“Every dog deserves two bites” -
Admiral Chester W. Nimitz
Not only did Summers work tirelessly
during his years in the Clinton Administration to undermine
regulatory and prudential controls in our financial markets, but he
joined Fed Chairman Alan Greenspan and his political sponsor, former
Treasury Secretary Robert Rubin, and public paragon Arthur Levitt, in
smearing CFTC Chairman Brooksley Born so as to make the world safe
for OTC derivatives.
“The moratorium was a huge victory
for Wall Street,” Robert Stowe England writes in his new book,
Black
Box Casino. “And a big win for Rubin, Summers and
Greenspan,” though he rightly notes that Levitt later expressed
regrets over his actions.
Summers played a major role in
creating the economic imbalances that fostered the housing bubble and
explain the weakness of the economy right up to the present. This is
the problem of the huge US trade deficit, which was in turn caused by
the over-valued dollar.
Summers cheerfully
explained to George Stephanopoulos that the U.S. has “walked back
from the brink” following the 2008 economic collapse, and that
“everyone agrees the recession is over and the question is what the
pace of the [job and economic] expansion is going to be.”
The case that Christina Romer made for a stimulus larger than the $787 billion that was ultimately passed was missing from the proposal that made its way to the Presidents desk.
At first, Summers gave
her every indication that all three figures would appear in the memo
he was sending the president-elect. But with less than twenty-four
hours before the memo needed to be in Obama’s hands, Summers
informed her that he was inclined to strike the $1.2 trillion figure.
So, having made two failed bites, does Summers present any further problems as the nominee for Chairman of the Federal Reserve? Yes, as a matter of fact, he does. To begin with:
Summers is even less
popular with Wall Street than he is with liberal bloggers and
Democratic
senators.
“On derivatives, yeah I
think they were wrong and I think I was wrong to take [their advice]
because the argument on derivatives was that these things are
expensive and sophisticated and only a handful of investors will buy
them and they don’t need any extra protection, and any extra
transparency. The money they’re putting up guarantees them
transparency,” Clinton told me.
“And the flaw in that argument,”
Clinton added, “was that first of all sometimes people with a lot
of money make stupid decisions and make it without transparency.”
Through the first half of
this decade, Meyer repeatedly warned Summers and other Harvard
officials that the school was being too aggressive with billions of
dollars in cash, according to people present for the discussions,
investing almost all of it with the endowment’s risky mix of
stocks, bonds, hedge funds, and private equity. Meyer’s successor,
Mohamed El-Erian, would later sound the same warnings to Summers, and
to Harvard financial staff and board members.
Summers, amazingly,
wanted to invest 100% of the university’s cash in the endowment,
and had to be talked down to investing a mere 80%. No wonder Meyer
and El-Erian tried to talk him out of it: the Harvard endowment was
never designed as a place to invest sums of cash which might be
needed immediately. Instead, it’s designed to invest for the very
long term, taking advantage of the higher returns on illiquid
investments.
Summers was playing a high-risk
carry-trade game with Harvard’s cash:
So why did Summers lose his job at
Harvard? It was because of his protecting a buddy, a fellow economist
at Harvard named Andrei Shleifer.
...
Shleifer got in trouble, and the U.S
Government sued and won against Harvard and Shleifer.
…
Summers was good friends with this
criminal, and used his position to protect him.
..
Summers said conflict-of-interest
“issues,” in his Washington experience, were “left to the
lawyers.” He said he was sensitive to “ethics rules,” but
testified that “in Washington I wasn’t ever smart enough to
predict them . . . things that seemed very ethical to me were thought
of as problematic and things that seemed quite problematic to me were
thought of as perfectly fine. . . .”
The Lending Club’s rates, says the
Times, are apparently “higher than what was available at a credit
union or other lenders.” And that’s not the only problem with the
outfit:
But Sarah Ludwig, the co-director of the New Economy Project, a nonprofit in New York, expressed concern that the company did not verify all borrowers’ income and employment.This shows incredibly poor judgment and out-of-control greed from someone who will be regulating businesses to see that precisely these sorts of things don't occur. Oh, and by the way, hey, and how is Summers with women? Ugh!
“It
does appear that on many, many different human attributes—height,
weight, propensity for criminality, overall IQ, mathematical ability,
scientific ability—there is relatively clear evidence that whatever
the difference in means—which can be debated—there is a
difference in the standard deviation, and variability of a male and a
female population.”
…
The
Boston Globe reported
on the speech on January 17. According to The
Globe,
an MIT biologist who was in attendance walked out, explaining that if
she hadn't, she "would've either blacked out or thrown up."
And as The
Globe made
clear, the anger at the speech was about more than just what Summers
said. Up to that point during his tenure, the percentage of tenured
offers made to women by Harvard's faculty of Arts and Sciences had
severely dropped. In 2004, only four of a total of 32 offers went to
women, a result Summers called unacceptable. Following the speech,
Summers faced
a 218-185 no-confidence vote, and the lingering anger eventually led
to his resignation in 2006.
Next
to former Clinton Treasury Secretary Robert Rubin, there is perhaps
no more notable public official most identified with Third Way
economics than Summers.
…
Occupy
Wall Street seems like an minor event today, but if current trends
continue in hindsight it is going to look like a turning point in
American history. All across the country, opposition to the economic
and political establishment and their order is growing. The same
people who told us nothing could go wrong with bank deregulation and
turning our economy from one of production and innovation to one of
flim flammery and an ever growing list of financier's card tricks,
are now under growing pressure from the discontent in the country.
…
Ten
years ago ... even five years ago ... Summers would have been hailed
and feted for his "keen insight" or whatever. Pundits would
sing his praises. Everyone would vigorously defend him, from the
president on down. CNBC would give us a glowing 1-hour documentary of
his life and times. But now he's under fire.
Update: The President is gettin' all huffy and irritated and L'etat c'est moi about Democratic Senators who are questioning his choice for the Federal Reserve and feels they oughta just siddown and shuddup and give Summers a rousing cheer and vote him in.
