He added: “In past blizzards, those statistics have been distorted by 100,000 to 200,000 jobs.”

What Summers meant to say was that the additional 100,000-200,000 people who, indeed, are unemployed due to the winter storms might well end up re-employed before too long. Many of those left jobless because of the storms are employed in the construction industry, which will pick up as weather conditions improve, and others were left unemployed when stores or restaurants closed during the storms, which impeded hiring.

However, with long-term unemployment at its highest level since the Great Depression and new statistics out showing that fully 40 percent of those collecting unemployment have been doing so for at least six months (let alone Jim Bunning’s one-man blockade of unemployment benefits for those very Americans), this administration ought to be smarter about focusing on the individuals facing job losses and unemployment. After all, the unemployed currently have a more favorable view of President Obama than those who have jobs — so long as Larry Summers can keep his foot out of his mouth.

Elizabeth Warren, chair of the Congressional Oversight Panel (EPA/ZUMAPRESS.com)

The White House wants it. Senate leaders support it. The House has already passed it. And, in the wake of the worst financial upheaval since the Great Depression, many consumer groups and state regulators say it’s vital if the country is to avoid another economic collapse. Yet the proposal to create a new consumer financial protection agency is, for all practical purposes, dead on arrival in the Senate.

Just call it the public option of the finance reform debate.

Image by: Matt Mahurin

“For Republicans, including me, a free-standing agency is a nonstarter,” Corker told The Hill last week. Instead, Corker wants to carve out a consumer protection unit within a much larger bank regulator being proposed by Dodd.

Yet that idea worries many consumer advocates, who argue that the agency charged with ensuring the soundness of the nation’s financial institutions shouldn’t also be responsible for protecting consumers. It’s not difficult to imagine, for instance, situations in which firms profit from unfair or abusive practices. In those cases, the strategies that bolster the firms’ financial health might do so by taking advantage of the same confused consumers the agency is supposed to safeguard.

“These two missions can conflict,” Travis Plunkett, legislative director of the Consumer Federation of America, said Tuesday at a finance reform discussion hosted by the New America Foundation in Washington. “It would be like putting the Department of Commerce in charge of the EPA. … It would mean that we haven’t learned the lessons of the crisis.”

No matter. Despite the recent Wall Street collapse — a crash that required trillions of dollars in federal help and has left nearly a fifth of the country underemployed — the powerful financial services industry has retained remarkable sway on Capitol Hill. Not only have the nation’s largest firms rebounded to a point where seven- and eight-figure bonuses are again the norm, but they’ve also pumped tens of millions of dollars into K Street to lobby against the Democrats’ reform plans in general and the CFPA in particular.

The industry warns that too much government oversight would stifle innovation and ultimately limit access to the same credit that’s the lifeblood of the economy — not unlike the health insurance industry warning that the public option would ultimately harm the same consumers it’s designed to help. And lawmakers are listening. Not only are Republicans united against the CFPA, but a handful of Democrats — including Sens. Tim Johnson (S.D.), Ben Nelson (Neb.) and Mark Warner (Va.) — are wary as well. That opposition means that the Democrats would have had trouble creating the CFPA even before the surprise victory last month of Sen. Scott Brown (R-Mass.), which has forced the Democrats’ health care reforms to the back burner.

The saga highlights the dilemma facing Democrats in Congress and the White House in the run-up to November’s mid-term elections. On one hand, party leaders want to bolster their populist image; on the other, they’ll have to rally the support of at least a few business-friendly senators to get anything at all through the upper chamber, where 60 votes are required to pass everything. Meanwhile, Democrats also don’t want to alienate the same Wall Street firms that gave heavily to the party in 2008. If the enactment of strict new financial regulations was a foregone conclusion in February of 2009, a year later it’s looking like the Democrats will have to settle for weaker tea.

Another hurdle facing the CFPA, according to some observers, has been the failure of Democratic supporters to sell the importance of their proposal. Tim Fernholz
, writer at The American Prospect, pointed out that most voters have experience with mortgage loans, or car loans, or credit card rates or overdraft fees. The question is: why haven’t CFPA supporters been able to convince those same folks that a consumer protection agency would work to their benefit? “It really should be something that’s politically popular,” Fernholz said.

Jonathan Mintz, commissioner of New York City’s Department of Consumer Affairs, agreed that, despite all the evidence that the industry needs a shorter leash, the Democrats’ messaging has failed to resonate with the public at large. “You can be very specific about the harm that’s being done,” he said. “Suddenly what you’re talking about is a literal problem with a literal solution.”

