The Times Sucks Up
Posted on April 6th, 2009 in Uncategorized | 22 Comments »
Today’s NYT runs an oddly loving piece about Larry Summers’ work with D.E. Shaw. Summers participates, but if the reporter ever said something to him like, “Mr. Summers, how can the American public believe that you’re impartial when the very companies you’re now regulating have made you a rich man?”, there’s no sign of it.
Instead…
Mr. Summers said in an interview that his experience at Shaw, however brief, gave him valuable insight into the practical realities of Wall Street, insight he is now putting to use in shaping economic policy in the White House.
“I have a better sense of how market participants sort of think and react to things from sort of listening to the conversations and listening to the way the traders at D. E. Shaw thought,” he said.
The “sort of”s in that sentence suggest that it is B.S., and that Summers knows it. They’re not a normal verbal tic for him; you’ll rarely hear Summers say “sort of,” and certainly not twice in one sentence. They reflect a pyschological awkwardness and hesitation that come when the speaker is shoveling it.
There’s more evidence that Summers turned to Bob Rubin for help looking for a job; he considered working at the two banks with which Rubin was associated and which later paid him some $200k in “speaking fees.”
…Mr. Summers discussed job possibilities with Goldman Sachs, long considered the premier Wall Street bank, and with Citigroup, where Robert E. Rubin, Mr. Summers’s predecessor as Treasury secretary, had become a senior adviser.
That’s a great example of bad journalism/poor editing, describing Rubin as “Summers’s predecessor as Treasury secretary.” That descriptive clause should read something like “his friend Robert E. Rubin, Summers’s predecessor at Treasury and a fellow member of the Harvard Corporation who helped negotiate Summers’ exit from the Harvard presidency…” Because after all, one of implicit issues in the article is backscratching for profit.
Again, we get more about how smart Summers is.
In a rare interview, David E. Shaw, who founded the firm in 1988 above a communist book shop in Greenwich Village, put it simply: Mr. Summers is “a brilliant, brilliant guy.” That is from a former computer science professor at Columbia who now spends his time researching areas like treatments for cancer, while others run his hedge fund day-to-day.
The second sentence of that paragraph is extremely odd. It’s like saying, “And just in case you don’t believe him….he’s really smart too!” Again: poor editing. The Times seems to be endorsing the sentiment of the quote.
The Times reassures us that Summers would never, ever do anything that risked a conflict of interest. [Emphasis added.]
Friends of Mr. Summers say he has always been meticulous about avoiding conflicts of interest and that he was just as careful at D. E. Shaw. For instance, Mr. Summers went to lengths to pay the Social Security taxes on payments he made to even occasional babysitters from the 1980s, said Jeremy Bulow, an economics professor at Stanford, who has known Mr. Summers since graduate school.
Now, wait a minute. First of all, I’m going to call bullshit on that paying Social Security taxes in the 1980s thing; No one paid Social Security taxes on babysitters in the 1980s—and if the babysitting was truly “occasional,” you didn’t have to—and of course Summers’ friend over at Treasury isn’t about to check it out. If it is true, I’d wager that Summers’ first wife, a Washington lawyer, was the reason for it.
But in any event, paying Social Security taxes on babysitters has nothing to do with avoiding conflicts of interest, it’s a straight-up legal issue. So the example provided isn’t actually an example, it’s a non sequitur.
What is a conflict of interest? Oh, taking $8 million in one year from financial institutions when you are the leading presidential candidate’s top economic adviser. Accepting (before giving away) $45,000 from Merrill Lynch on November 12, 2008.
Those things are a conflict of interest.
The author of this Times piece, Louise Story, appears to be an idiot. She provides no evidence that Summers avoids conflicts of interest. I love that “friends say” part. Well, that’s what “friends” would say, isn’t it? Perhaps Story should have asked someone who wasn’t a friend of Summers? And how would a graduate school friend have the slightest idea what Summers was up to with DE Shaw?
We will call this Journalism 101.
Anyway, Story provides no evidence that Summers avoids conflict of interest, and yet, she ignores the massive evidence that he doesn’t—the very evidence that prompted the Times to run this story in the first place. Taking millions of dollars from the industry you are likely going to oversee is, by definition, a conflict of interest.
(Hell, even the White House has said that Summers will recuse himself from anything specifically pertaining to D.E. Shaw. Apparently they think that would be a conflict of interest.)
Here’s one final tidbit in the article that really caught my eye [emphasis added]:
At Harvard and at Shaw, Mr. Summers cultivated a small circle of financial professionals — particularly hedge fund managers — to serve as an informal brain trust. He consults with them on policy matters from his perch in the White House.
