Shots in the Dark

BusinessWeek reports on how much money Summers made between 2001, when he left the Clinton administration, and 2009, when he returned to Washington. (Bear in mind that he was Harvard president from July 2001 to June 2006, so the bulk of this money was presumably made in the 2.5 years between then and early 2009.)

Consulting work helped make Summers a wealthy man between the time he left government service in 2001 and when he returned in 2009. When President Bill Clinton nominated him to be Treasury Secretary, he listed assets of about $900,000 and debts, including a mortgage, of $500,000. When he returned to serve in the Obama administration, he reported a net worth between $17 million and $39 million.

And all that is before Summers’ latest round of buckraking for clients such as Citigroup and Nasdaq, not to mention his adventures in techland. You’d have to push that number up to $50 million by now.

Of course, as BusinessWeek points out, you won’t find any mention of Summers’ consulting work on his website.

Why does this matter? Well, for one thing, because banks weren’t really paying Summers for his counsel (though he probably believes otherwise). The work didn’t merit the money.

At hedge fund D.E. Shaw,

…[t]he job entailed coming into the office periodically and working on investment ideas based on mathematical models, according to Cathy O’Neil, a data scientist and former Shaw employee who worked on a couple of Summers’s projects.

“They gave him a cushy position and didn’t ask him to come in very often,” O’Neil said in a telephone interview.

At Citigroup, Summers was basically asked to come in and impress clients from time to time.

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, said in a statement that Summers speaks at internal meetings and meets with clients to provide “insight on a broad range of topics including the global and domestic economy.”

So if they weren’t really availing themselves of his services, why were banks paying Summers millions for the occasional drop-by?

Because it bought them influence, especially in case Summers went back to Washington, which of course he did and hopes to again.

And the fact that Larry Summers cares a lot about making money (bear in mind, Harvard pays him $400, 000-plus a year, a sum most folks would be quite happy to live on) means that he’s more likely to feel grateful to Wall Street for helping him live in the style to which he’s grown accustomed.

But, you say, doesn’t everyone do this sort of thing?

Well, no.

As of 2012, Janet Yellen and her husband, economist George Ackerloff—a Nobel Prize-winner—listed assets worth between $3.4 million and $7.4 million, which is about what two economists in the 60s might have after a lifetime of making professors’ salaries and saving carefully.

Their largest reported individual holdings were invested in the Vanguard Tax-Managed Growth and Income Fund (VTGLX:US), valued between $1 million and $5 million.

Yellen and Akerlof also reported owning a stamp collection valued from $15,001 to $50,000.

Who do you think Wall Street would prefer as Fed chair? The lifelong academic and public servant….or the guy who’s on their payroll?

The Nobel Prize-winning economist explains the mistakes of the non-Nobel economist.

…Summers made some pretty big mistakes in his campaign [to be Fed chair]. …Summers did not recognize the extent to which the political world has changed. He’s been carefully cultivating an image as a Very Serious Person, in a world where VSPness has gone from a source of cachet to being a liability on both right and left.

Think about it. Carefully cultivating a reputation for Seriousness does you no good on the right in a world where the Republican Party is more or less officially committed to crank economic doctrines, and where the GOP’s universally acknowledged intellectual leader is an obvious flimflam man.

Meanwhile, many if not all Democrats are well aware that the VSPs have been wrong about everything for the past decade or more, from the risks of financial deregulation to the fear of nonexistent bond vigilantes. Coming across as the return of Robert Rubin may have seemed savvy back in, say, 2008; it’s worse than useless now.

Krugman allows that Summers might still get the job, but only if the President is willing to expend a substantial amount of political capital on his behalf.

So is that what Obama did yesterday?

…the president described Mr. Summers as a rock of stability who deserved credit for helping to steer the American economy back from the financial crisis of 2008 and the ensuing recession. …

The Washington Post put it this way:

With the grumbling against Summers growing, Obama on Wednesday mounted an extraordinary defense of his friend and old adviser in the halls of Congress….

I have a slightly different take than Krugman; my argument is that Summers is such a contentious personality, and has made such dubious choices (Wall Street buckraking, the end of Glass-Steagall, opposing derivatives regulation, talking about women in science, Andrei Shleifer, treating so many people so badly) that, politically speaking, he dies the death of a thousand cuts. There are just so many angles of criticism opponents can take against him… You defend Summers against one thing, and critics just change the channel to the next. And this is where all those years of insufferable arrogance kick in; people just don’t like Summers.

For this reason, I would be surprised if the President nominated Summers to be Fed chair. But then, I’m surprised that he’s even seriously considering him. It’s Obama’s second term. Anything can happen.