Not that all Democrats are done fighting for the CFPA. “There needs to be a new agency with new powers for whom this will be a primary mission,” Lawrence Summers, White House National Economic Council director, said last month. More recently, White House Press Secretary Robert Gibbs echoed that sentiment, telling reporters Friday that an independent consumer protection authority remains “a great priority” of President Obama.

Congress is half way there. In December, House Democrats passed a financial reform package that included a stand-alone CFPA. Sponsored by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, the bill would prohibit certain complex financial products, require greater transparency surrounding terms and rein in misleading marketing campaigns. It received exactly zero Republican votes.

Some state financial regulators warned Tuesday that the industry has evolved quickly, with more and more companies dabbling in the complicated products that few seem to understand. “The fringe sector really isn’t so fringe anymore,” said Sarah Bloom Raskin
, Maryland’s commissioner of financial regulation.

Plunkett agreed, noting that the recent turmoil was caused by a series of regulatory failures that allowed the nation’s financial institutions to make a habit of abusive practices — a “parade of horribles,” Plunkett said, that extended well beyond sub-prime mortgage lending into the realm of credit cards, overdraft fees and payday loans. Because no one agency concentrates exclusively on protecting consumers, he said, they were able to focus elsewhere without much consequence — until it was too late.

“It’s a failure of will,” Plunkett said. “No one had consumer protection as a priority.”

And if Corker and the others have their way, that trend will continue.

Larry Summers was not out to get me. I was not present at the famous interview between him and Cornel West, but in my opinion (Summers) merely used my name in a clumsy attempt to cajole Cornel West into behaving more like a professor, less like a celebrity. Larry Summers was doing many good things at Harvard before his enemies there succeeded in ousting him.

“Conservatives agree that as point person, you failed,” Rep. Kevin Brady (R-Texas) told the Treasury secretary yesterday during a hearing of the Joint Economic Committee. “Liberals are growing in that consensus as well. Poll after poll shows that the American public has lost confidence in this president’s ability to handle the economy. For the sake of our jobs, will you step down from your post?”

Geithner, of course, didn’t budge, arguing that it was Congress that left the new administration “an economy falling off the cliff.”

“Almost nothing of what you said represents a fair and accurate perception of where this economy is today,” Geithner told Brady.

And on some counts he’s right. Since Geithner’s swearing-in 10 months ago, the stock market has rebounded and the investment-banking industry has flourished. Yet little of that high-altitude recovery has trickled down to middle-class America, where homeowners continue to sink and unemployment is at a 26-year high.

That discrepancy has led some liberal Democrats to go after the White House recovery strategy as well. Earlier in the week, Rep. Peter DeFazio (D-Ore.) blasted Geithner and others on Obama’s economic team for hoarding unspent Wall Street bailout money instead of allowing Congress to tap some of it for infrastructure projects — a plan that would help shift the recovery to Main Street.

“Unfortunately, the president has an adviser from Wall Street, Larry Summers, and an adviser from Wall Street, Timmy Geithner, who don’t like that idea,” DeFazio told MSNBC’s Ed Schultz Wednesday. ”They want to keep the money [because] there may be more needs on Wall Street.”

None of this, of course, should come as any surprise. Geithner headed New York’s Federal Reserve Bank for the five years prior to his appointment atop Treasury, forming entrenched allegiances to Wall Street. So if there’s anything new in these latest episodes, it’s only that Congress is finally discovering where the loyalties of the Treasury secretary actually rest.

Short answer: yes.

From the pool report:

One thing to note is that Summers appeared to be nodding off near the beginning of Obama’s remarks. And then he DID nod off, doing the head on
the hand and then head falling off the hand thing. Photogs seemed to be having a field day. All other officials in the room appeared fully awake.

But the most fascinating thing about the episode — aside from the fact that it took event organizers about an eon to get the protesters off the stage — was that these activists think that President Obama is somehow a victim of Larry Summers.

“Resign Larry,” one protester said as she was being escorted through the doors of the conference room. “The people are asking you to give Obama a fair shot and you should resign.”

Give Obama a fair shot? Who do they think appointed Summers to his post?

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Asked when the economy will rebound, Summers said there are only two types of experts out there wrestling with that question: “Those who know they don’t know, and those who don’t know they don’t know.”

Based on the range of predictions we’re hearing, that seems fair enough.

Appearing before hundreds of business officials in Washington, Larry Summers said the finance industry has evolved both enormously and unpredictably since he urged those changes as Treasury secretary for President Clinton in 1999.

