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April 06, 2009

Newly released documents detail Summers' ties to finance industry

Dan Froomkin analyzes the newly-released financial disclosure documents detailing Larry Summers cozy and multifaceted relationships with Big Money, including millions of dollars in speaking fees from the institutions he's supposed to be regulating:

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. [WaPo]

That Summers is beholden to the financial services sector is kind of a dog-bites-man story, but it's important to document the details. 

Froomkin points to this story from Saturday's Washington Post to illustrate where the Obama administration's real priorities lie. According to the story, the administration is deliberately structuring the financial rescue package to thwart Congressionally imposed rules, including limitations on executive pay.

The new laws apply to banks that get money directy from the federal government; so the government is setting up straw companies to funnel the money to the banks instead of giving it to them directly.

Great, more money laundering in the bailout and another furtive executive power grab.


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Regarding the question:

Why is the government lending a trillion dollars to hedge funds to buy mortage-related securities (aka "toxic assets") instead of just buying them itself?

Larry Summers' pay from a hedge fund may explain that contrived approach.

Yes, we knew he was "beholden." We didn't know he took bribes. I think that's news.
"That's $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government ... Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It's basically an advanced bribe. And it's paying off in spades.

yeah, but have you notice this part?

Bank scams

Jeff Sachs comes down hard on the Geithner plan, and his worries need to be taken seriously.

I was starting to come to the conclusion that the plan would simply fizzle — that even though participating players would get a large put along with their free toaster, it wouldn’t be enough to raise the price they’re willing to pay to a level banks would be willing to sell at, rather than keep assets on the books at far above their true value. But once you take into account the possibility of insider deals, that all changes. As Jeff says, a bank can create an off-balance-sheet entity that buys bad assets for far more than they’re worth, using money borrowed from taxpayers, then defaults — in effect a straight transfer from taxpayers to stockholders.

If there’s a mechanism to police such deals, it isn’t clear. And the sense that the administration is just too close to Wall Street continues to grow.

Mary, conservative critics were not pointing out dubious connections so much as throwing whatever they thought would stick. Before the election, the main charges were that Obama loved terrorists and wanted to destroy capitalism. That's the charge you went with; the scandals involving Geithner came fairly late in the cycle, and were pointed out by people all over the map.

In your previous comment, you used the phrase, "Conservative critics." The conservative critics in charge of the McCain campaign didn't talk much about Obama's choice of advisors; it made a big stink out of Ayers, Joe the Plumber, and Obama's being too cosmopolitan. The more extreme Republicans tried to argue that he wasn't actually a US citizen, or that he was a stealth black nationalist.

Now, it's true that a few other Republicans did talk about a wider variety of issues. Some talked about Rezko, some talked about taxes, some talked about foreign policy, and so on. Now that the advisors have been revealed to have minor conflicts of interests, some of these grassroots Republicans are rediscovering the criticisms other Republicans made earlier. This isn't consistent criticism; it's throwing whatever mud you can find and hoping something will stick. The invocation of every Republican attack, from "untested man" to "learn to compete," no matter how irrelevant it is to the Summers issue, doesn't inspire hope. Even Rezko isn't particularly relevant - Rezko is an urban machine boss, while Summers is an academic elitist. Historically, these two styles have been diametrically opposed, with each often rising as a direct response to the excesses of the other.

Are you for real? You're coming off as a parody...

See, you don't seem for real. You're talking to the Redstate echo chamber, what with your defense of Sarah Palin, your complaint about the birth certificate, your raving about real America, and your belief that the media conspired against McCain. Blogs where some people don't agree with you are a strange place to do that.

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