On the one hand, a lot of tea leaf watchers had expected Larry Summers to leave the Administration economic team for some time. Summers clearly wanted a bigger job, and the only jobs big enough to satisfy his rather large ego were Fed chairman (the one he really wanted) or Treasury chief. When it was clear Bernanke would be reappointed, some wags anticipated that Summers would take his leave shortly thereafter. Perhaps he hoped to get Geithner’s job (there has been off and on speculation that he would leave after the mid-term elections) but the most plausible explanation comes from Martin Wolf, who has know Summers for a long time. His take was that Larry loved being close to the action, and would stick with what he considered to be too small a role for longer than most expected. (The Wall Street Journal has a good recap of his tenure with the Obama Administration)
As much as some will be pleased to see Larry gone (he was a leading advocate of bank-friendly policies), his replacement is certain not to represent a change in philosophy. In fact, one of the ideas being mooted is to install an “ambassador” the business community because it is allegedly up in arms with Obama. Huh? The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness. But he has made the cardinal mistake of trying to please everyone and has succeeded in having no one happy with his policies. Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson, and Reagan, were tenacious and not ruffled by noise. Obama, by contrast, announces bold-sounding initiatives, and any real change will break eggs and alienate some parties, then retreats. So he creates opponents, yet fails to deliver for his allies.
The interesting bit is Geithner’s quiet expansion of his role, which reportedly extends beyond the reach typical for the Treasury secretary into broad economic policy matters. Summers and Geithner came to the Administration as allies, and Summers was perceived to be an adept bureaucratic infighter. Yet Geithner, who at the outset looked terribly wobbly and was perceived to have such a bad public image that the Administration did a makeover for him for him (remember the Vogue story and the grocery store visit?) sails on seemingly above this fray. The speculation has long been that he would not stay much beyond the mid-terms, but that looks like a far less sure bet than it did a few months ago.