Summers a Hot Commodity in Asian Crisis

When President Suharto earlier this week stepped out to greet the high-level envoy President Clinton had sent here to talk about Indonesia’s mounting financial crisis, the rumpled, plainly dressed man he beheld looked more like a college professor than an experienced diplomat.

But the appearance was deceiving.

Although Lawrence H. Summers, the deputy secretary of the Treasury who headed the American mission here, started out as an economics professor, he has become a consummate Washington insider and one of the most influential players in the Clinton administration.

Summers, 43, was a leading architect of the administration’s successful bid to bail Mexico out of its peso crisis in 1995. He has been instrumental in shaping the president’s policies on issues ranging from IRS reform to the U.S. positions at the global warming summit in Kyoto, Japan, last fall.

Already, he is on almost everyone’s short list as a candidate to become secretary of the Treasury if the incumbent, Robert E. Rubin, decides to return to New York before the end of the administration. “He is one of the real stars of this administration,” Rubin says.

By any standard, Summers has the qualifications for the job. An economist by training, he was the youngest PhD (at age 28) to receive tenure as a Harvard professor. He has served as chief economist at the World Bank. And he has been deputy secretary since 1995--and undersecretary before that.

He also has developed skills at playing the “bad cop” to Rubin’s more gregarious, polished style in negotiations with Congress and with foreign officials. And he has developed a reputation as a shrewd--and effective--bureaucratic infighter, often carrying the day in internal battles.

Indeed, even before this week’s presidential mission to Indonesia and other Asian countries, Summers has been the administration’s point man in managing the region’s financial crisis, steering the foreign governments and the 181-nation International Monetary Fund toward Washington’s point of view.

But Summers also has his detractors. Critics say privately that he sometimes is abrasive, lectures colleagues as though they were college students and is not shy about elbowing opponents aside--figuratively--in his push to emerge victorious.

He also can be blunt to a fault.

Some of his gaffes have become Washington classics. In 1991, as chief economist at the World Bank, he argued in an internal memo--that quickly was leaked--that it would be more efficient to dump more of the world’s toxic waste in developing countries on grounds that they are “underpolluted.”

Although Summers insisted later that he was just trying to be “sardonic” to “sharpen the [World Bank’s] analysis,” the damage was irreversible. Nominated later for undersecretary of the Treasury--before his present post--he drew vigorous opposition from environmental and civil rights groups.

Former Brazilian Environment Minister Jose Lutzenberger wrote that “your reasoning is perfectly logical but totally insane.”

In the debate over the administration’s tax-cut bill last spring, Summers outraged GOP lawmakers by asserting that there was “no case other than selfishness” for Republicans’ attempts to repeal the federal estate tax. He later apologized, saying there was “room for honest disagreement.”

More important, some critics fault Summers for failing to spot--and to move quickly to head off--looming problems, ranging from the congressional backlash over the use of taxpayer dollars in the 1995 Mexican bailout to the defeat of Clinton’s controversial “fast-track” trade bill last year.

C. Fred Bergsten, director of the Institute for International Economics, complains that on Summers’ watch, the administration has been slow in dealing with everything from the Mexican crisis and the decline in the value of the dollar to the deterioration of the Group of 7 economic alliance. “He’s reactive rather than proactive,” Bergsten said. “He’s not a strategic thinker.”

Indeed, the administration has drawn widespread criticism for failing to recognize the likely effect of the Asian financial turmoil. Thanks partly to Summers, the United States essentially sat on its hands when Thailand got into trouble, and it provided only token help when the Indonesian economy collapsed.

Although Summers orchestrated the current international game plan for rescuing financially strapped Asian countries, he acted only after Japan threatened to take away the U.S. lead by forming a new “Asian-style” fund that would have lent money to financially troubled countries without requiring policy changes.

Even so, Summers has had some successes, from the Mexican peso bailout, which ended with Mexico repaying its U.S. loans three years early, to persuading the White House to scrap plans to back tougher emissions limits at the global warming summit that would have hurt U.S. business.

Though hastily arranged, the whirlwind tour of Asia that he is taking this week has been a short-term success. Its main objective--persuading Suharto to follow IMF demands and thus avoid an unraveling of the entire Asian rescue effort--succeeded earlier in the week.

The deputy secretary was traveling on a tight schedule this week and was unavailable for an interview.

Most of Summers’ life has been linked to economics or academia. His parents were economists, and two of his uncles, Paul A. Samuelson and Kenneth J. Arrow, won Nobel prizes in economics. His wife, Victoria, is a tax expert at the IMF.

Summers spends long hours at the office--he stayed at the Treasury round the clock during the Mexican peso crisis--and travels continually, flying all over the world. He took this week’s tour, covering seven countries in eight days, in stride.

An affable man, Summers often regales co-workers and journalists with insiders’ one-liners at “deep-background” briefing sessions, under ground rules that they may not be printed.

He keeps going by sipping sodas at every chance.

His reputation for using blunt tactics occasionally has cost him politically. He was passed over in a bid to become president of the World Bank and was considered too confrontational to head the president’s National Economic Council.

Where he is headed from here depends partly on Rubin. The Treasury secretary insists that he is not leaving imminently, but it is an open secret in Washington that Rubin wants to return to private life--and he almost certainly would back Summers to be his replacement.

Meanwhile, Summers has become a power in the administration’s economic policymaking apparatus--he is not merely No. 2. Suharto never felt slighted for a minute.

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Profile: Lawrence H. Summers

* Born: 1954, New Haven, Conn.

* Education: MIT, 1975; PhD, Harvard University, 1982.

* Career: Faculty at MIT, 1979-1982; professor at Harvard, 1983-1993; vice president of development economics and chief economist of the World Bank, 1991-1993; undersecretary of the Treasury for international affairs, 1993-1995; deputy secretary of the U.S. Treasury, 1995-present.

* Family: Married; twin daughters and a son.

Compiled by MALOY MOORE / Los Angeles Times