A Smart, Edgy Treasury Nominee

The smartest kid in the class is going to be Treasury secretary.

That, in a nutshell, is what will happen when Lawrence H. Summers takes the job that will make him jointly responsible with Federal Reserve Chairman Alan Greenspan for protecting the nation’s long economic expansion and keeping the rest of the world out of financial trouble.

On the surface, the casting could hardly be stranger.

To be sure, the 44-year-old Summers was born to economic aristocracy. Both his parents are economists. Uncles on both sides of the family--Paul Samuelson and Kenneth Arrow--won Nobel Prizes.

And his own career has been dazzling: admitted to MIT in his junior year of high school, at 28 the youngest ever to be appointed a full economics professor at Harvard.

But there is something about Summers that distinguishes him from the parade of ex-investment bankers, former senators and patrician political advisors who precede him at Treasury’s top job. For one thing, until recently, he couldn’t keep his shirt tucked in.

“He was your typical disheveled academic, maybe even a little more disheveled than the rest of us,” said N. Gregory Mankiw, who was a student of Summers’ at MIT and later a colleague at Harvard.

Dress is the least of it; Summers is known for cutting to the quick of issues in conversation and, at least until recently, for sometimes cutting up the person with whom he is talking. As Mankiw said: “He has a reputation for brilliance, not tact.”

He also has an intellectual’s love of controversial ideas, one that almost stopped his Washington rise in its tracks and earned him the passing enmity of another political power broker, Vice President Al Gore.

The trouble began in 1992 when Summers, then chief economist at the World Bank, signed off on an internal memo written by a subordinate that suggested the Third World could make money by setting up landfills and accepting the industrial world’s trash. In the ensuing uproar, he was denied a job many had expected him to get as chairman of President Clinton’s first Council of Economic Advisors.

Summers came by his iconoclastic curiosity honestly. His parents encouraged it, according to people who knew the family. Suzanne Okun, wife of the late economist Arthur Okun, remembered a 2-year-old Summers focused not on cartoon characters but on the names of gas stations.

“He would ride along in the car reading off names: Esso, Amoco,” Okun said. Others remember him lecturing his Nobel Prize-winning uncles by the time he was 4.

In graduate school, he churned out papers attacking the then-reigning free-market orthodoxy even as he studied with one of its theoreticians, Martin Feldstein, who later became President Reagan’s economic advisor.

Even after he arrived at Treasury, he could not curb his tongue, a habit that earned him a memorable attack by the Wall Street Journal’s conservative columnist Paul Gigot.

“Larry Summers,” Gigot wrote in 1995, “is to humility what Madonna is to chastity.”

Friends insist that Summers has matured. Under the tutoring of outgoing Treasury Secretary Robert E. Rubin and with the help of his family--he and his wife, tax lawyer Victoria Summers, have twin daughters, 8, and a 5-year-old son--he has improved both his tact and his wardrobe.

In any case, said Roger C. Altman, a onetime colleague and former deputy Treasury secretary, “Sartorial splendor is not a requirement.” Lucky thing.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Rubin’s Legacy

Robert Rubin’s reign as Treasury secretary, which began on Jan. 10, 1995, has been marked by rising U.S. economic growth, a 186% surge in the Dow Jones industrial average and the disappearance of the once-mammoth annual federal budget deficit. Despite fears that he would cater too much to Wall Street, Rubin oversaw an increasingly sparkling U.S. economy. His leadership through the foreign economic crisis of the last few years is credited with keeping bad situations from getting much worse and from threatening the U.S. economic expansion.

U.S. ECONOMIC GROWTH

Annual percentage changes in real gross domestic product:

1998: 3.9%

*

DOW JONES AVERAGE

Monthly closes and latest:

Nov. 1992: Clinton elected

Jan. 1995: Rubin named Treasury secretary

Mid-1997: Asian economic crisis begins

Aug. 1998: Russia devalues currency

Wednesday close: 11,000.37

*

BUDGET DEFICIT/SURPLUS

Fiscal year data, in billions of dollars:

1998: $70 billion