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Millions of Reasons to Doubt Summers

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."]

By Dan Froomkin  |  April 6, 2009; 10:00 AM ET
Categories:  Brain Trust , Financial Crisis  
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Next: Quick Takes



Who probably don't want the job(s), however.

Posted by: herzliebster | April 6, 2009 10:24 AM | Report abuse

It is unfortunate. Summers payment for just one speaking engagement is more than most American families make in an entire year. If he feels that the millions paid to him are justified then how can he possibly feel any different about the millions paid to the executives. Even without this being a de facto "bribe" there is real reason to doubt whether Summers has the perspective to do the job he has been hired to do.

I don't think the question should be whether Obama trusts Summers in light of these revelations. Summers surely filed the same disclosures with Obama's people as everyone else. Obama's people have seen his tax returns. The question is why Obama ever trusted Summers even though he knew that Summers had received such large sums of money from the very people he is now supposed to rein in. The press gets caught up in the notion of a narrative. This is a revelation to us, but not to Obama or Summers or the executives who approved Summer's massive compensation.

Posted by: fletc3her | April 6, 2009 10:52 AM | Report abuse

Maybe, if Obama's team can't be trusted to do the right things on the financial crisis, they can be shamed into doing the right things.

I'm not shocked at this--Obama's a polititican, after all, and they all tell their share of lies--but I do fear that politics-as-usual could, in this case (as with the War on Terrorism), prove catastrophic.

Posted by: whizbang9a | April 6, 2009 11:19 AM | Report abuse

How soon can we expect Summers to come out with a statement saying that he will return the money (Put it back into the Treasury, Larry!) and he will work for $1.00 (as long as the media is watching).
At least he quit using corporate jets (because he flies in government jets now)

Posted by: Anadromous2 | April 6, 2009 11:25 AM | Report abuse

I thought everybody knew that Larry Summers was a lap dog of Wall Street?

How else do you explain the difference in handling the Merrill and AIG bonuses and the UAW contracts?

Posted by: jdcw | April 6, 2009 11:32 AM | Report abuse

Aside from his earnings, Summers' past record as an enabler of financial deregulation in the Clinton cabinet disqualifies him from ever being trusted by the public. He's an arrogant SOB who brushed aside criticism of derivatives for the Harvard endowment and was confident that women can't understand numbers like he does. He hurt Harvard in many ways. Don't let him hurt us.

Greenspan, Rubin, Summers, Bernanke- the dangerous quartet. They are toxic assets, liars and totally unable to see the other side of any argument. Krugman for government office? No way- he's bright like Noam Chomsky, but he'll cut and slash others inside the tent.

Posted by: bobsnodgrass | April 6, 2009 11:32 AM | Report abuse

" thought everybody knew that Larry Summers was a lap dog of Wall Street?


not just summers, but geithner and obama too.

Posted by: tru-indy | April 6, 2009 11:38 AM | Report abuse

Summers analysis of the economy has been transparent. His FT articles in 07 and 08 were very insightful and gave an early warning of the collapse. Your writer should get smart and realize Summers is an asset

Posted by: swifts | April 6, 2009 11:53 AM | Report abuse

Lemme guess ... this isnt the Larry Summers that BHO knew .. right?

Posted by: SharpshootingPugilist | April 6, 2009 11:55 AM | Report abuse

Same old same old.
Really doesn't matter who the Prez is, even Obama with his slick populist rhetoric.

Posted by: confused1 | April 6, 2009 12:00 PM | Report abuse

It is staggering that people like Summers and Paulson, who walked away with 500 million should be running the show instead of peeling potatoes in the prison kitchen. These people helped design and acquiesced in a program to churn and skim the markets, effectively looting many billions.

Posted by: scientist1 | April 6, 2009 12:11 PM | Report abuse

I would go Ms. Warren one further, they would be forced to resign and the replacements would then, working with the Justice Department, be forced to institute a full internal investigation of the fraud perpetrated on not only the stock holders but the worlds economy and American taxpayer as well. Then turn the results over to the Justice Department and then we would get to watch the perp walk and forfeiture of the vast sums fraudulently, accumulated by these modern day Ponzies.
As far as I can tell, Bernie Madoff may be a veritable piker compared to these guys.
BTW not just the banking and insurance communities, but the ratings agencies, and hedge fund managers as well.

Posted by: NHEngineer | April 6, 2009 12:18 PM | Report abuse

And then there is the matter of Rubin's and Summers' former Butt Boy, one Timothy Geitner.

