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Monday, June 01, 2009

Inglorious Summers

Here's your "Holy crap!" moment for the day. It comes to us by way of Dakinkat at the Confluence and Mark Ames at Alternet, who have uncovered some more unsavory facts about Larry Summers, the noted sexist and former Harvard president who functioned as Clinton's Treasurey Secretary and who now directs Obama's National Economic Council. Ames poses the musical question:
Is Larry Summers taking kickbacks from the banks he’s bailing out?
Why did Goldman Sachs, Citigroup and Morgan Stanley steer millions to a company Larry Summers directed while he administered "stress tests" on them?
And do we now know the reason why those institutions survived the stress test in a better-than-expected fashion? Back to Ames:
Last month, a little-known company where Summers served on the board of directors received a $42 million investment from a group of investors, including three banks that Summers, Obama’s effective “economy czar,” has been doling out billions in bailout money to: Goldman Sachs, Citigroup, and Morgan Stanley. The banks invested into the small startup company, Revolution Money, right at the time when Summers was administering the “stress test” to these same banks.

A month after they invested in Summers’ former company, all three banks came out of the stress test much better than anyone expected -- thanks to the fact that the banks themselves were allowed to help decide how bad their problems were (Citigroup “negotiated” down its financial hole from $35 billion to $5.5 billion.)
Don't forget that Summers tried to wrestle Chris Dodd into supporting an attempt to lift pay caps on executive compensation at Citigroup. As Dakinkat notes, the Dow has de-listed Citibank. You may be able to fool the Obama administration, but you cannot fool everyone.

Here's a fun fact: When Summers joined Revolution, it was called GratisCard. As in "Get out of jail free," perhaps?

Preliminary Googling identifies Revolution Money as an attempt to compete with PayPal. You'll want to check out this rather ominous story:
Revolution Money Raises Another $42 Million For Alternative Payment Service Nobody Is Using
Steve Case’s startup Revolution Money announced a series C funding today of $42 million led by Goldman Sachs. Case and other existing investors (Citigroup, Morgan Stanley, former AOL vice chairman Ted Leonsis, former Charles Schwab CEO David Pottruck, and JP Morgan vie chairman David Golden). That is on top of $50 million the company raised is September, 2007.
Hmm. How does a start-up of this sort attract that kind of heavyweight support?
In tandem to its regular credit card, it also operates Revolution MoneyExchange, an online payment processing service that is trying to compete with Paypal. MoneyExchange is basically a loss leader to get people to sign up for the credit card. The problem is that nobody is really using MoneyExhange.

Only 33,000 people in the U.S. even visited the site in February, down from a marketing-fueled high of 742,000 a year before in March, 2008, according to comScore.
For more background on Revolution and Steve Case, go here. The obvious question: How much of that $42 million goes to Summers?

Of course, this is far from the first time that Summers has been accused of being compromised:
We discovered, for instance, that Lawrence Summers, the president’s chief economic adviser, made $5.2 million in 2008 from a hedge fund, D. E. Shaw, for a one-day-a-week job. He also earned $2.7 million in speaking fees from the likes of Citigroup and Goldman Sachs...
Some spoilsports raise the conflict-of-interest question about Summers: Can he be a fair broker of the bailout when he so recently received lavish compensation from some of its present and, no doubt, future players? This question can be answered only when every transaction in the new “public-private investment plan” to buy the banks’ toxic assets is made transparent. We need verification that this deal is not, as the economist Joseph Stiglitz has warned, a Rube Goldberg contraption contrived to facilitate “huge transfers of wealth to the financial markets” from taxpayers.
While president of Harvard, Summers did well-recompensed work for another hedge fund called Taconic. He later tried to install a founder of Taconic as the administrator of the TARP funds. It's impossible to escape the conclusion that this guy's relations with the finance industry are incestuous.

Here's my question. The Republicans are going after the Obama administration on every front, and they have mounted a whole bunch of arguments that are more strained than baby food. So why do they never criticize Larry Summers?
Comments:
Go look at the number of folks that get REALLY huge donations from the big 9 financial institutions that started that lobbying firm together is unbelievable. This is the result of monopoly power and rent-seeking behavior. It's textbook. These folks are huge donors to both parties, but more significantly the biggest donors to the current white house clan. Senator MBNA is now Vice President, just as an another example.
 
Larry 'the world's a shitty place' Summers also acted as an advisor to many of the Harvard thiefs who went over to post-Gorbachev Russia to advise the Russians on privatisation, and wound up engaging in a series of banned financial transactions (e.g. investing in enterprises that would benefit from privatisation funds). The feds, who provided financial support to Harvard, ultimately sued Harvard and the case was settled for millions.
 
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