Larry Summers: Wrong Man for the Job

I have been wondering why the new administration has continued carrying out the ruinous, misguided policies of the Bush administration when it came to the banks. I simply couldn’t figure out why the hell we were giving away trillions of dollars on absurdly favorable terms to a group of incompetent managers — reckless speculators, really — who destroyed their own companies.Perhaps this helps shed some light:

“Top White House economic adviser Lawrence Summers received about $5.2 million over the past year in compensation from hedge fund D.E. Shaw, and also received hundreds of thousands of dollars in speaking fees from major financial institutions.

A financial disclosure form released by the White House Friday afternoon shows that Mr. Summers made frequent appearances before Wall Street firms including J.P. Morgan, Citigroup, Goldman Sachs and Lehman Brothers. He also received significant income from Harvard University and from investments, the form shows.

In total, Mr. Summers made a total of about 40 speaking appearances to financial sector firms and other places, with fees totaling about $2.77 million. Fees ranged from $10,000 for a Yale University speech to $135,000 for an appearance paid for by Goldman Sachs & Co.

The disclosure — in a financial report that is required for federal office holders — comes as Mr. Summers is involved in shaping the Obama administration’s policy decisions on the financial meltdown as well as the broader recession. Among the many decisions the economic team has wrestled with has been whether to step up regulation of hedge funds, one of the most contentious subjects during a summit of world leaders this week. European nations pushed for tougher rules, while the Obama administration preferred a less stringent approach.”  (emphasis added)

Let’s review: Summers, along with Robert Rubin, pushed for the repeal of Glass Steagall, and supported the Commodity Futures Modernization Act; If memory serves, he was also around during the LTCM bailout.

If the history books eventually judge the Obama administration a failure, they may have to point to one horrific appointment as the root cause of the misguided policies: The “Smart Guy” who decided to continue the “Dumb Guy’s policies.

And that’s not very smart at all . . .


Source: Hedge Fund Paid Summers $5.2 Million in Past JOHN D. MCKINNON and T.W. FARNAM WSJ, APRIL 3, 2009, 11:38 P.M. ET

Originally published at The Big Picture blog and reproduced here with the author’s permission.

9 Responses to "Larry Summers: Wrong Man for the Job"

  1. Guest   April 4, 2009 at 3:16 pm

    The ridiculous part is that “Smart Guy” is really “clueless guy”, but America got exactly what it voted for: a glamourous shell.

  2. arnoldsimage   April 4, 2009 at 5:30 pm

    great. and now what barry. i’ve been reading countless pieces on whose responsible and all of their improprieties, but so what. i’ve been absolutely ranting to whoever will listen that these guys are serious criminals. deaf ears everywhere barry. deaf ears. fuck it. let them steal the country. let them have their way. let them do whatever the fuck they want. funny thing… if i had just a bit of power, just a bit of media pull, i’d be screaming my bloody head off till something got done. all you media boys… print and tv, you’re pussies and you are not doing enough to stop this. typing away day after day, reminding us yet again what the bankers and politicians are doing to the american taxpayer. it’s not working. you know and i know these guys are criminals and need to be in irons. butch up and get it done.

  3. Guest   April 4, 2009 at 6:15 pm

    Are there any attorneys, white-collar criminal investigators or investigative reporters out there that want to make a name for themselves?Think of what a hero you’d be, throughout the world, if you got the goods on the slime that are stealing Americans blind.Get the evidence, and get some of the victims of this fraud to bankroll your media and court cases.

  4. OuterBeltway   April 4, 2009 at 6:20 pm

    Previous post (Guest 18:15:19) by OuterBeltway.I deeply resent the continued fleecing of the American people.In the end, though, fellow Americans, it’s only going to get better when we have the guts, in sufficient numbers, to stand up for ourselves.No leader can go where the people aren’t already.Get yourself where you want everyone else to be. That’s what you can do. Not “all you can do”…but What You Can Do.Thank you Barry Ritholz for getting to the right spot on the floor.

