Living Large and in Charge
Not surprisingly, Lawrence Summers is convinced that he deserved every penny of the $8 million that Wall Street firms paid him last year. And why shouldn't he be cut in on the loot from the loopholes in the toxic derivatives market that he pushed into law when he was Bill Clinton's treasury secretary? No one has been more persistently effective in paving the way for the financial swindles that enriched the titans of finance while impoverishing the rest of the world than the man who is now the top economic adviser to President Obama.
It is especially disturbing that Summers got most of the $8 million from a major hedge fund at a time when such totally unregulated rich-guys-only investment clubs stand to make the most off the Obama administration's plan for saving the banks. The scheme, as announced by Treasury Secretary Timothy Geithner, a Summers protégé, is to clean up the toxic holdings of the banks using taxpayer money and then turn them over to hedge funds that will risk little of their own capital. At least the banks are somewhat government-regulated, which cannot be said of the hedge funds, thanks to Summers.
It was Summers, as much as anyone, who in the Clinton years prevented the regulation of the hedge funds that are at the center of the explosion of the derivatives bubble, and the fact that D.E. Shaw, a leading hedge fund, paid the Obama adviser $5.2 million last year does suggest a serious conflict of interest. That sum is what Summers raked in for a part-time gig, in addition to the $2.77 million he received for 40 speaking engagements, largely before banks and investment firms, and on top of the $587,000 he was paid as a professor at Harvard.
Summers was a top adviser to the Democratic presidential candidate last year, and that might have enhanced his speaking fees, which seem to have a base rate of $67,500, the amount he received on each of two occasions when he appeared at Lehman Brothers before that company went bankrupt. Lehman had purchased a 20 percent stake in D.E. Shaw while Summers was employed by the hedge fund, and it would be interesting to know if the subject of the overlapping business came up during Summers' visit to Lehman.
Lehman was only one on an impressive list of top financial firms that consulted Summers during a troubled period. Goldman Sachs was so interested in his thoughts that it paid him more than $200,000 for two talks, even though it soon needed $12 billion in taxpayer bailout funds. Citigroup, which has been going through hard times, managed only a $54,000 fee for a Summers rap. Merrill Lynch could pony up only a scant $45,000 for a Summers appearance last Nov. 12, but that was at a point when Merrill was in deep trouble, with the government arranging its sale. Summers, anticipating an appointment in the administration of the newly elected Obama and perhaps wanting to avoid any embarrassment the fee might bring, decided to turn over the $45,000 to a charity.
Why was someone as compromised as Summers made the White House's point man overseeing $2.86 trillion in bailout funds to the financial moguls whom he had enabled in creating this mess and many of whom had benefited him financially? Will no congressional panel ever quiz Summers about his grand theory that the derivatives market required no government supervision because, as he testified to a Senate subcommittee in July of 1998: "the parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies. ... "
Think of the sophisticates at AIG when you read that sentence, and then ask why Summers is once again at large in the public sector. Or take White House spokesman Ben LaBolt's word for it that "Dr. Summers has been at the forefront of this administration's work ... to put in place a regulatory framework that will strengthen the financial system and its oversight--all in an effort to help the families across America who have paid a very steep price for risky decisions made by Wall Street executives."
The very same executives that Summers had previously assured us could be trusted without any regulation. Why should we now trust Summers any more than we trust them? Couldn't Summers just take his ill-gotten gains and go hide out in some offshore tax haven? If this was happening in a Republican administration, scores of Democrats in Congress would be all over it, asking tough questions about what exactly did Summers do to earn all that money from the D.E. Shaw hedge fund. As it is, with their silence they are complicit in this emerging scandal of the banking bailout.
Robert Scheer is editor in chief of Truthdig and author of The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.
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Agree with many of you here. It is okay to pick the brains of many highly competent and knowledgeable folks when you want to establish a policy. That is especially important for a president like Obama who may have many skills and know many things but lacks the experience. The choices Obama made for positions in his Cabinet and administration, so far, do have that experience. But Obama isn't calling on Krugman or Stiglitz, both Nobel price winners, or any of the other economic geniuses that would be automatically available to him. The real question is why? My take is that Obama's very cautious nature and his innate conservatism, not often revealed in speeches, tend to make him trust the guys who Wall St trusts, and the ideas of corporate capitalists. And, though I know the Obama fans will not like this, Obama does like to be a power broker and appreciates those who have risen to the top. As Scheer put it, living large and in charge.
Dear MoveOn member,
Last week the Obama administration took tough, decisive action with the auto industry, forcing the resignation of the CEO of General Motors.
The president knows that we can't trust the same folks who got us into this mess to help lead us out.
It's time to do the same for the banks. And the best way to start is by firing Bank of America CEO Ken Lewis. He's the worst of the worst.
Lewis's poor management helped ruin his company and our economy. Shareholders are calling him "reckless" and citing "disastrous missteps."
There can't be real reform on Wall Street until the CEOs who brought down the banks we had to bail out are long gone.
Can you sign our petition asking Treasury Secretary Geithner replace the leadership at bailed out banks—starting with Ken Lewis? Clicking here adds your name:
http://pol
Regulate hedge funds...NO
America will be paying for the deregulation years for decades.
Obama's worse than Bush!
Why?
Because we knew that Bush was a thief and a liar, owned by big oil and the banks.
We believed Obama represented change. We trusted him. And so far, he has betrayed that trust.
