. Phil Gramm, absolutely. But let’s start with Summers, since he’s the one name on the list who’s still actively involved in making incredibly important decisions which affect the future of the country. And if he can’t admit to making mistakes, how can he learn from them?


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