NEW YORK ( TheStreet) -- It only took five years after the crisis but Larry Summers' decision to withdraw his candidacy to replace Ben Bernanke as the next Federal Reserve Chairman means Democrats can finally start looking for an alternative to Clintonomics.
Make no mistake, Summers' withdrawal is a victory for liberals -- by which I mean the left wing of the Democratic party. While Jon Tester (D., Mont.) is the only Democratic Senator who went on record saying he would oppose a Summers nomination, Jeff Merkley (D., Ore.), Sherrod Brown (D., Ohio) and Elizabeth Warren (D., Mass.) were all expected to make Summers' confirmation a challenge, according to Politico.
These Senators' biggest beef with Summers is that he was one of the leading proponents of keeping swaps free from regulation, a view that became law with the passage of the Commodity Futures Modernization Act of 2000, one of several deregulatory moves during the Clinton Administration that helped set the stage for the 2008 financial crisis.
They are right to question Summers's fitness to be Fed chair in light of that decision. It was AIG's (AIG) outsized exposure to credit default swaps that took down the giant insurer, requiring what was arguably the biggest bailout of the crisis. While President Clinton admitted he was wrong to deregulate those instruments, I have never seen Summers admit it. He may have said something somewhere that I missed, but the error was so egregious that he ought to have devoted several speeches to begging for the public's forgiveness.Instead, Summers spent his time outside of government earning hefty paychecks working for Wall Street firms such as Citigroup (C) and the hedge fund D.E. Shaw. He was just another in the countless line of top government officials shuttling back and forth between Wall Street and Washington, sighing wearily at anyone who dared question their hypocrisy. Summers is part of a clique of economic policy advisers groomed under former Goldman Sachs (GS) co-chairman Robert Rubin, who successfully convinced Democrats for years that what was good for Wall Street would also be good for Main Street. While the absurdity of that notion would seem to have been laid bare during the 2008 crisis, it seems to be sinking in only now in Washington D.C. Throughout his administration, President Obama has been steadfast in naming members of the Rubin clique to key positions in his administration. In fact, he hasn't chosen advisers from any other camp, as Felix Salmon recently argued.
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