Hey guys, where's MY bailout!?!?!

Posted by: angelos_peter | April 6, 2009 12:22 PM | Report abuse

Yes, we can attack Larry, and we should.
We should have attacked Paulson, though, because this bailout fraud started with him.

How did Paulson 'earn' nearly 3/4's of BILLION dollars in the five years before he joined the Bush team to 'sort out the problem' he at Goldman Sachs and the other big Wall St. financial firms created.

Paulson and his cohorts of the "millions upon millions to bonuses and compensation club" took all the money. The money didn't disappear. These folks stuffed it into their pockets, and the pockets of our Senators and Representatives, and into the pockets of political insiders, like Larry, to keep the fraud alive.

The fraud had been going since the late 1970's early 1980's. The fraud is called: Derivatives, in all its flavors: hedge funds, puts/shorts, credit default swaps, etc. Derivatives aren't investments, derivatives aren't insurance. Derivatives are fraud which only benefits those selling this garbage. They don't benefit the economy. They don't create jobs.

We've made it so anyone can obtain the protections of corporations. You don't have to create jobs, you don't have to make anything. Paulson put Goldman Sachs on the stock exchange, then like most CEOs decided that our 401k money should be their salaries!

The G20 wanted to see some regulation, no commment from the bought-off US government. As Americans, we should be demanding regulation. We need to fix these problems, and rein in the disportionate salaries and greed that have overtaken America. We need to stop stoking Wall Street and it doesn't stoke the economy, it stokes the fires of greed that have burned down our economy.

We need to regulate banks as banks, insurers as insurers, and investment houses as investment houses, and end the free for all that has defined our financial sector for nearly 30 years, and as a result put us in a hole.

Banks and Mortgage companies must be regulated. Banks and mortgage companies must own the loans they make, which means underwriting them -- not this selling of loans to borrowers who can't apy, and then selling these bad loans to unsuspecting investors. It's been the S&L fiasco (another BUSH inspiration) magnified 1000 times!

Finally, TARP must stop. America does itself no good by paying off these gambling slips generated by the corrupt and fraudulent derivatives market. The people we are giving this money to are the people who drove their businesses in the ground by putting all the money in their own pockets.

Posted by: NDmiddle | April 6, 2009 12:28 PM | Report abuse

I certainly lack expertise in macro finance. However, it doesn't take much to ascertain that sommers and geithner are of the Wall Street Club and think as wall streeters think. It is beyond me how a company receiving bail out funds from tax payers can be so tied to wealth that it doesn't think anything of putting million/s into the rehabing of a bathroom, a simple utilitarian room.

It seems to me that group think is going on for wall streeters which continues the corporate group think that they deserve whatever they can get or take. While this is probably true for the auto execs also, there is clearly a double standard going which protects the wall streeters. That double standard is perpetrated by sommers, geithner and the other elites who are in command of our financial system. Be gone, I say. Let us get some new blood into the financial system that may dilute the ongoing process of covering up for wall street.

Posted by: jaimetre | April 6, 2009 12:28 PM | Report abuse

Presidents don't go to homeless shelters to select their advisers. Practically anybody selected who is not already a full-time politician will have made a pile of cash from some business or group with a financial interest in policy. The trick for the president, or anybody else for that matter, is to filter out the bias and make use of the information and advice offered.

As far as making Paul Krugman an official member of Obama's advisers, there is something to be said for Lyndon Johnson's famous quote, "I'd rather have him inside the tent pissing out than outside the tent pissing in." However, I have my doubts about Krugman's aim.

Posted by: BuddyK | April 6, 2009 12:29 PM | Report abuse

I'm more satisfied that I voted for Nader every day. I'd still take Obama over the Bush/Cheney crime syndicate but the fresh fragrance of new leadership is already starting to smell a little like a compost heap. As Mr. Nader said, "Vote for Obama and be prepared to be disappointed." I was but I'm not. I expected nothing less from the New American Century. Leona Helmsley summed it up: "Taxes? They're for the little people." We're getting smaller everyday. The rich, Demicans and Republicrats both, are a lot like you and me. No matter how much they have, they still want more. I just want to keep my job and health benefits for more years, while they just want more than one family could ever need in one lifetime.

Posted by: curtb | April 6, 2009 12:38 PM | Report abuse

Seems like everyone is out to I'm shocked! Shocked I tell you!