[Blogger: He did? There’s no source for that, so I’m going to say it’s from Summers himself. Interesting. Anyone out there ever bump up against this inner circle of financial advisers? Jack Meyer, maybe?]
Among these insiders are Kenneth D. Brody and Frank P. Brosens, the founding partners of another hedge fund, Taconic Capital Advisors, for whom Mr. Summers did consulting work from 2004 to 2006.
Wait a second—Larry Summers was consulting for a hedge fund for two years while he was president of Harvard?
Strange, right? And inappropriate.
Next question: Did Taconic have any dealings with the Harvard Management Company?
Which is to say, was a hedge fund with financial interests with Harvard paying off the president?
[Might one call this a conflict of interest?]
You’d think that the Times might have picked up on the fact that it’s unusual to be a college president and advise a hedge fund at the same time. But everything about this terrible piece—the cooperation of Summers and David Shaw (oh my gosh, a “rare interview”!), the details of Summers’ activities at the hedge fund, the generally fawning tone, the lack of attention paid to ethics questions (two short grafs)—suggest that this story was brokered by the White House to take some of the heat off Summers, and that the Times agreed to go easy on him in exchange for his cooperation (agreeing to be interviewed, asking Shaw to be interviewed, and so on). You can just imagine the White House spin people agreeing to pick one outlet with whom to cooperate, perhaps negotiating with the Times over the reporter (Louise Story? not one of the Times’ tougher business reporters), laying down the terms of the interview, and so on.
If you’re in the White House press operation, you’ve got to be delighted about this piece of propaganda.
22 Responses
4/6/2024 7:18 am
Good righteous work, Richard. You should send it as a letter to the Times public editor.
4/6/2024 7:24 am
Others in this inner circle include Nancy Zimmerman, a longtime friend and hedge fund manager in Boston
Zimmermanis Schleifer’s wife
4/6/2024 8:19 am
Fascinating to hear that Zimmerman is Shleifer’s wife. I assume that this is Andrej Shleifer, whose illicit dealings in Russia provoked a government law suit against him. Might Harvard be better off financially had it not paid out such large sums to settle that case? And was Summers right when he claimed not to have infringed conflict-of-interest guidelines in the matter?
As for the NYT article, notice that, apart from Zimmerman, few if any actual friends of Summers are cited.
4/6/2024 10:23 am
You’re right to go after this, but I think you may be stetching the concept of a conflict of interest a bit too far. Yes, being Pres of Harvard and accepting money from a hedge fund that is a Harvard Trust vendor would be a conflict of interest (albeit you don’t appear to have any evidence that this is the case). But being a paid consultant or whatever for the investment industry based on your economic expertise and then subsequently joining the administration as chief economic advisor isn’t, in my book, a conflict of interest. There’s certainly a revolving door problem (working the other way in this), and it’s real, but I think you’re buying into the tabloid frisson here charging conflict of interest. Your own interest in this story is clear; it’s vindication perhaps; but as with the whole AIG bonus thing, there’s some scape goating going on here when the real problem is the whole System — the fact that our public servants are in fact corporate servants. And (a la Nader) I’d tag even the Chosen One with that, albeit I’m hoping he represents something greater for us at the same time. Summers and the whole economic team are deeply conflicted only in the sense that they can’t imagine a world in which elites like themselves don’t rule.
4/6/2024 10:43 am
I was shocked by the mention of Nancy Zimmerman without noting that Zimmerman was directly implicated in the Russian conflict of interest that ultimately cost Harvard tens of millions. Zimmerman owned the company that profited from Russian trades while her husband, Andrei Shleifer, was advising the Russian government on matters that affected those trades.
I wonder how many other omissions are in this terrible article.
4/6/2024 11:02 am
Summers’ deposition in the Shleifer case (as reported in the Institutional Investor):
Summers hinted in the deposition that although he didn’t know all the facts and wasn’t a lawyer, he felt his friend Shleifer might have been unfairly accused — that there was nothing necessarily wrong with “providing advice on a financial issue in which one had an interest.”
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. . . .”
4/6/2024 3:14 pm
Summers’ statement (as quoted by Anonymous 11:02) is quite characteristic. Summers is smart enough to work with numbers like the math whiz he is, but he’s not very smart about some other things. We know that he lacks social smarts; but it may also be the case that he lacks good intuitions about ethical questions. Of course, what he intends to suggest when he makes that statement about not being “smart enough to predict” ethical positions taken in Washington is that these decisions were erratic and illogical. Otherwise, he would never admit to any lack of smartness.
4/6/2024 3:22 pm
I think that’s a very astute comment, Anon Too. It’s an intriguing and real possibility that, intuitively, Summers may just not know what is ethical and what isn’t.
