Rubin replaced by Summers by mid summer?

Henry C.K. Liu hliu at
Fri Mar 26 14:46:21 PST 1999

If Rubin’s Down, Who’s Up?

Rumors of Replacement If Treasury Secretary Retires

Treasury Secretary Robert Rubin has presided over an unprecedented expansion of the U.S. economy, and won the acclaim of both Democrats and Republicans.

By Erin Arvedlund

Who will succeed Robert Rubin as treasury secretary? Rumors swirled again this week that Rubin was on the verge of retiring, and the odds-on favorite to fill the boyish, politically savvy secretary’s shoes is none other than his deputy secretary, Lawrence Summers. The 44-year-old Summers is seen as Rubin’s natural replacement, having played a leading role in financial-rescue plans for Mexico, Russia and countries in Asia. “Those two are like Batman and Robin” in terms of working on ideas, says Allen Jacobson, economist and senior vice president of HSBC

Washington Analysis. “Rubin gets a lot of ideas from Summers, who acts as a sort of brain trust at Treasury on issues such as Social Security, Japan’s need for fiscal belt-tightening and the possibility of forcing the Japanese central bank to monetize their debt.”

No Time like the Present A political appointee, Rubin was named the 70th treasury secretary in 1995 by President Clinton. His term expires in June 2000. A former co-chairman at Goldman Sachs & Co., Rubin has earned praise from Democrats and Republicans alike, as well as from Wall Street. Though Rubin, 60, is in good health, his wife never liked Washington D.C., and few believe he wants to stay on until Clinton leaves office. If he wanted to leave, “the pressure would be on for him to do it sooner rather than later,” says one Washington, D.C., economist who requested anonymity. “The market is calm right now, and we’re over the hump in emerging markets like Brazil.” “Rubin is not going to be there much longer,” says Jacobson.

Summers the Likely Choice

All signs point to Summers as the frontrunner. He recently made the cover of Time magazine, along with Rubin and Fed Chairman Alan Greenspan, leaving the impression that the Clinton administration was angling to position him as top Treasury dog.

“Summers is far ahead as a frontrunner,” Jacobson says. “He and Rubin get along extremely well, and Rubin is the president’s favorite. So if Rubin wants Summers [as a successor], there’s really not anyone else.” Though Rubin declined to comment about a potential successor at a press conference Wednesday, political analysts say it’s an open secret that Rubin hopes his deputy gets the nod. The secretary very much wants a successor who will follow through on Treasury’s key initiatives, like maintaining a strong dollar, supporting the International Monetary Fund and working for open, stable international markets.

But Not the Only Candidate Still, Summers’ confirmation by Congress is not a sure thing. While he’s widely recognized as a brilliant economist, “he’s rubbed a lot of people the wrong way,” says Dean Baker, a senior research fellow at both the Preamble Center think tank and the Century Foundation. Summers “is a very brash character, and sometimes acts like people don’t know what they’re talking about,” Baker adds. Moreover, Summers may have a difficult time justifying Treasury’s support for the disastrous IMF bailout of Russia last summer to the Republican majority in Congress. And when he worked at the World Bank earlier in his career, Summers played a key role in designing the assistance programs for some of the very countries that now find themselves caught up in the global economic meltdown. Who else, then, is a potential candidate for the key treasury secretary post? Two other names surface consistently, although they are viewed as distant runners-up. Check out the dish on all three would-be successors in the table below:

The Contenders at a Glance

Lawrence Summers

Age: 44

Career: Deputy treasury secretary since


Summers entered MIT when he was 16; at

28 he became the youngest tenured

economics professor in Harvard's history.

Later worked as chief economist with the World Bank. Supports Rubin's strong-dollar policy and Clinton's plan to funnel budget surpluses to Social Security and invest part of the trust fund in the stock market. The Buzz: “Summers can be somewhat arrogant,” says Cynthia Latta, principal economist with DRI/McGraw-Hill Inc., a forecasting firm in Lexington, Mass. “People in Congress don’t like other people who are also arrogant.” But all in all, most Treasury-watchers agree that Summers is a shoo-in to replace Rubin if and when he leaves, if for no other reason than because he’s already expected to win.

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