Posted by: tuzoner | April 6, 2009 12:44 PM | Report abuse

Not surprisingly, the Obama administration has been fairly conservative so far, in every regard except its willingness to spend. Among the Bush administration policies that the Obama administration continues to support are many that maintain Government secrecy, continue the practice of extraordinary rendition, prevent 9/11 prisoners from obtaining habeas corpus, continue installing missle defense systems in Eastern Europe, keep American troops in Iraq, funnel Government funds to reckless banks, maintain tax cuts for the wealthy and Government spending on religious organizations. Not surprising from a candidate who praised Ronald Reagan.

Posted by: rjoff | April 6, 2009 12:45 PM | Report abuse

Surely you are not suggesting that Summers is going to be biased for a mere $135k? No, it would take more than that. After all, as the premier courtier he has an image to maintain. You working class types just do not understand! Marie Antointette was so right about crowds and bagettes, or cakes, whatever. OMG!!

Posted by: Aeschylus | April 6, 2009 12:55 PM | Report abuse

What a surprise--NOT! Obama, the master of "change"--his mind, his policies, his sense of honesty? One thing you can't change is your origin--who nurtured your thinking processes as you matured. For that, the record is quite clear!

Posted by: baltic | April 6, 2009 12:56 PM | Report abuse

I think Goldman Sachs gave Summers $135k because he was worth it. But worth it, for what purpose? Now there is the rub ...

Posted by: Aeschylus | April 6, 2009 12:58 PM | Report abuse

Obama made a $500,000 dollar book deal just days before taking office ! He did so, in order to cash in, before he would not be able to as president. He was more than happy to engage in Capitalism, the thing he has vowed to destroy !!!

Yet, he and all you silly lib idealogues continue to demonize those who make some nice change in this wonderful country. Figure out a way to make your OWN big bucks instead of whining that you don't and hating on those who do, and hating on the "wealthy" who pay for practically all your wasteful "welfare state" programs.

They don't owe you squat !!! Thank you...

Posted by: SirLoinofBeef | April 6, 2009 12:59 PM | Report abuse

Gosh, if you really want to fight the war on terror, first thing you do is get those American TRAITORS aiding those who financially support terrorism.

That means (some of )Wall Street.

Posted by: thegreatpotatospamof2003 | April 6, 2009 1:04 PM | Report abuse

Noticed. It's suggested people didn't notice because of the timing of the news release. Yes, people (at least in my family) NOTICED. We are very sad. Not only about this, but about the Treasury's setup of "dummy" organizations so that they can pass on excessive executive compensation. Also on Mayor Fenty's travel. When, WHEN, will there be an incorruptible politician????

Posted by: ingbermr | April 6, 2009 1:04 PM | Report abuse

You'd think with that kind of money the guy could buy a decent suit.

Posted by: Jeff08 | April 6, 2009 1:19 PM | Report abuse

Looking at your photo of Summers' bloated, overindulged head makes me think that were he the face of a GOP administration we would be asking more questions of him.

Posted by: Bartolo1 | April 6, 2009 1:20 PM | Report abuse

It is hard not to suspect that the fix is in with the bank bailout. Dr. Krugman and Dr. Stiglitz, both Obama supporters and Economic Nobel prize winners, strongly criticize the administration's approach. What ever happened to Paul Volker? There was a news article some time back claiming that Dr. Summers had essentially sidelined him. Where does Mr. Volker stand on this bailout scheme?

Posted by: mleahy1 | April 6, 2009 1:23 PM | Report abuse

Summers and Geithner need to be replaced. The financial fraud that's been perpetuated needs to be investigated and prosecuted. Those found guilty should be jailed and all funds fraudulently obtained should be forfeited.

We need a thorough revamping of our financial systems, beginning with an investigation into the Federal Reserve, on down.

In addition, we need genuine leaders in place (who were not benefiting from the looting) to oversee and revamp the way banks and the market work, with total transparency and stiff, firm regulation in place for violations of the rules.

This is not complicated -- it's very simple. If Obama is to fulfill his promise -- and his promises to voters last November -- he needs to get moving on this now and stop taking advice from those who've benefited from the corruption.