“I think the world has changed in very profound ways since the 1990s,” Summers said.

In November 1999, Congress passed the most sweeping changes to the finance industry since World War II. The bill, known as the Gramm-Leach-Bliley Act, repealed part of the 1933 Glass-Steagall Act, in effect blurring the boundaries between commercial banks, investment banks, insurance companies and securities firms.

At the time, Summers was a leading cheerleader for the bill, applauding its passage in no uncertain terms. ”Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,” he said at the time, according to The New York Times. ”This historic legislation will better enable American companies to compete in the new economy.”

Others weren’t so sure. Sen. Byron Dorgan (D-N.D.) said after the vote that “we will look back in 10 years’ time and say we should not have done this,” while the late Sen. Paul Wellstone (D-Minn.) warned that lawmakers ‘’seemed determined to unlearn the lessons from our past mistakes.”

No matter. The bill passed the upper chamber by a vote of 90 to 8, and Clinton signed it into law shortly thereafter.

A decade later, many of the nation’s top economists say the current recession is largely a consequence of that law, which freed commercial banks to dabble in more risky investments, like mortgage-backed securities, while empowering the largely unregulated non-banks (think: AIG) to get into the mortgage lending business.

Summers said Thursday that that was a different era — a time when credit default swaps “were a blip” and “very few people” predicted either their meteoric rise or the degree to which an overexposure to those complex products could harm the larger economy. In the finance environment of the late 1990s, he said, the deregulations made perfect sense — just as they wouldn’t make sense today.

“You have to think about how the different parts interact,” Summers said. “That’s how you get to the best possible policies.”

The opponents of the measure gloomily predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly.

”I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010,” said Senator Byron L. Dorgan, Democrat of North Dakota. ”I wasn’t around during the 1930’s or the debate over Glass-Steagall. But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”

Compare that to the predictions of then-Treasury Secretary Larry Summers, who now serves as the top economic adviser to President Obama. ‘This historic legislation,” Summers told the Times in 1999,” will better enable American companies to compete in the new economy.”

Ten years later, we all know what Wall Street’s experiment has done to the country. Dorgan, just one of just eight upper-chamber lawmakers to vote against the bill (vote is here), told Newsweek recently about the frustrations of being a real-life Cassandra.

Newsweek: How did you see this coming?

Dorgan: I saw the development of these complicated financial instruments … and it occurred to me that it’s an unbelievable amount of risk. I introduced several pieces of legislation to regulate it, but my warnings were widely ignored.

Newsweek: Why?

Dorgan: I guess they thought I was old-fashioned. The financial establishment had no interest in slowing down the march toward modernization. But the firewalls were made of tissue paper.

Newsweek: What was it like watching your fears realized?

Dorgan: It makes you sick. I felt strongly that if the banks want to gamble, go to Las Vegas. There’s very little solace in being right, given the carnage. This is one of the most expensive lessons in American history.

Asked about his confidence in Summers to lead the country out of the mess, Dorgan bit his tongue.

“I offered the president my advice about financial advisers early on,” he said. “I’ll leave it at that.”

CQ’s Jonathan Allen points out that Gregg, one of the upper chamber’s most vocal fiscal hawks, voted twice in 1995 to abolish the department — once in the Budget Committee and once on the Senate floor. From CQ:

Gregg’s 1995 votes were cast for the fiscal 1996 budget resolution, a nonbinding blueprint that outlined the GOP’s fiscal priorities after Republicans won full control of Congress for the first time in 40 years.

The Senate version of the controversial measure envisioned spending cuts of more than $960 billion, almost half of it from Medicare and Medicaid. Democratic efforts to amend it were uniformly rebuked by a united GOP majority on the Budget Committee.

Ultimately, the Commerce Department survived, and Gregg has since shown more interest than most of his Republican colleagues in funding some of its agencies, particularly the National Oceanic and Atmospheric Administration.

Gregg also fought President Bill Clinton’s efforts to increase funding for the Commerce Department to administer the 2000 census. Indeed, Gregg’s commitment to basic functions of the department has been questioned at times.

“He was generally pretty harsh on them and not really interested in their programs, especially the commerce side of things,” said a Democratic appropriations aide.

A Republican staffer was even more blunt, telling CQ: “I guess if you can’t destroy it, go be in charge of it.”

It brings back memories of John Bolton, the United Nation’s critic who later became U.S. ambassador to the U.N. And it begs the question: At what point do we stop blaming Obama’s candidates (think: Tim Geithner; Tom Daschle; Larry Summers), and start questioning the judgment of the guy who wants them at his ear?