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Despite ties, Warren, Summers paths are diverging

Paths diverging for two who share many ties

Senator Elizabeth Warren and Lawrence Summers.AP (left) and Bloomberg/File

WASHINGTON — They are two heavyweights of Democratic economic policy, each with strong connections to Harvard University and known for intellectual firepower, each a staunch supporter of President Obama.

But the relationship between Senator Elizabeth Warren of Massachusetts and Lawrence H. Summers, the former Obama economic adviser and treasury secretary in the Clinton administration, is more complicated than their resumes might suggest. And now, in the midst of a fierce personality and policy fight that has gripped Washington in recent weeks, a new chapter in their complex friend-and-foe relationship is being written.

Summers, a former Harvard president, is seeking appointment as the new head of the Federal Reserve — but Warren is openly backing another contender, Janet Yellen, vice chairwoman of the Federal Reserve.


Warren’s move turns the tables on their personal history; in 2010, Summers was seen by Warren’s supporters to have joined then-Treasury Secretary Timothy Geithner in scuttling Warren’s effort to become head of the new Consumer Financial Protection Bureau, an agency that was her brainchild.

On the Fed pick, Obama and White House officials are said to be leaning toward Summers, who helped guide Obama out of the depths of the 2008 recession. But the appointment is far from secured, given the enthusiastic support some Democratic senators, Warren among them, are generating for Yellen.

Both Summers and Warren declined requests for an interview. At the root of their disagreements is a fundamental difference in approach to economic regulation, with Warren placing far more emphasis on everyday taxpayers. Summers has maintained stronger Wall Street ties and has worked as a paid consultant at Citigroup since 2012, the banking company confirmed last month.

As treasury secretary under President Clinton, Summers worked to repeal the Glass-Steagall Act, dismantling the wall between commercial banks and many investment activities. Warren and many other observers contend the repeal contributed to the 2008 financial collapse and now, as senator, she is spearheading legislation for a new version of Glass-Steagall.


“She just tends to see things through Main Street and he sees things through Wall Street,” Sheila Bair, a former FDIC chairwoman, said.

“Elizabeth is wary of large institutions and their financial power, and Larry views them as necessary,” she added. “She fears that their market power [risks hurting] the economy.”

Bair knows Warren and Summers, and has at times clashed with Summers. Like Warren, Bair has endorsed Yellen to lead the Fed.

“There’s nothing personal about it,’’ she said of disagreements between Warren and Summers. “This is strictly policy.”

As Warren’s star rose at Harvard law with her expertise in bankruptcies, Summers returned from Washington and took over as the university’s president in 2001. Those who knew them at the time say they rarely had reason to interact — although Warren and her husband would dine regularly with Summers’ successor, Drew Faust, and her husband.

When Summers created an academic firestorm with his suggestion that gender differences contributed to women being less represented in math and science fields, there was no evidence that Warren joined in the calls for him to resign.

People who know her say that comments about women were less likely to upset her than his positions on how the economy should be run.

“I don’t think she’s ever described herself as a feminist,” said Richard Parker, a senior fellow at Harvard’s Shorenstein Center, which studies press and politics. “It’s very much more a class thing than a gender thing as far as I can tell.”


In early 2009, as Congress was trying to craft a legislative response to the financial collapse, Warren saw an opening. She wanted to push her idea of a consumer protection bureau, one designed to protect average Americans.

But although she had advised Obama during his 2008 presidential campaign and helped him conduct a business roundtable in Iowa, she was not a powerful force yet in Washington.

She needed a conduit to the White House, and Summers helped provide that connection.

In April 2009, Warren reportedly spent three hours dining with Summers at the Bombay Club, an Indian restaurant a block from the White House, a meeting that was first reported by the Wall Street Journal. She was pitching her idea about the consumer protection bureau, and she was apparently successful. Summers became an early advocate for the agency.

Around that time, Michael Barr, an assistant treasury secretary, wrote a detailed options memo about whether the administration should support a consumer protection bureau.

“I was just blown away by how much support we got on the consumer bureau from Larry,” Barr said in an interview. “It was unbelievably enthusiastic and it was just full on.”