Posted by: caroll1 | April 6, 2009 1:23 PM | Report abuse

It is uncharacteristic of you to conclude guilt by association on a government functionary as you have in this piece on Larry Summers. Even in the salad days of Bush era shenanigans you were more even-handed. By all accounts, Summers is not a likeable guy but neither was Joe Kennedy who was put in charge of the new SEC by FDR precisely because he had played in the game, won big, knew how it worked, knew all the players and could beat the (other) scoundrels at their own game. Give me a player like Summers (who can make big bucks working part-time at a hedge fund and for whom being bought off by a measly 135 grand speaking fee is ludicrous) to clean our financial Augean stables, over some suitably potty-trained outsider. To paraphrase Harry Truman, if you can’t stand the smell, get out of the stables.

Posted by: kantcould | April 6, 2009 1:24 PM | Report abuse

Thanks Dan, for some Real Fair and Balanced here (as opposed to Pretend/Fox).

Who guards the guards, who watches the watchers?

I think Obama needs some Private Eyes and Noses to sniff out these kinds of issues that keep cropping up with his appointees.

Of course, the same needs were unmet most oftern with the last President (what Was his Name?). And with Clinton, as well.

Are there no clean hands and pockets among the power elite???

Posted by: Spectator | April 6, 2009 1:36 PM | Report abuse

Where did FDR turn to for guidance in imposing regulation on high finance and enacting legislation such as Glass-Steagle, which separated commercial and investment banking until it was repealed under Bill Clinton?

We know that by appointing the ubra stock manipulator Joseph P. Kennedy the first commissioner of the newly created SEC FDR must have been sending a clear message to Wall Street that the Bolsheviks hadn't taken over in Washington, but it seems there was a pool of economists of consummate ability who didn't have personal stakes in the continued flourishing of the Old Order.

If my memory of undergraduate college history courses does not disserve me, it seems that FDR, and the nation, benefitted from a crop of economists from academia who both understood and had a sense, if not a knowledge, of how to implement the theories and principles of what came to be known as Keynsian economics, even before Keynes himself was widely known outside academia.

In contrast, we face the present crisis after more than two generations of infiltration--no, indoctrination--of Milton Friedman's laissez faire "rational man" economic model into the economics departments and schools of business and finance of every prestigious university in the nation. And with that, the virtually unchecked spread of the unquestioned ideology throughout academia, into business, journalism, and, as a matter of course, government itself.

Occasionally, one reads of power struggles in university economics departments between the "free market" devotees and their opposition, pejoratively tarred with the collective label of "Marxists". The University of Notre Dame is perhaps the highest profile example of such conflicts deep in the bowels of academia.

This is scary. It indicates that the nation lacks the intellectual tools for facing the crisis, that the quick fix is still in, like when a transit system "corrects" the problem of unreliable service by lowering the standard for what is a late departure or arrival, for instance, deciding that a plane or a train or a bus is not off schedule until the deviation is 30 minutes, rather than 5 or 10 or 15 minutes.

The scariest thing about President Obama is the repeated reference to his search for "consensus," be it in dealing with the economy or with Afghistan. Sometimes the "cure" that comes from a compromise that brings consensus is worse than the ill it deals with, because it creates an illusion of progress and purpose when there is only drift. Prime example: LBJ's "consensus" policy in Vietnam.

One can only hope that on his flight back from Europe, or upon his return, the president goes through the accumulated newspapers and sees that the nation's economic health is not well served by the coddling of Wall Street moguls by his closest economic advisors, and that he is not well served by the likes of Larry Summers and Richard Rubin.

Posted by: bfieldk | April 6, 2009 1:44 PM | Report abuse

These fellas that have a hand on the nation's economic knobs will always be "in control" of huge portfolios. Let's face it we can't have a system that puts capitialism on top, except when you work for government. We need a fully integrated caplitialist *and* government. Personally, I judge the federal government to be at fault in this econo fiasco. REgulation of finacial transactions has been much too lax. Remember economist Milton Friedman? He set into play economic policy that could be traced to the current econo meltdown. He really advocated FREE MARKET policy without much government oversight.

The Princeton University economist and fellow Nobel laureate Paul Krugman, while regarding Friedman as a "great economist and a great man," criticized him in 2007 by writing:[51]

In the aftermath of the Great Depression, there were many people saying that markets can never work. Friedman had the intellectual courage to say that markets can too work, and his showman's flair combined with his ability to marshal evidence made him the best spokesman for the virtues of free markets since Adam Smith. But he slipped all too easily into claiming both that markets always work and that only markets work. It's extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose.