  5. Sam Mishra   April 5, 2009 at 2:32 am

    Barry,Good to see this blog, I gave you a link from mine — you get corrupt, it is hard to get out of it… Larry, a brilliant economist once upon a time (got full tenure at Harvard at 28, Bates Clark medal before age 40), became secretary of treasury under Clinton, after Rubin. Apparently, he was a Rubin protege. Rubin became member of Harvard board around the same time Summers became Harvard president? And now is a board member of Citi, which got $50 billion from Uncle Sam in TARP money?Anyway, once he was treasury secretary, Summers had stopped being an academic / honest professor and was on his way to power, which can corrupt you…Harvard Presidency was next, and once he blew that because of some sexist stupid comments, the hedge fund gig came along, etc. etc.It is indeed tragic that Obama recruited him to be the Director of NEC…He should have been left alone to do his speaking engagements (apparently, he is a good economist and a Milton Friedman disciple) and his hedge-fund stuff… In this time of wall street crisis, where Wall Street has blown it, he should not have been allowed to influence policy…Also, I mention in my website that April 1 was indeed a Financial Fools day. AIG got close to 200 billion in TARP, 12.8 billion of which has gone to Goldman. Goldman execs have taken multi-million $$ in bonus for jobs done well. Can be argued the Goldman bonus came from TARP? And nobody seems to be investigating these bankers who keep looting taxpayers’ money, in the name of free-market-Friedman-capitalism and democratic meritocracy and meritocratic democracy…Apparently, Rubin, Summers’ mentor and predecessor as US Treasury Secretary was against regulating derivatives? Also, a washington post report came out suggesting intermediary orgs have been formed which can receive TARP money, funnel it to banks, and the exec compensation in these banks can’t be subject to congress oversight.Obama seems to have blinders on. He has to wake up, else our money, your money, my money, the taxpayers’ money, will keep getting funneled to the rich bankers, while the poor American loses his home and his job, while his progeny inherit a massive future tax bomb…If Summers has any spine, he should come out in the open and make transparent how the TARP money is flowing into the bank coffers of the Wall Street bankers. Summers should also recommend which CEOs of bailout recipients (oh yeah, including Goldman, which indirectly received close to $7 billion through AIG) should be fired. The Obama administration should demand it, and demand that all the Goldman bonuses be pulled back; else the Obama administration should pull back the $6.8 billion AIG gave to Goldman… The Govt has the power, but people like Summers might be blocking it and telling Obama otherwise…Wow, when will this well meaning president get well meaning people to advise him? That is what the country needs now, not the Milton Friedman dose of greed and no govt. regulation which has ruined the lives of millions of Americans…Have a good day,Sam

  6. George Harter   April 5, 2009 at 2:57 am

    Thank You Mr. RitholtzYou are in a tiny minority of financial writers who are worth reading!How do older, cynical persons avoid making the conclusion that this is a fixed game with a puppet in nominal control of a group of very dirty financial scum(WITH COLLEGE EXPERIENCE!!)???At this point, I am leaning toward the conclusion that the new pretty executive is not a dupe, but a co-conspirator. The charmingly smarmy front man for the likes of Summers, Rubin et al.Before voting I knew I would be disappointed-I was unprepared for Bush/Cheney/Paulson redux.Similar to the weather, what will happen will happen. Synthetic derivatives will unwind themselves. We COULD have avoided economic chaos-NOW, I believe it is unavoidable.What frightens me is that I don’t know how to plan for economic chaos.George HarterBaghdadontheHudson, USA

  7. Guest   April 5, 2009 at 10:03 am

    Everyday our society seems to sink to a new low. This is just despicable. I have lost all faith in our Government’s ability to be fair and representative.Isn’t government supposed to be “of the people, for the people and by the people”? If Obama keeps Summers on board, he will never become a Lincoln. Rather just another smooth politician serving the interests of his party and the elites.

  8. Guest   April 6, 2009 at 8:14 am

    The fix is in. Larry Summers has Wall Streets back and, by extension, so does Obama. No one wants a ‘day of massive deleveraging reckoning’, even though that is exactly what needs to happen. The bad investments made by big banks needs to drive them into bankruptcy. And, from the ashes, build again with tigther regulations and support for the surviving banks. Keeping a dead economy walking, benefit’s Larry Summers personally. Larry Summers is comprimised. Pitch fork your congress reps to do someting about this TODAY!

  9. Michael LittleBig   April 15, 2009 at 4:51 pm

    As I see it the media is saying that Americans are afraid and fearful. As these citizens are educated to the facts and the realityof what really happened I believe that fear will turn to anger.My concern is when the anger turns to action.