The chattering classes are fascinated by the Republicans’ internecine battle to redefine the party in the wake of the George W. Bush calamity and the Mitt Romney defeat — from Senator Rand Paul’s revolt against the neoconservative foreign policy, to intellectuals flirting with “libertarian populism.” Less attention has been paid, however, to the stirrings of what Senator Paul Wellstone dubbed “the Democratic wing of the Democratic Party” — now beginning to challenge the Wall Street wing of the party.
Perhaps the strongest demonstration of this was the barrage of “friendly fire” that greeted the White House’s trial balloon on nominating Lawrence Summers to head the Federal Reserve Bank. More than one-third of Democrats in the Senate signed a letter supporting Janet Yellen, now vice chairwoman of the Fed. More than half of the elected Democratic women in the House of Representatives signed a similar letter. Many were appalled at the notion of passing over the superbly qualified Yellen for Summers, with his notorious record of denigrating and dismissing women.
But, as Katrina vanden Heuvel, editor of the Nation wrote in the Washington Post, Summers also drew opposition because he was the “poster boy for the Wall Street wing of the party — literally.” (Summers joined then-Treasury Secretary Robert Rubin and then-Federal Reserve Chairman Alan Greenspan on the now risible 1999 Time magazine cover celebrating the “Committee to Save the World” — before the global financial collapse exposed the folly of their policies).
Under President Bill Clinton, Summers was Rubin’s powerful protégé and championed the deregulation of Wall Street. Summers scorned the chairwoman of the Commodity Futures Trading Commission, Brooksley Born, when she sought to tame the market in derivatives. (Instruments that Warren Buffett later called “weapons of financial mass destruction.”) He defended the Clinton administration’s trade policies — the North America Free Trade Agreement, the World Trade Organization, opening to China — that led directly to unprecedented and unsustainable trade deficits, as multinationals rushed to ship good jobs abroad.
After a troubled stint as president of Harvard, Summers made millions consulting for hedge funds on Wall Street. He then went back through the revolving door — into the Obama administration, where he supported the bailout of the banks without restructuring them, suffered (though opposing internally) the premature turn to austerity and pressed on with the old trade policies.