It looks like the federal government is struggling to find its voice for "intervention to serve a useful purpose". So far we have all seen financial leaders come to congress with hat in hand, asking for taxpayer bailouts. But no one has been held accountable for the econo meltdown (other than Bernie Madoff). We need to see more law enforcement, so that WE THE PEOPLE can feel like the federal government is doing some econo regulating. An unbridled FREE MARKET - ala Milton Friedman - is not sustainable. We need a system that is FREE but LICENSED. It is the role of government to LICENSE business practices, and most importantly, ENFORCE its LICENSING.

Posted by: rmorris391 | April 6, 2009 1:45 PM | Report abuse

Sad to say Obama and the Democrats are just more of the same old corrupt self serving politicians!

Posted by: american1 | April 6, 2009 2:02 PM | Report abuse

Pretty pitiful if you ask me and I am a Democrat.
Any fifth grader can see the conflict with Geitner and Summers running this show.
Very, very disappointing.

Posted by: lasker1895 | April 6, 2009 2:30 PM | Report abuse

It doesn't surprise me that Larry Summers earned a lot of money as an advisor and speaker to Wall Stree financial houses. His history with these institutions frankly bothers me a lot less than Tim Geithner's involvement in the decision to let Lehman go under.

I have a great deal of respect for Paul Krugman and take his criticisms of Obama's policy on the financial system very seriously. But I'm not sure that making Krugman secretary of the treasury, or even a senior economic advisor, would have been the best move. Krugman has never been anything but an academic. And Reich is just as tainted by his involvement in the de-regulation that took place in the last years of the Clinton administration as anyone else. Indeed, anyone who knows anything about the way the financial markets work is likely to be tainted to one degree or another.

In any event, the repeal of Glass-Steagal need not have led to the current mess. The repeal of this statute did not mandate the Bush administration's decision not to regulate the investment banks and other financial institutions at all, not to mention its decision to allow 30 to 1 leveraging.

Posted by: litigatormom | April 6, 2009 2:42 PM | Report abuse

Dan -

Thanks for continuing to speak truth to power.

Lemme guess ... this isnt the Larry Summers that BHO knew .. right?

Posted by: SharpshootingPugilist

Hey Sharpie - You've long chastised Fromkin for being "in the tank" for Obama. This posting shows pretty clearly that Dan will call a spade a spade - regardless as to which party is in power. I don't think we've ever seen your friend Hannity ever do something similar.

Posted by: Buster3 | April 6, 2009 2:52 PM | Report abuse

People should not tar Geithner with the same brush as Summers.

Geithner is a career civil servant, not a former Master of the Universe.

Summers was one of the primary authors of the deregulation of derivatives that led to this mess. He is NOT the Treasury Secretary, and having been present "at the birth" it may be that his so-called wisdom is good to have around, but I don't think Obama should have made him CHAIR of the Council of Economic Advisors.

Every he says should be taken as coming from someone who DID this, not someone who warned against it.

It is a mystery to me why Brooksley Born has been shut out, since she, as head of the CFTB, warned of this.

Summers should be shunned by the media, tho.

Posted by: RealCalGal | April 6, 2009 3:04 PM | Report abuse

Krugman! Krugman! Krugman!

Posted by: gposner | April 6, 2009 3:10 PM | Report abuse

President Obama hopefully will quickly remember that Katrina in 2005 made President Bush a lame duck for the last 3 years of his Presidency.

Americans seeing others enriched at the large expense of the American taxpayers in 2009 could easily make President Obama a lame duck president in 2009.

Posted by: bsallamack | April 6, 2009 3:28 PM | Report abuse

I find it a little disappointing yet unsurprising to learn of the great wealth people like Summers earned consulting with Wall Street bankers. That being said, I also suspect that these people have the knowledge and skills to help our country through all of this. It also does not mean that they need a high degree of scrutiny.

All government officials should be very carefully watched and questioned with a sharp eye on the details. Not being diligent with the Bush Administration for 8 years led to disaster. We do not need to repeat this again.

However, it would be the height of stupidity to think that Summers and Geithner are not capable of getting us out of these troubled times. I really like Paul Krugman as someone who seems to have a solid understanding of economic issues. However, it is a lot easier to be an acedemic and commentator than it is to be responsible for running a huge government agency. In dealing with the US economy and all its complexity and the associated political ramifications and competing interests, there are skills that are not typically found with most professors, commentators and bloggers.

