This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Rules and Derivatives Moves Helped Do In Summers

NEW YORK ( The Deal) -- Critics of Lawrence Summers raised lots of issues with his candidacy to lead the Federal Reserve.

However, noise from the liberal wing of the Democratic Party about his role in a series of deregulatory efforts during the Clinton Administration's waning days were a key factor in pushing the former Treasury secretary to pull his name from consideration to run the central bank Sunday. Republican reservations didn't help Summers' cause either.

Summers appeared to be President Barack Obama's main choice for the job. However, repeated criticism of his actions in the late 1990s, first as deputy Treasury secretary and then later as Treasury secretary, all contributed to the end of his candidacy.

"The enemy of Larry Summers was Larry Summers," said Cornelius Hurley, professor at Boston University's School of Law. "While he had the progressive passionately against him over deregulation during the Clinton administration, he didn't have a lot of fans on the right either."

Opponents on the left repeatedly pointed with disdain to his support for a statute approved in 1999 that eliminated the 1933 Depression-era Glass-Steagall Act, which for more than 60 years kept commercial banks out of the investment banking business. Sen. Elizabeth Warren, D-Mass., an opponent of Summers on the key Senate Banking Committee, is pushing bipartisan legislation she introduced recently to reinstate the measure, which would force some big banks, such as Citigroup (C) and JPMorgan Chase (JPM) to break in two.

The bill is unlikely to be approved anytime soon, barring another major bank meltdown. Her public support for Glass-Steagall in conferences and on Capitol Hill, however, helped fuel resistance to Summers.

Critics on the left also point to concerns over Summers' role in squashing an effort by the Commodity Futures Trading Commission in the late 1990s to regulate derivatives. The CFTC eventually lost that battle and instead Congress and the Clinton administration approved the Commodity Futures Modernization Act, which was later criticized for contributing to the 2008 financial crisis.

"If you believe that repeal of Glass-Steagall was a great idea, and if you believe the Commodity Futures Modernization Act was a great idea ... then Larry Summers is your guy," former Democratic Delaware Sen. Ted Kaufman said at a conference last week at George Washington University Law School that was co-hosted by left-leaning advocacy group Better Markets. The conference featured a keynote address by Warren and a few high-profile Summers opponents. "The fact that there aren't riots in the streets over the idea of Larry Summers being head of the Fed is an indication of how deep our problem is," Kaufman added.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%
TSLA $229.64 5.22%
YHOO $33.16 0.61%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs