Today’s New York Times features a a very disturbing article by Louise Story and Annie Lowrey about the walking conflict of interest that is Larry Summers. Lots of great stuff there, but this is the money quote, as it were:
“With Larry, my wife always says that it’s hard to be happy if you want to have the most money because you’ll never have the most money,” said Jeremy I. Bulow, an economics professor at Stanford University who is a friend and co-author of academic papers with Mr. Summers. “He’s kind of been going about his life just on the basis of ‘who knows what’s going to come next?’ and just sort of maximizing his experiences, given the opportunities in front of him.”
“Maximizing his experiences” — I love it! In simpler times, we called it greed.
According to the article, before working for Obama, Summers had accumulated a fortune of between $7 million and $31 million. And even after he left the administration, and must have known full well that he wanted to return to public life, he couldn’t help himself from grabbing as much cash from the very industries he would, as Fed chair, be regulating. He’s been scarfing up consulting gigs and speaking fees like they’ve been going out of style, from investment banks like Goldman Sachs, JPMorgan Chase and Citigroup. He is very well-compensated indeed; according to the article, his fee for a single speech runs “into the six figures.”
Summers’ sketchy financial adventures don’t end there. He also works for a shady-sounding start-up called the Lending Club, which, according to the Times:
offers loans to consumers and small businesses by making arrangements directly with online investors, a new business model that falls into a regulatory gap that consumer advocates say may lead to risky borrowing.
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 should be another red flag,” Ms. Ludwig said of Mr. Summers’s involvement. “What is he doing on the board of this company? What is a potential Fed chairman doing on the board of a company that doesn’t check if people can afford loans?”
In a far better political environment than the one that currently exists, extracurricular activities like Larry’s would be strictly illegal for anyone who has held or is being considered for a position of public trust. Taking money from — hello! — the very industry you are regulating, should be banned, for at least five years before and five years after holding such an office.
Sadly, we don’t live in that world. Nevertheless, if Obama nominates good ol’ Larry, he will reveal himself to be either a fool, or someone who, politically, has a far higher tolerance for risk than I ever believed. Can you imagine what the likes of Bernie Sanders and Elizabeth Warren would do with the Summers conflict-of-interest stuff?
Finally, I want to mention one more tidbit from the article that I found particularly amusing:
On top of all his other jobs, Mr. Summers has continued economic research. He is currently the co-chairman of a study at the Center for American Progress about stagnating wages for the middle class.
Awesome! Given what we know about the relationship between the growth in economic inequality and rents accruing to finance professionals (of which more later), Larry agreeing to investigate the causes of stagnating wages is something akin to O.J.’s vow to “find the real killers.”
There are many reasons to strongly support the appointment of Janet Yellen as Fed chair. Clearly, one we can add to the list is this: she is not bought and paid for.