I am thankful that there are people Like Froomkin who are diligent and willing to challange those in power. This is good. It does not necessarily mean that we should hang people based on articles such as this. Froomkin establishes a basis for continued scrutiny and it lets these people know that they are not going to get a free ride.

Steven Richards

Posted by: scr02882 | April 6, 2009 3:36 PM | Report abuse

You know that old saying that if someone really and truly wants you dead, then there is nothing you or the authorities can do about it? Well, it seems that both George W. Bush and Barak H. Obama want to murder Main St. and the middle class. And as in the old saying, there is nothing Main St. can do about it. RIP America.

Posted by: davidbn27 | April 6, 2009 4:03 PM | Report abuse

I am disappointed in Obama and digusted with his economic advisors, Summers and Geithner. Starting with Bush and Paulson, the elite of Wall Street, the former Wall streeters now in the Obama administration, and former and current members of Congress on both sides of the aisle are engaged in a massive effort to perserve the power and privledges of the wealthy elite, and a massive cover-up to conceal from the public the wholesale looting of the public treasury and the funneling of billions into the pockets of billionaires around the world.

It absolutely amazing that the American people are not rising up and overthrowing the government. Both parties are complicit in this outrage. I wonder whether Obama is being led by the nose by these crooks, or whether he knows exactly what he is allowing to happen. It is in his interests to cooperate with Wall Street, they have probably told him that he and his family will end up rich beyond their wildest dreams for generations to come. Why wouldn't he cooperate? What would be the consequences of not cooperating with Wall Street?

Posted by: Chagasman | April 6, 2009 4:15 PM | Report abuse

What's this? Froomkin actually being critical of the Obama administration, even of Obama himself? Is it April 1st? No, this column is almost a week too late for an April fools joke. Can it be, can it be?

Posted by: dcsuburb | April 6, 2009 4:28 PM | Report abuse're the best. You're riding Obama just as hard as you were riding Bush. Too bad most journalists are not like you.

Posted by: August30 | April 6, 2009 4:45 PM | Report abuse

Obama is proving to be even more ruthless than Bush, something I never would have thouhgt possible unitl now. It just proves how strong the plutocracy is in this nation.

Posted by: bastanow | April 6, 2009 4:47 PM | Report abuse

as I said many a time for several month now in my comments: summers and geithner (rubin in the background) are the most dangerous men in this administration. they are systematically organizing the biggest fraud and theft of taxpayer-funds in history of the U.S. and the president? he is not even watching. beginning in september 2008, my comments relating to these facts, my accusations and warnings were deleted by the post and the N.T. now every columnist writes about them openly. unless these two abbeters and protectors of crooks and criminals are incapacitatet and replaced by honest and wallstreet/bank independent persons disaster will ensue. I was always saying that dr.'s stiglitz and krugman would be the best people in the world for the leading economic positions in this country. summers and geithner are destroying the U.S. systematically. wake up people of this country!

Posted by: fieldon | April 6, 2009 4:54 PM | Report abuse

The disappointment with Obama is not so much that he is acting like a regular politician, but that he promised so much more. If he had promised to do his best, or to work hard every day on our problems, that would be different, but he promised nothing short of a total transformation. Talk about losing the expectations game!

Posted by: davidwatching | April 6, 2009 5:04 PM | Report abuse

I figure that I knocked on more than 2500 doors for Obama, but I don't trust those financial guys at all. I do trust Dr. Warren. As I have said before, we could probably end up ahead if we just sold the Treasury Department to the highest bidder.

Posted by: dickdata | April 6, 2009 5:08 PM | Report abuse

"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?'"

Absolutely! I defy anyone to say with a straight face that Summers, who has made millions in no-show Wall Street jobs and consultancies, not to mention that $135K a day gratuity from Goldman, isn't hopelessly tarnished. The very idea that this guy, who also championed the deregulation that has created this economic horror, should have influence in correcting the problem is obscene.

How can Summers NOT be in the back pocket of Wall Street and the hedge funds?

What a total disillusionment! The press ought to take off the gloves at Obama's next press conference. This is shameful.

Posted by: Redhand2 | April 6, 2009 5:18 PM | Report abuse

Perhaps the time has come for a Chinese Solution: A fair trial, a stout brick wall and a firing squad. This would be something that even these Wall Street PIGS could understand. Even as I write this I'm shaking with rage, and for once in my life I'm not angry about the country's gun laws,either.


