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Millions of Reasons to Doubt Summers

By Dan Froomkin
10:00 AM ET, 04/ 6/2009


Larry Summers file photo. (Brendan Smialowski/Bloomberg)

The latest White House Friday-night document dump had its desired effect, as it's Monday morning and there's little to no attention being paid to how stupendously beholden it turns out President Obama's top economic adviser, Larry Summers, is to the financial industry that he is ostensibly trying to rein in.

Summers, it turns out -- according to financial disclosure statements released by the White House late on Friday -- was paid $5.2 million for his part-time work for a massive hedge fund last year. He also raked in more than $2.7 million in fees for speaking engagements at such places as Citigroup, Lehman Brothers, Merrill Lynch and Goldman Sachs. For one speech alone last April, Goldman Sachs paid him a cool $135,000.

All of a sudden, Obama's expressions of outrage over the culture of excessive pay on Wall Street are a bit harder to take at face value.

And the advice Obama is getting from Summers, his economic guru, is looking very suspect.

I mean, come on: How tough are you going to be on someone who paid you $135,000 in one day?

It's become increasingly clear over the last several months that despite the Obama administration's generally progressive economic views and sporadic bouts of populist rhetoric, the White House has something of a soft spot for Wall Street. Especially when it comes to financial rescue plans, Obama and his aides have held back from applying the tough medicine that an ever-growing number of economists say is necessary.

Consider, for instance, the contrast between these two stories: Amit R. Paley and David Cho wrote in Saturday's Washington Post that the Obama administration is "engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay"; while James Doran writes in the Guardian that "Elizabeth Warren, chief watchdog of America's $700 billion bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse."

Friday night may seem like several news cycles ago to our fast-moving media, but the public deserves to hear from Summers directly about how he can possibly maintain that he doesn't owe any loyalty to the financial interests that showered him with money until a few months ago and that he now seems to be protecting. Why isn't his advice inherently suspect given how he is a veritable poster boy for the Wall Street culture that Obama called a "house of cards" and a "Ponzi scheme" in which "a relatively few do spectacularly well while the middle class loses ground"? Isn't he part of the problem, not part of the solution?

And, yes, I know Obama is overseas and busy doing other things right now, but when he gets back, he needs to explain why he still trusts Summers. And he needs to directly address the concern that he has made a mistake in surrounding himself with economic advisers who come from the very Wall Street culture that is responsible for this crisis in the first place.

One of Obama's great strengths as a campaigner and a writer was his ability to explain his thought processes. Now as president, as I've written time and again, Obama needs to do a better job of explaining how he reaches his conclusions, in particular regarding economic policy.

The White House announced to the press corps late Friday afternoon that the financial disclosure statements were available -- upon request. Both The Washington Post and the New York Times published their resulting stories inside the A section.

Both led with the Summers disclosures. Philip Rucker and Joe Stephens also noted for The Post that the forms "show that many of Obama's top aides earned generous salaries, investment income and fees for delivering speeches and serving on corporate boards."

Here's the official White House statement on Summers: "'Given that Dr. Summers is widely recognized as one of the country's most distinguished economists and formerly served as Treasury secretary, there was considerable interest in hearing his economic insights from companies across various industries,' White House spokesman Ben LaBolt said."

Jeff Zeleny noted in the New York Times: "Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments."

The Times also Web-published several of the forms, and reports that they "also shed further light on the compensation received by a top Obama aide who previously worked for Citigroup, one of the largest recipients of taxpayer bailout money. The aide, Michael Froman, deputy national security adviser for international economic affairs, received more than $7.4 million from the company from January 2008 to when he joined the White House this year.

"That money included a year-end bonus of $2.25 million for work in 2008, which Citigroup paid him in January. Such bonuses have prompted political controversy in recent months, including sharp criticism from Mr. Obama, who in January branded them as 'shameful.'"

Rucker had another story inside Sunday's Post about how some top Obama "economic advisers were paid, in some cases handsomely, for their commentaries in 2008 about tax policy, government bailouts of financial institutions, global trade and the economic recession."

But the Summers disclosure has gone largely uncommented-upon in the traditional media. Mark Seibel, blogging for the McClatchy Washington bureau, seems to be the only person asking one obvious question: "Isn't this what got Daschle in trouble?"

Indeed, Obama's good friend and would-be health czar Tom Daschle withdrew his nomination as secretary of health and human services in early February not only because of his failure to pay back taxes, but also because of the perception of a conflict caused by the (considerably fewer) millions of dollars he earned from insurers and other corporate interests.

The White House's timing somehow seems to have muffled reaction even in the blogosphere -- with at least one very notable exception.

Salon blogger Glenn Greenwald calls the outsized payments Summers received for speaking engagements "basically an advanced bribe. And it's paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis....

Greenwald also writes about Summers's role, while he was Treasury Secretary under Bill Clinton, in blocking regulatory reform of the kind of financial instruments that precipitated the current crisis.

"Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government. Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced. This corruption is so tawdry and transparent -- and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity -- that it is mystifying that it is not provoking more mass public rage."

[Update: I somehow managed to overlook this earlier. But Louise Story writes on the front page of the New York Times today with more about Summers's job at the D. E. Shaw hedge fund, including the fact that he "worked there just one day a week...

"Mr. Summers said in an interview that his experience at Shaw... gave him valuable insight into the practical realities of Wall Street, insight he is now putting to use in shaping economic policy in the White House."

Story also notes, 11 paragraphs in: "Some of his critics worry that such ties raise questions about whether the government’s ever-changing effort to bolster the financial industry will benefit Wall Street in general, and hedge funds in particular, at the expense of taxpayers."]

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