C.f. http://books.google.com/books?id=yRNnpQViosIC&pg=PA150&lpg=PA150&dq=richard+bradley+lawrence+summers+aspergers+syndrome&source=bl&ots=FGiDgnHeX4&sig=gpihPSU-ijLaJ6zlVRoj51X0K2k&hl=en&ei=v2PaSd_5E6XslQe87cTeDA&sa=X&oi=book_result&ct=result&resnum=9
And your interpretation of his remark about “smart enough to predict” is exactly right; implicit in it is the assumption that the fault could not lie with him.
4/6/2024 4:20 pm
It seems to me that those pages of “Harvard Rules” you refer to, Richard, give an absolutely on-target view of Summers’ psychological profile.Thanks for giving us a chance to read them again.
4/6/2024 8:25 pm
Some of the following, from Summers’ deposition in the Shleifer case at the President’s house on March 13, 2002, has been quoted already. The complete transcript provides some context, and casts light on both (a) how Summers used a “brain trust” while he was Treasury Secretary and (b) how he thinks about conflicts of interest. To be sure, a resurrection of this transcript could have made for an awkward confirmation hearing.
————————-
Q. Did you have any discussion with Professor Shleifer about the fact that his wife’s business invested in Russia?
A. Well, along with a number of other colleagues, it was the practice at the Treasury Department to seek the advice of market participants on developments in Russian financial markets and people met, met market participants at conferences at which they appeared. They came into contact with them in a wide variety of ways. Ant it was generally know certainly prior to the Yeltsin reelection period, which was 1996, it was generally known that Nancy Zimmerman and her fund were actively involved in various kinds of financial activities involving GKOs, GKOs in Russia, and that her hedge fund participated in investor conferences in Russia.
Q. I think my question was: Did you have any discussion with Professor Shleifer about the fact that his wife’s business invested in Russia?
[counsel: At what time period?]
[counsel: At any time.]
A. Well, he and I discussed the fact; discussed, you know, “How’s Nancy’s business going?” We discussed the fact that during a certain portion of his period, American investors in Russia had done well; and we discussed the fact that that was the case, without discussing amounts. He commented on some of the somewhat bizarre legalism involved in the Russian process, which he sort of learned abobut through Nancy’s business.
I did, I believe, remark at one stage that because of the sensitivity that I had acquired in Washington to ethics rules, which at least in my experience in Washington I wasn’t ever smart enough to predict — things that seemed very ethical to me were thought of as problematic and things that seemed quite problematic to mere where though of as perfectly fine — and so I remarked that it would be a good idea for him to make sure that he was operating within the rules of whatever legal arrangements he had with Harvard.
…
Q. Did you ever express disapproval to Ms. Zimmerman about her doing business in Russia before the investigation?
A. As I say, my contacts on this subject with Mr. Shleifer and Ms. Zimmerman are indistinguishable in my mind, so I must feign vagueness on any expression on that question.
…
Q. Is it your view that it is not necessarily a conflict of interest or it is not per se a conflict of interest or otherwise improper to make investments in a country just because you’re providing advice to the government of that country?
[Objections]
A. It was the U.S. Government’s objective in the time that I was there to engage in what was referred to as commercial diplomacy, which consisted in a variety of different ways of seeking to encourage foreign governments to take advice form individuals or companies who had particular interests and motives in those countries.
It was the practice of the Treasury to take advice from investment banks on bond market issues from others with a stake in development of those markets. It was common for the Treasury to listen to advice on currency intervention from those with undisclosed positions in currency markets. It was commonplace in our cooperation with financial markets, for example, to speak with members of the board of the New York Stock Exchange about market integrity, all fo whom had a variety of positional interests with respect to different aspects of the market functioning.
So without judging what would or would not be a conflict of interest, what would or would not constitute a conflict of interest, it certainly would be my view and I think would have been the view of other U.S. financial officials that there was no per se disqualifying of the validity or morality of advice based on the holdings of financial positions in the entity, area, place, type of investment, or anything else with which the advice was given.
How conflict-of-interest issues were to be addressed in any particular context was an issue that was left to the lawyers. And it was our practice to ourselves follow the guidelines or the contracts which we signed. But there was no aura of wrongness of any kind that would be associated with providing advice on a financial issue in which one had an interest.
———-
Not to make a mountain out of a molehill here — it does seem Summers was getting tired by the end of the deposition — I do think the phrase “I must feign vagueness” is quite accurate!
4/6/2024 10:24 pm
That is funny. But think about the last line of that statement, Harry:
“But there was no aura of wrongness of any kind that would be associated with providing advice on a financial issue in which one had an interest.”
