Summers Defends Clinton Era Record

University President Lawrence H. Summers defended the Clinton administration’s record on corporate regulation in an interview Wednesday, dismissing charges by Republicans that the seeds of the current accountability crisis were sowed during the former treasury secretary and his colleagues’ watch.

Summers touted actions he took against corporate tax shelters and regulatory havens as major successes of his year and a half as treasury secretary. He argued that the Clinton administration as a whole took strong stances in favor of government regulation and private sector vigilance.

“I think that we were very focused on questions of tax shelters, very focused on questions on regulatory havens…very focused on the questions of dirty money,” Summers said. “In terms of questions of the integrity of the market, we worked closely with the SEC [and] that brought to light the auditor independence set of issues.”

State Republican Party leaders and White House officials have in recent weeks sought to deflect political fallout from the controversy surrounding the collapse of Enron and WorldCom and the rash of high profile earnings restatements. Several have argued that problems with lax oversight began during the Clinton administration, pointing out that many of Enron’s questionable deals occurred during the 1990s.

Summers countered that the administration had advocated more rigorous oversight and had fought congressional Republicans’ attempts to weaken the government’s power through deregulation.

Summers said that despite “a fair amount of political pressure,” the administration resisted calls for changes to Federal Accounting Standard Rules that would have resulted in laxer treatment of corporate expenses.

“[On] a number of issues…the administration’s position was in favor of more authority to regulate in the public interest than the decisions that were taken by the Republican majority at that time,” Summers said, highlighting the 1999 repeal of the Glass Steagall banking reform bill as a prime example.

Summers also defended his close friend and predecessor as treasury secretary, Robert E. Rubin ’60, who has been a focus of Republicans’ attempts to associate the Clinton administration with corporate wrongdoing.

Republicans have charged that in addition to overseeing an era of false prosperity, Rubin inappropriately intervened on Enron’s behalf after leaving government.

Sen. Peter G. Fitzgerald (R-Ill.) and Rep. Mark Foley (R-Fla.) want Rubin, now a director of Enron underwriter Citigroup, to testify about his role in the controversy. Others have questioned a rise in the statutory debt limit that Rubin pushed through Congress in 1995.

This spring, Rubin was named to the seven-member Harvard Corporation, the University’s highest governing body.

Summers said that while he did not know the specifics of all of the alleged improprieties, he did not think the controversy would affect Rubin’s ability to serve Harvard.

“Bob Rubin is a person of the highest integrity,” Summers said, adding that from his own involvement he knew that allegations that Rubin broke the law in 1995 were baseless.

Enron director Herbert S. “Pug” Winokur ’64-’65 resigned from the Corporation in April, explaining that his role at Enron was diverting his time and attention from Harvard.

In Wednesday’s interview Summers also discussed University-wide repercussions of the corporate scandals and the continuing economic slump.

The scandals will have a variety of curricular impacts, Summers said—the full extent of which have yet to emerge. But Summers said that “the real lesson of Enron and the like is not the need for more ethics courses,” but the need for “the creation of habits of mind and culture, where people who have questions about something feel free to raise them.”

Summers said that despite the slumping stock market, Harvard is financially in much the same place as it was earlier this year.

Since he arrived as president, Summers said, he has cautioned that Harvard must act conservatively on financial matters.

“From the time I came I have felt that we needed to make sure we were planning on a very conservative basis that did not assume any of the remarkable returns on the endowment we enjoyed during much of the 1990s,” Summers said. “Nothing has happened that has caused me to deviate from those judgments.”

This year, the University’s undergraduate and professional schools received only a 2 percent increase in endowment payout, and Summers said he has told deans to expect payouts in a similar range for the next several years.

Some years during the 1990s the endowment payouts rose by as much as 20 percent, though a more typical annual increase was closer to 7 percent.

According to Summers, the continuing stock market woes only underscore the need for fiscal discipline and have not pushed schools into crisis situations.

“The University’s finances and endowment have fared well in a relative sense over this period,” Summers said.

“Certainly [the endowment’s] performance has been far, far better than that of the broad stock market…and it has fared relatively well compared to other schools,” he said.

—Staff writer David H. Gellis can be reached at gellis@fas.harvard.edu.