Treasury Secretary Short List: Lawrence Summers

Nov. 7, 2008 -- President-elect Barack Obama could be looking back to find the future leader of the American financial system.

Larry Summers, President Clinton's last treasury secretary, is reportedly at the top of the list of candidates being considered to fill the role of chief financial officer of the government.

And he probably should be.

Summers' economic credentials are sterling -- an undergraduate degree from MIT and a doctoral degree in economics from Harvard. He has written influential academic papers, became one of the youngest tenured professors in Harvard's history at the age of 28 and served as chief economist of the World Bank. He even worked as an economic adviser in the Reagan administration.

"Larry Summers embodies a rare combination as one of the most respected scholars and one of the most influential public servants of his generation," said Robert Stone, chairman of the Harvard presidential search committee, in 2001.

His time at Treasury was marked by dramatic economic expansion, federal budget surpluses and effective government responses to the 1997 Asian and 1998 Russian financial crisis. Summers is widely recognized as being an effective leader during his nine-year stint in various roles at the Treasury Department.

But if Obama is impressed with Summers, he comes with some baggage that could hurt his chances.

After leaving Treasury in 2001, Summers became the president of Harvard. His tenure there was marked by a series of controversies.

The most damning was when he said basic genetic differences between the sexes may be one reason why fewer women succeed in math and science careers.

"Summers' suggestion that women are inferior to men in their ability to excel at math and science is more than an example of personal sexism," said Kim Gandy, president of the National Organization of Women at the time. "It is a clue to why women have not been more fully accepted and integrated into the tenured faculty at Harvard since he has been president."

Summers resigned the presidency of Harvard a year after making the controversial speech. Some who know him say making the speech was "stupid," but it doesn't reflect his true feelings.

"What I think upsets me about this is that taking that incident aside, his track record on women is amazing," said Sheryl Sandberg, Summers' chief of staff during his days at Treasury and the current COO of Facebook.

She said in addition to consistently appointing women to positions of power and influence, he took up the cause of girls' education on a world stage well before it was fashionable.

"Larry did this speech on girls' education at the World Bank in 1992," said Sandberg. "We wrote this report and he gave his speech saying girls' education is the highest return financial investment you can make in your country. You want to help your economy? Start investing in girls' education."

Assuming Obama overlooks the potential political fallout from women's groups and taps Summers for the top job at Treasury, he will get someone who has a well-defined sense of the financial world.

"He's fiscally responsible," said Sandberg. "He has a deep understanding of how markets work, and, I think, has seen a lot from the political side, the academic side and the policy side of what really happens."

Summers, a self-described "market-oriented progressive," has been publicly outlining what he believes must happen to address the current economic crisis.

"I think moving beyond a 'trust the market no matter what, what's best for Wall Street is what's best for America' approach to the financial markets is important if the economy is to work," Summers told Portfolio earlier this year. "That's what Sen. Obama favors."

In his regular column for the Financial Times, Summers offered a prescription for a new regulatory order, including reducing the number of financial system regulators, focusing government efforts on maintaining the health of the entire system instead of the practices of individual companies and making sure financial firms do not get "too big to fail."

Summers has made several public appearances lately, focusing his remarks on the roots of the current economic crisis and what it means for the United States in the future, leading many people to believe he's the right man for what is arguably the most difficult job in all of government service.

"Larry can be brilliant, pedantic and arrogant," said economist Diane Swonk in a report she wrote after seeing Summers address the National Association of Business Economics (NABE) in October. "Ask anyone who had to work with him when he was Treasury secretary in the late 1990s. But that was then and this is now. He showed NABE that he could be self-deprecating, humble and wise. He showed us he could be a good leader, something that has been missing from the political arena for some time."