Larry Summers wanted to nationalize the banks?

A split in the two-headed Wall-Street-friendly Geithner-Summers axis? Who knew?


Andrew Leonard
June 8, 2009 7:09PM (UTC)

Unlike most "inside the Obama White House" stories, Jackie Calmes' article in the New York Times on rivalries among Obama's economic advisors actually has on-the-record comments from all the major players -- Lawrence Summers, Tim Geithner, Christina Romer, Austan Goolsbee and Peter Orszag. Whether this makes the reporting any more reliable than the typical anonymous back-stabbing that we're used to getting is open to question. And the most eye-opening assertion -- that Summers leaned toward "nationalizing" some banks" -- does not get on-the-record attribution.

Mr. Summers left some colleagues believing that he favored nationalizing some big banks, as many liberals wanted. Insiders say that Mr. Geithner would counter that nationalizing banks might sound appealing politically but where would the government get the legions of bank managers it would need? And what would be the exit strategy?

In the interview, Mr. Summers denied that he favored nationalizing banks but acknowledged that he explored the idea so that the president had all options. At the time, the Treasury and the Fed were conducting "stress tests" of the big banks' books, and it was not clear that some banks would be judged viable.

The popular left-wing critique of Obama's policy toward the banks holds that the Summers-Geithner team is aligned with the interests of Wall Street, so there might be some befuddlement at the idea that Summers may have pushed for a more hard-line stance. The other possibility, hinted at several times in the NYT article, is that Summers is just a more adroit political player -- if he's aligning his interests with anyone, it's Obama's political advisors.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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