I had warned here, since last Fall, that no one man could change the system of financial Oligopoly that has grown in DC. I never suspected that the one man we hoped might make a dent in it, would so willingly become part of it.
We've seen the list of names of the advisors and department heads he has surrounded himself with. We know their credentials and the part they've all played in making this economic disaster happen.
We read every day now how Giethner's plan will only continue to enrich the Wall Street robber barons he serves--four blogs just today on HuffPo blowing holes in the program he has sidestepped Congress with. Not my opinion only--but the words of highly regarded men in the field each saying that this is doomed to failure.
I know I'll get heat for this. Too many still believe Obama has a "plan," and he's smarter than we are and will whip wall street into shape, save the ecnonomy, and bring justice to the land. I'll say it right here--he won't.
You'll get no heat from me. I'm right there with you.
Ever wonder why 'Trader' and 'Traitor' sound so much alike?!!!
Now rich people can be rich with money that was spun from nothing, provided by no one, and exists only as a financial orobouros, debt eating its own tail that through the magic of wedge funds, compact deliverables and semi-translucent definable bondage becomes wealth for me, not for thee.
well sed
steelwheels - I wish you were right, but I cannot help but think that Obama is wholly supported even selected by wall street. These government officials are just reshuffled like a deck of cards. When they are in office they are complicit in changing regulations and policies to the benefit of their being out of office. It is to the point that other than the social "wedge" issues, there is no real difference between the parties; just the players. All of these folks have forgotten the meaning of two words, "public servant:". Just about all of them end up being millionaires.
Lawrence Summers is the Paul Bremer of the Obama administration.
Please,ple
Get away from these people. Wormtounge is in your palace. The Dark Lords of Commerce are about unleash their fury upon man. We must look for the small one who will cast the "Ring" (Sophisticated Financial Instruments) into the fire of Mt. Doom.
But seriously, President Obama, please be the man we all hoped and prayed you would be. Do the right thing. Do more than think about your next term. I do not think you could imagine the support you would reap if you were to finally put these financial demons in their place.
Obama is credited with being brilliant. What makes you think he wasn't aware of the past machinations of his economic team before installing them in our government? If he didn't trust and agree with these economists, they wouldn't be on staff.
holey, while you know I agree, and my post above will get me pilloried, it still makes me so sad for our country and the people who work so hard to make it the great place it is--or was. I wanted to believe in him, too. I know that feeling of hoping for change to see it dashed. How much worse can it get? A lot, I fear.
He' s not reading this...
Since anything we the people can do to stop this open plunder of the Treasury would fit neatly within the confines of the single word "nothing." we may as well take satisfaction from the still forming fact that everything Wall Street is plundering will soon be as worthless as their hedge funds and derivatives. By the time this is over, and the financial elites have cornered every last piece of money on the planet, virtually everything on the planet which has actual value will have been destroyed. All that'll be left is money; and without resources and industries and consumption to back it up, all the trillions the elites are holding will literally not even be worth the paper they're printed on. That's what human stewardship of the planet has done: everything real has been transmuted into a great phantasmagoric void called money. Which the Masters of the Universe are pocketing as fast as they can. Keep up the good fight for wealth, gentlemen. No one deserves it more than you.
geeesh, I am really getting depressed now.
"No one has been more persistently effective in paving the way ..."
I would have nominated behind-the-scenes Henry Kissinger to be number one, but you are probably right.
The Bailout, AKA the reason Daddy went to jail (thanks KO).
Geez, talk about letting the fox guard the henhouse!!!
Maybe Obama didn't realize who Summers really was though from what I hear of the strick vetting process that would be really hard to believe.
Geithner and Summers were horrible picks by Obama, from the beginning I felt that way. Especially because all of the Republicans swooned over those two as pickes, you just knew there was something 'not right' about them even without knowing their backround.
Obama ought to rethink his moratorium on reading blogs because he's being torn apart by the liberal blogs and liberal radio on this issue and he deserves every disparaging word.
This plan is the biggest looting of taxpayer money in history, even in the outside chance this works, that will be his legacy. I can't honestly say a Republican would have done worse in this situation.
It may be that we have all been had.
Not all, just the majority of us.
Spot-on post, Robert!
You wrote: "Why was someone as compromised as Summers made the White House's point man overseeing $2.86 trillion in bailout funds to the financial moguls whom he had enabled in creating this mess and many of whom had benefited him financially?"
IMO, take a wild guess! (It wasn't an accident nor was it ignorance or naivite by Obama [if that were true, it would still be another black mark on Obama's admin. so far.)
IMO, unfortunately, Obama has turned out to be as cozy with the banksters as the two admins. before. The powers that be (big multi-national corpora-plutocrats) did NOT want someone who would re-regulate Wall St., meaning undo the deregulations of the Clinton admin. (which, largely got us into this mess.)
Go to commoncaus
And go to accountabi
Come on people. As Summers was one of the participants instrumental in dismantling the regulating and oversight of these institutions, he MUST be the only one infinitely qualified and intelligent enough to understand the complex nature of the BEAST to get us out of this and put OUR financial institutions back on track while mitigating the responsibility of the middle class to have to pay for a ten year black out due to the party of overconsumption by WS and the hedge funds...BO
This seems to be the rationale, but I'm not buying it. It's fine to pick their brains, if you need to, but don't put them in positions of power, for God's sake.
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