Larry Summers Made Out Like a Bandit on Wall Street: That May Be His Key Credential to Head the Fed


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Your Daily Dose of BuzzFlash at Truthout, via my pal Mark Karlin:

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, 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 recklessness 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 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.


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 protector 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. ...

Please read the entire post here.