Posted by: ruinedbruin | April 6, 2009 5:47 PM | Report abuse

"Obama needs to do a better job of explaining how he reaches his conclusions, in particular regarding economic policy."

It might be a conspiracy theory; but I believe his teleprompter is telling him what he ought to do....... It's in the blog!


Posted by: Spitfires | April 6, 2009 6:36 PM | Report abuse

Elizabeth Warren will issue a blockbuster report this week, saying that bank CEOs must be replaced, that shareholder values in defunct banks must be wiped out, and that Timothy Geithner is not doing his job. Will someone tell me why I had to read about this pending major report in the April 6th issue of the "New Zealand Herald"? Why aren't a set of important recommendations by a much-respected watchdog major news in the U.S.? Thank goodness for Lexis-Nexis.

Posted by: texlonghorn_98 | April 6, 2009 6:50 PM | Report abuse

To use an old, time-worn analogy: why does Obama have the fox (Summers) guarding the hen house?

Posted by: Diogenes | April 6, 2009 6:57 PM | Report abuse

Krugman is right.

We need to get rid of the corporate tax exemptions for all exec salaries and benefits beyond $1 million for any firm, arrest, prosecute, sentence, and jail (keep in GITMO until jailed) those who received salary, benefit, options, and retirement based on "misstated earnings" (aka "LIES") and Triple Fine them for said outsized earnings with release only after 100 percent of the base fine is repaid and travel restrictions until the full fine is paid off.

Treat them as the crooks they are.

CEOs in Japan are pulling down $98,000 a year right now. CEOs in the USA need to realize their days of being overpaid for lesser value are OVER.

Posted by: WillSeattle | April 6, 2009 7:18 PM | Report abuse

The Obama administration has been very hollow and shallow in its infrequent populist rhetoric. The unfortunate reality is Obama and his advisers are elitists, not progressives or populists, who received millions for writing books, giving speeches, working for Wall Street. The idea of paying a person, whether former president Clinton or Summers tens of thousands for a single speech is an insult to the tens of millions of hard-working people in this country, who must work, on average, two or three years, to earn such a sum.

Anyone who thinks the Democratic party is a liberal or progressive party, especially in the European sense, is highly naive. Democrats, by and large, are only somewhat less beholden to corporate and other privileged special interest groups than Republicans. As Mr. Dione wrote in a column appearing earlier today, the Democrats in Congress are willing to incorporate individual mandate for health insurance, which candidate Barack Obama strongly criticized, to appease the insurance companies. This is hardly liberal or progressive, but throwing up a white flag to corporate interests at the expense of millions of ordinary people.

The Republican party, of course, is worse, largely dominated by militarists, bigots and reactionaries, so by comparison Obama and many Democrats seem nearly angelic. Obama may be somewhat empathetic and understanding of ordinary people in this country, but most Democrats in Congress do not seem to be.

Posted by: Aprogressiveindependent | April 6, 2009 7:39 PM | Report abuse

This says more about Obama than it does about Summers, really. He's just a huge fake. I'm sorry I didn't vote for Nader, too. Because I'm starting to hate Obama almost as much as I hated Bush. He's been such a crushing disappointment in so many ways and it all boils down to one thing - his screw-the-middle-class philosophy is identical to Bush's.

For those who act surprised that Dan is holding Obama's feet to the fire the same way he did Bush - you must not have paid much attention to Dan over the years if you thought he'd let Obama get away with this kind of crap.

Dan Froomkin and Glenn Greenwald - I wish we had hundreds of you.

Posted by: solsticebelle | April 6, 2009 8:48 PM | Report abuse

Millions of Reasons and they each have a dollar sign in front of them!
Change We can Believe In!? This ain't no chump change that these corporate insiders are being paid. Can we believe in that!? If Obama doesn't come clean with the likes of Summers, Geithner et al. then he will be accountable. I hope he changes course. I could believe in that!

Posted by: drum_sing | April 6, 2009 9:12 PM | Report abuse

Summers is fronting for his Wall Street cronies. They gave their buddy Larry a few million (it's called influence peddling - see Rod Blagojevich) to throw trillions their way. Of course it's more ivy league suave style rather than Rod's crude Chicago Style.
But it's still the same crime.

