Learn from the Master

I’m someone who admires President Clinton very much. Like all of us, he is not a perfect man. But I guess I was struck again and again with the 1993 budget deal, with what happened in Mexico with the way he worked to contain the Asian financial crisis. But on all sorts of things, he did the politically convenient thing. But when it was really important, I never saw him hesitate to do what he thought was the right thing. Probably the single moment I will remember with the greatest clarity was the night Secretary Rubin was sworn in as Secretary of the Treasury by Chance. We walked in and we told him that after Bob’s swearing in, we walked in and we told him that Mexico was going to default within 48 hours if the United States did not make an appropriate commitment. He asked how large a commitment. Bob turned to me. I said $25 billion. One of his aides said you mean, $25 million. Bob said, no. He means $25 billion. There was a certain silence in the room. Another very senior person on the White House staff remarked – remember, this is January 1995, so it’s two months after the President had lost badly the 1994 election. One of his most senior people remarked that if we send this $25 billion to Mexico and it doesn’t come back, there is no way you are going to be reelected. The president didn’t hesitate. He said – I’m going to clean up slightly what he said but the essence of it was – this is serious, this is why we’re here. We are going to do our best to make the right decisions. If we make the wrong decisions and we lose an election, that is how the process ought to work. So I just want to know two things. First, is there a substantial chance that something very serious will happen if we don’t do this? We said yes. Then he said, I realize there are no guarantees, there are no certainties, but is there a reasonable chance that is we are prepared to make a commitment that we will contain the situation. We said yes. He said, well, it’s pretty obvious what we should do. That launched us on something that had a fair number of ups and downs. If I look back at the calendar of those events and look at graphs of the market, it was basically pretty clear that the thing was going to work within about two-and-a-half months. But if I take my subjective experience of those two-and-a-half months, and I think about it, it feels more like two years. That was probably the single most dramatic of the episodes that I was involved in.

-Larry Summers