About two months after the dinner between Warren and Summers, Obama came out in support of the agency. Yet Warren remained a critic of the White House’s post-meltdown approach to bank regulations.


She chaired a congressional oversight panel overseeing the Toxic Asset Relief Program, a bank bailout that started under President George W. Bush and continued under Obama. Warren criticized the Obama administration for not cracking down on big banks, and she compared his advisers — including Summers specifically — unfavorably to a country in South America that decades ago used government funds to try to prevent banks from going under.

“Tim [Geithner] and Larry’s whole plan is just like Argentina in the 1980s,” Warren told author Ron Suskind in September 2009, while he was working on “Confidence Men,” a book on the aftermath of the financial collapse. “There was this giant hole marked ‘Banks’ and the government just dumped money in that hole, as much as they had, while they lied about it. That’s what Larry thinks: that the US is Argentina!”

While Warren and Suskind were waiting at a terminal in Washington’s Reagan National Airport, Warren began to sing, “Don’t Cry for Me, Argentina.” Several started to applaud, and she modified the verse, with Summers in the role of Eva Peron.

“Why not?” Warren said with a laugh. “He might understand things better as a woman.”

In March 2010, Warren appeared on PBS’s “The Charlie Rose Show” and said some of Obama’s economic advisers — especially Summers and Geithner — were beholden to Wall Street interests. “I think we have different worldviews,” she said.

She declined to respond to a question of whether they should be in their current jobs.


“Well, I’m going to say it differently,” Warren said. “I think that Summers and Geithner are smart. I think they’re honorable. I think they approach the economy and the world through the largest institutions. And they see the world from a top-down perspective. I spent 25 years somewhere else.”

She noted that she cared about the American middle class and implied that Summers did not.

“It will not save us if a handful of Wall Street banks prosper and the rest of America fails,” she said. “Our focus, our energy, our heart has to be on the rest of America.”

Warren’s increasing outspokenness, and willingness to criticize, rankled many of those on the president’s economic team, according to several sources and insider’s accounts. Publicly, Summers was saying that Warren was well-qualified to head the new consumer protection board.

“Elizabeth Warren, who’s an old friend of mine from our time at Harvard and from whom I have learned an enormous amount, is one of the people who would be a terrific candidate,” Summers said on MSNBC in July 2010, in the days after Congress passed the Dodd-Frank law.

About three weeks later, he and Warren were scheduled for a meeting in the White House. In her quest to lead the consumer board, she had already gained some high-profile backers within the administration, among them senior adviser David Axelrod and Christina Romer, chair of the Council of Economic Advisers.

But Summers opposed Warren for the post, according to Warren supporters in and outside the administration, as well as Suskind, who said in his book that Summers grew irritated when Romer threw her support behind Warren.

During the meeting at the White House, which Suskind recounted, Summers arrived late, disheveled. He asked a few questions and departed abruptly to go take a call.

The next day, in the Oval Office, Obama told Warren he was not going to nominate her to lead the agency, instead naming her a “special assistant to the president’’ to help get the bureau running.

Summers apparently hasn’t publicly described his role in the matter; a Summers spokeswoman would not comment.

Obama went on to nominate Richard Cordray, the attorney general of Ohio, as the bureau’s first permanent chief. It took two years before he was confirmed by the Senate.

Nearly three years after her meeting with Obama, Warren held a seat in the Senate, having defeated Republican Scott Brown in the most high-profile Senate race of 2012. Months later, buzz began building about whether Obama would nominate Summers to become the next chairman of the Federal Reserve, to replace Ben Bernanke.

Senator Sherrod Brown, a Democrat of Ohio, collected signatures for a letter drafted to the president backing Yellen, the Fed vice chairman. The letter did not mention Summers. Without elaborating, Warren added her name to the list.

A few weeks before she signed the letter, she said on Bloomberg TV that Summers and Yellen are well qualified.

“In that sense, we’re really lucky,” she said. “We’ve got really smart, talented people who can serve in that position.”

But when asked if Summers could get confirmed in the Senate — the very question that dragged Warren’s stature down in her quest to lead the consumer protection bureau — she gave pause.

“I don’t know,” she answered.

Matt Viser can be reached at