It seems to me too early in the 2012 presidential campaign to be toting up the successes and failures of the Obama administration. Yet Noam Scheiber’s new book wants to be read, digested, taken into inventory. The Escape Artists: How Obama’s Team Fumbled the Recovery is the third account by a high-level journalist to appear so far, each seeking to relate how policy-makers coped with the financial crisis of 2007-09.
The first, in 2009, was In Fed We Trust: Ben Bernanke’s War on the Great Panic, by David Wessel, of The Wall Street Journal. Last year came Confidence Men: Wall Street, Main Street and the Education of a President, by Ron Suskind, formerly of the WSJ.
Each author has, of necessity, relied heavily on the perspective of a protagonist in order to tell his story. That is the way the news business works. For Wessel, it was Federal Reserve chairman Bernanke. For Suskind, it was Peter Orszag, director of the Office of Management and Budget.
Scheiber covered the White House for The New Republic. His book is an account in which Lawrence Summers plays the leading role. It is not too much, I think, to call it Larry’s version. Summers was Obama’s in-house economic counselor, director of the National Economic Council for the administration’s first two years, and his battles with Orszag and Treasury Secretary Timothy Geithner, a central theme of Suskind’s saga, continue in Scheiber’s book.
Not that Summers in any sense dictated it to him. The notes indicate that Scheiber interviewed Summers on the record just once in four years, and then only long after he left office. (Associates of Summers saw him many more times than that.) Nor does it mean that the author doesn’t have opinions of his own. A hard worker, he’s well-schooled in the Washington game (including, presumably, the occasional act of ventriloquism.)
But Summers is definitely the hero of Scheiber’s story. He has been since Scheiber wrote “Free Larry Summers” in the administration’s early days. And Scheiber is almost certainly correct when he writes, “More than can be said of anyone else, the future president would see the crisis unfold through Larry Summers’s eyes.”
Obama hired the right experts, Scheiber begins. He recounts a September meeting in Miami, just as the financial crisis is escalating into panic. Former Treasury Secretary Robert Rubin and Summers, his former deputy, travel to Miami to interview Obama. “The candidate was auditioning for the advisers as much as vice versa,” writes Scheiber. Rubin tells him that afterwards he and Summers grade the candidate’s financial knowhow A or A-plus. The pair sign on, and Summers begains talking to campaign economist Austan Goolsbee on a more or less daily basis.
Then, on a Sunday not long after the election, the president-elect interviews both Summers and Geithner for the Treasury job. Geithner defers to both Rubin and Summers, for whom he previously worked in the Clinton Treasury. But Obama chooses Geithner. He subsequently offers the lower-ranking White House job to Summers. “When Summers accepted a few days later, Obamaland was giddy at assembling an economic dream team,” writes Scheiber. “Only the captain of the team [Summers] grasped the backlash that lay ahead.”
And what was that? That Geithner “had been one of the three people in the room when the Bush administration saved the country’s biggest banks.” It turns out, Scheiber thinks, that Geithner, who had been recruited from the presidency of the Federal Reserve Bank of New York, has a case of “Clientitis.” It is clear that Summers thinks so, too. But then Scheiber suspects that Summers may also have a touch of the bug. Lee Sachs, the Bear Stearns alumnus who served Geithner’s point man for two years, is an unsung hero of the crisis (he never appears in Suskind more extensive account). Scheiber paints him vividly, yet never gets to the bottom of the “epic” six-week argument that culminates in the stress tests, though it was here that Geithner won the day.
Much of the book concerns the familiar narrative of the Obama presidency. The stimulus: too large or too small? (Scheiber quotes a memo in which Summers writes,”all of the danger is doing too little rather than too much.”) The management of expectations? Bad? Or worse? (The January 2009 forecast of an unemployment peak of 8 percent, was the “Romer/Bernstein” report, Jared Bernstein having been the vice president’s man on the team (Summers successfully kept his name off the report). Health care reform: a mistake or the prime desideratum? That was the president’s call. Again, Summers hardly seems to have been in the room.
How, then, did Obama’s economic adviser’s fumble the recovery? Scheiber’s premise has two main struts. He feels that Obama should have somehow gone after the banks, though how, aside from preferring Summers to Geithner for Treasury, he doesn’t say. And he believes that Obama should have pushed for jobs instead of the reorganization of health care, which he calls “the Great Diversion.” Even then, he thinks, Obama had a second chance. In the spring of 2010, after the long battle on health insurance, he should have launched into a campaign for a second round of stimulus. Scheiber writes,
The reason Obama didn’t seize this opportunity, is that he deferred too much to the members of his economic team, chiefly Orszag and Geithner, who considered the deficit a higher priority, and to members of his political team, like [chief of staff Rahm] Emmanuel, who assumed that the public wouldn’t stand for another jolt of spending. He didn’t give enough credence to the views of dissident advisers like Christy Romer [chair of the Council of Economic Advisers]. And the one aide who had both correctly diagnosed the problem by late 2009 and still enjoyed influence with the president, Larry Summers, was incapable of brokering agreement internally, even with natural allies. [Presumably this has to do with Romer’s reported espousal of a staggering $1.8 trillion stimulus.]
It is too early to be pressing these judgments firmly. For instance, in my opinion, Obama was quite right when he chose to pursue health care reorganization in his first year in office. He toughed it out pretty well after the Republicans refused offers of compromise in the summer of 2011 in the knock-down drag-out battle over raising the debt ceiling. Summers did get an enormous fiscal stimulus, whose effect may finally becoming visible in a declining unemployment And Obama is likely to be re-elected in November. Reasonable people can differ on questions like these. The election will cast new light.
When I came to the end of the book, I looked back in vain for explicit explanation of the title. Who were the escape artists that Scheiber has in mind, and from what did they escape? From economic depression? The perils of the ’90s? Irrelevance? The Republicans?
I found the answer in the endnotes, or so I thought, in the form of Scheiber’s long and thoughtful article about Geithner, in February 2011, titled “The Escape Artist.” And from whom, or what, did the Treasury Secretary escape? The answer seemed to be Summers, who had clearly wanted his job. The artists escaped from each other.
Many more accounts of the response to the crisis are in the works. The book I am especially looking forward to reading is the one that Bob Woodward, of The Washington Post, is working on now. Fifteen years after his success, many years ago, with All the President’s Men and The Final Days, both written with fellow Watergate reporter Carl Bernstein, Woodward invented a new template as a solo author, beginning with Veil: The Secret Wars of the CIA 1981-1987. Since then he has honed the format, in which he rounds ups all the conflicting accounts that have been surfaced by beat reporters, talks to everyone involved, usually more than once, and then seeks to tell the story whole. (Unfortunately, his long suit is not economics.)
The story of the response to the financial crisis – both the policies that engendered it and those that sought to reduce its effects – is an incredibly complicated one, involving two presidents, two Federal Reserve chairmen, two Treasury secretaries, any number of supporting players in Washington and New York and, of course, an extensive economic catechism, some of it rapidly changing. It will be a good while before we begin to get it straight. Meanwhile, Scheiber’s contribution is a welcome addition to the shelf of evidence.