What Summers is saying is that you can give advice from which you may stand to profit, which may be influenced by the fact that you will profit it from it, and there is no “aura of wrongness” associated with that. In other words, there is no such thing as a conflict of interest.
Yikes.
4/6/2024 10:25 pm
Whoops-make that “profit from it.”
4/6/2024 11:21 pm
There is nothing in Summers’ background, education, or stated views about what disciplines are worthy of study, and what lessons they might teach, that would lead him—when advantageous options are in the offing—to allow ethics into his decision-making beyond what is strictly required by unambiguous rules.
Hey, isn’t that how they teach ethics in America’s Business Schools? I’ve heard that most BS students do ethics courses so as to learn how to work around the rules and stay just inside the legality while maximizing what can be gained by sailing as close to the wind as possible.
What was most telling about Summers was the Nov. 12, 2008 $45K Merrill Lynch gig. He knew he had several million banked, knew he was headed for the administration, but thought he could milk it for another measly $45K for a couple hours work. Then came the lie about not being able to cancel (yeah, sure), then the ex post facto decision to give to charity (yawn). The man is dishonest and always has been (credite experto -he lied to me in front of about 200 people!).
I see no reason to doubt that Geithner-Summers will deliver the nightmare scenario Sachs suggests here:
http://www.huffingtonpost.com/jeffrey-sachs/the-geithner-summers-plan_b_183499.html
Whether they intend such results occur is now irrelevant, and time to dump these guys I say, as Prof. Warren implicitly suggests.
4/7/2024 7:40 am
Summers’ strange use of the words “feign” and “aura” seems to me to be the clue here.
We see him talking about the ethics of Washington as a mystery he couldn’t quite solve; similarly, he also had trouble figuring out what was going on in the transition of Russia from communism to a financial system a little close to our own. In both cases, we see him trying to figure out a “culture” that is in some sense foreign to him. In Washington, attitudes to ethical questions appear shifting and to some extent chaotic; he can’t put them into a consistent, logical system. Similarly, as Russia makes its transition, much remains murky: there are no clear rules, and Summers is placed in the very disconcerting position of having to guess what they might be from an “aura” he perceives but cannot fully analyze. (To make matters worse, he has trouble distinguishing between his exchanges with Shleifer and Zimmermann!) With respect to both Washington and the Russia, Summers is nonplussed by “cultures” that are essentially opaque to him. The problems arise every time human behavior (and thus also human psychology) doesn’t quite jibe with the unwritten rules he is trying to deduce.
The pages of *Harvard Rules* to which Richard linked yesterday in his post of 3:22 p.m. have to do with a possibility suggested by some people that Summers may have Asperger’s Syndrome. To manage in the social world, people with Asperger’s often have to learn to feign emotional responses they don’t have and don’t fully understand through empathy. To some degree they can be taught what the expected responses are, even though they may not actually empathize with, say, Auntie’s need to receive appreciation for what may have been an inappropriate gift. To some degree, they can learn how to sound appreciative (or whatever is required by social norms), but only as long as the rules are clear and do not change.
Now I don’t know whether Summers does or does not have Asperger’s; in fact, it would be wrong to make a diagnosis since most of us are not professionals in that field and none of us has enough evidence of the kind a professional might look to in making a diagnosis. What does seem to emerge from what we’ve been seeing, however, is that he has some difficulty (1) empathising with others and seeing things from their perspective(s), and (2) figuring out situations that are unfamiliar in very complex ways and responding flexibly when flexibility is required.
Sorry about this very long post, but I’ve been thinking about all this for some time.
4/7/2024 7:44 am
Oops-remove “the” before “Russia” in line 21 above.
4/7/2024 7:53 am
Richard, look at Richard Cohen’s column in today’s Wash Post. Looks like you got it all wrong about Larry, who is quite clearly a highminded and selfsacrificing public servant
4/7/2024 8:06 am
Can we have a link for the Cohen column, please?
4/7/2024 8:35 am
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/06/AR2009040602731.html?hpid=opinionsbox1
4/7/2024 9:03 am
Does Cohen not understand that for some people, power is even more intoxicating than money? Especially once they have some of the latter?
Smart post, Judith. If I remember correctly, Summers was skeptical that ethics could be taught at all. Perhaps you’re right - he just got uncomfortable whenever an ethical issue moved beyond a rules question.
4/7/2024 9:41 am
Professor Lewis, that was satire.
4/7/2024 9:43 am
Actually, Anon, contrary to my post above, I don’t think it was…..sadly.
4/7/2024 10:05 am
They guy needs to read some tragedies.