Posted by: ritchee303 | April 6, 2009 9:24 PM | Report abuse

This on-going massive fraud is outrageous, including the role Tim Geithner has played in it before being promoted to Treasury Secretary, as well as the crusade led by Alan Greenspan, former Goldman CEO Robert Rubin (Geithner's mentor) and Larry Summers in the late 1990s, when he and others blocked the efforts of top regulators (especially Brooksley Born, head of the Commodities Futures Trading Commission) to regulate the exact financial derivatives market that became the principal cause of the global financial crisis.

As chairperson of the CFTC, Born advocated reining in the huge and growing market for financial derivatives. . . . One type of derivative—known as a credit-default swap—that has been a key contributor to the economy’s recent unraveling. . .

Born’s proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists. . . The dozen or so large banks that wrote most of the OTC derivative contracts saw her proposal as a threat to a major profit center. Greenspan and his deregulation-minded brain trust saw no need to upset the status quo. The sheer act of contemplating regulation, they thought, would cause widespread chaos in markets around the world.

Born recalls taking a phone call from Lawrence Summers, then Rubin’s top deputy at the Treasury Department, complaining about the proposal, and mentioning that he was taking heat from industry lobbyists. . . . The debate came to a head April 21, 1998. In a Treasury Department meeting of a presidential working group that included Born and the other top regulators, Greenspan and Rubin took turns attempting to change her mind. Rubin took the lead, she recalls.

“I was told by the secretary of the treasury that the CFTC had no jurisdiction, and for that reason and that reason alone, we should not go forward,” Born says. . . . “It seemed totally inexplicable to me,” Born says of the seeming disinterest her counterparts showed in how the markets were operating. “It was as though the other financial regulators were saying, ‘We don’t want to know.’”

She formally launched the proposal on May 7, and within hours, Greenspan, Rubin and Levitt issued a joint statement condemning Born and the CFTC, expressing “grave concern about this action and its possible consequences.” They announced a plan to ask for legislation to stop the CFTC in its tracks.

Rubin, Summers and Greenspan succeeded in inducing Congress -- funded, of course, by these same financial firms -- to enact legislation blocking the CFTC from regulating these derivative markets. More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive who was also instrumental in blocking any regulation of those derivative markets He then enriched himself by feeding on those unregulated markets).

Posted by: caroll1 | April 6, 2009 10:54 PM | Report abuse

Mr. Obama's Wall Street courtesans are going to destroy his administration and what chance this country has for economic recovery!

One last point, Mr. Froomkin forgot to mention Obama's Chief of Staff in his roster of brought and paid for pimps!

Posted by: dgward44 | April 6, 2009 10:59 PM | Report abuse

Herzliebster gave the SOLUTION! (see the very first comment!) BRING IN KRUGMAN!

Posted by: lufrank1 | April 6, 2009 11:45 PM | Report abuse

I have never liked Summers, even during the Clinton administration. Noone smells elite like Summers. It is obvious that no matter how hard Obama tries, he cannot get rid of those Washington insiders.

His administration is getting a black eye by these arrogant wall street nerds and Harvard prima donna's. I do believe Obama's heart is in the right place, but, like most lawyers (I did lawyer tax returns as a cpa) They do not understand money. So these chumps are running circles around him and he can't see the forest from the trees.

Posted by: sandnsmith | April 6, 2009 11:57 PM | Report abuse

Well, what did we expect from Obama? He came from a basically unknown position to "win" the presidency in 2008. Where did we think he was getting the vast sums of money to campaign as he did? Obviously, it came from the same elite Wall Street Bankers. DUH!

Posted by: sailorflat | April 7, 2009 9:24 AM | Report abuse

"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."

Oh, no s**t. It seems the only way the taxpayer is going to alerted to the collosal beating they are going to take with the toxic asset plan is if it is headlined on American Idol.

"In the end they were handed all the s**t they demanded"

E. Hemingway

Posted by: PoohziePhart | April 7, 2009 4:28 PM | Report abuse

First step is to get rid of Cuomo who is owned by Wall Street and replace him with Spitzer who has cojones.

Secondly, Robert Rubin, Summers, Paulson and Geithner should be held responsible for the enormous derivative exposure ("WEAPON OF MASS DESTRUCTION" per BUFFET) they allowed to grow over the past several years.

Lastly, bring in Reich and Krugman ASAP. Obama must act boldly. No more bail out of shareholders and bondholders of mega financial institutions. We are a capitalist country that rewards risks and punishes poor economic decisions. No exception should be made for Wall Street's Oligarchy. This is not Argentina!

Posted by: FloresdelaHoz | April 7, 2009 4:39 PM | Report abuse

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