MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
Don't get BuzzFlash at Truthout wrong; we're not implying that Larry Summers, allegedly the White House's favored candidate to head the Federal Reserve, actually robbed anybody to make his millions. No, he just is the usual revolving door multi-millionaire "government servant" who has made a fortune from the same financial elite that he was supposed to advise the president on regulating as director of the National Economic Council. In reality -- along with Timothy Geithner -- he appears to have been one of the two key advisers to Obama on continuing to dump government money into saving Wall Street from its gambling debts, and of not proescuting the perpetrators.
It would have been hard for Summers to do anything else but urge the use of taxpayer money to salvage banks too big to fail for a variety of reasons. First, he was a key advocate of allowing large banks to trade in derivatives without regulation. (Summers took a position as early as the Clinton administration, in which he served as deputy secretary of the treasury and secretary of the treasury, that big banks should self-regulate themselves on derivatives.) Secondly, he was responsible for Harvard University, where he served a controversial term as president, losing an estimated one billion dollars in derivative tradings. Thirdly, he supported repealing vitally important protective provisions of the Glass–Steagall Act, the repeal of these regulations that many analysts consider the beginning of the rash recklessnes and unethical if not illegal behavior on Wall Street that led to the 2008 economic crash. Fourthly, Summers is of the same economic elite as those who control Wall Street and Silicon Valley (in fact, he is currently paid for his work with a "red flag" online financing service). This is a guy who served as a chief economist at the World Bank!
Fifthly (although we could go on to create quite a longer list), Lawrence Summers has enriched himself through his Wall Street and Silicon Valley ties to become another revolving door overseer of the institutions who have made him very rich.
As a lengthy Sunday New York Times (NYT) front page (print edition) above-the-fold article on Summers records:
But in 2006, Mr. Summers was forced out of the [Harvard] university presidency for a variety of reasons, including remarks he made questioning why few women engage in advanced scientific and mathematical work. Soon after, a young Harvard alum brought him into the hedge fund world with a part-time posting at D. E. Shaw. That firm, one of the largest in the industry, paid Mr. Summers more than $5 million.
Mr. Summers’s wealth soared from around $400,000 in the mid-1990s to between $7 million and $31 million in 2009, when he joined the Obama administration, according to a financial disclosure he filed at the time. Before returning to government service, he earned $2.7 million from speeches in one year alone.
As for his current work, representatives for Citigroup, Nasdaq and D. E. Shaw declined to disclose his pay. His speaking rates today run into the six figures, according to an associate who spoke on the condition of anonymity, and Mr. Summers has spoken to Wall Street companies like Goldman Sachs, JPMorgan Chase and Citigroup.
The job that is likely to generate the most scrutiny for Mr. Summers is his work with Citigroup, which was rescued from the brink of bankruptcy by the federal government’s bailout. Though he does not have an office there, two people with direct knowledge of the matter said he was a regular consultant. In a statement, Citigroup said he provided “insight on a broad range of topics including the global and domestic economy” to prestigious clients, and attended internal meetings.
In the NYT article entitled, "The Fed, Lawrence Summers, and Money," there is no estimate of his current value, which clearly has climbed given his increased "brand value" generated from his service in the Obama administration, his ongoing speech fees, his advisory fees, and all sorts of additional income opportunities. Furthermore, knowing of President Obama's fondness for Summers' advice, any financial firm is investing -- when they hire Summers -- in a possible future ... well let's say chair of the Fed, for example.
That makes for a lot of Wall Street money going into Larry Summers' pocket -- millions and millions of dollars from the people and institutions that would be impacted by policies that he determined as chair of the Fed.
The NYT states simply: "Among the top contenders for the position [of Fed Chair], Mr. Summers has by far the most Wall Street experience and the most personal wealth."
Given that the NYT generally supports the status quo on Wall Street in its news articles, the front page exploration of Summers' financial institutional and corporate dependent wealth is an intriguing story placement. Just a few paragraphs into the article, one comes across this disquieting passage:
“With Larry, my wife always says that it’s hard to be happy if you want to have the most money because you’ll never have the most money,” said Jeremy I. Bulow, an economics professor at Stanford University who is a friend and co-author of academic papers with Mr. Summers. “He’s kind of been going about his life just on the basis of ‘who knows what’s going to come next?’ and just sort of maximizing his experiences, given the opportunities in front of him.”
The opportunities have been many over the last two years. Mr. Summers, 58, has been employed by the megabank Citigroup and the sprawling hedge fund D. E. Shaw. He works for a firm that advises small banks as well as the exchange company Nasdaq OMX. And he serves on the board of two Silicon Valley start-ups: both financial firms that may pursue initial public offerings in the next year. One of them, Lending Club, offers loans to consumers and small businesses by making arrangements directly with online investors, a new business model that falls into a regulatory gap that consumer advocates say may lead to risky borrowing.
Some of these financial windfalls for Summers are brought up again later in the article, as BuzzFlash at Truthout indicated earlier. This is all the more the reason that a piece such as this emblazoned across the front of the Sunday NYT appears to indicate (despite some balancing favorable comments about Summers in the article) that the paper is not going to be a reliable cheerleader for Summers if Obama chooses to appoint him.
This is a "the guy has too much baggage" piece of reporting from a paper in a city that in large part depends upon the financial industry for much of the city's expendable income and tax base.
One possible way of interpreting the NYT's choice to pursue and publish this story is that Summers may just draw too much heat if appointed Fed Chair -- and in that respect could be bad for Wall Street since Obama might need to potentially replace him with an actual reformer. The ongoing vulnerability of Summers -- for being a protecter of the banks too big to fail and questionable Silicon Valley start-ups and schemes -- might, in the end, bring more light to shed on the shady underside of Wall Street than would be the case with a more low key and uncontroversial pick such as Janet Yellen, the current vice chairwoman of the Fed.
In printing this "cozy multi-milion dollar cash relationship with Wall Street" article on Summers (although he represents the rule not the exception in this regard), the Times may just be trying to save Wall Street by nixing a candidate that will put its government officials buy-off practices too much in the spotlight.
And unlike some of the others who have swung through this get-rich revolving door, Summers has made enemies of a lot of people who just don't like the guy.
(Photo: World Economic Forum)