All the sins of Larry Summers that justified his comeuppance

Since yesterday, when Larry Summers announced that he is taking his name out of consideration for the Chairman of the Federal Reserve, I have received two emails from old friends.  Hey, Judy, what do you think of that?  (As if they didn't know!)
Let us not cry for Larry and his lost dream.  He will have to satisfy himself in his comfy office at Harvard, and at whatever hedge fund he's hanging out at these days.  The man will not starve, though a little bit of fasting might not hurt him.
Still, it is time for me to lay out ALL of his sins, and to wonder why President Obama would ever have thought he would be acceptable to his (Obama's) base.  Most of these you will know about.  One, however, was embedded deep in one of Summers' op-ed pieces in the Washington Post over the past year.  It's the most cardinal sin of all.

Recap:  The frequently mentioned sins:  

1.  Responsible for the Financial Crisis:  He and his mentor (Bob Rubin) disparaged Brooksley Born, of CPSC, back in the 1990's, when she tried to get the Clinton Administration to do something about  the danger of unregulated derivative markets.  Those two, along with Alan Greenspan, snickered at little Brooksley who, as female, could not possibly understand the workings of big finance.  Eventually, to ensure their point of view, the four horsemen (Rubin, Greenspan, Summers and Gramm)  shepherded the Commodities Futures Modernization Act of 2000 through Congress near Christmas 2000.  Did Clinton even know what he had signed?  Well, not his greatest hour, but he listened to his advisors.  His advisor, our boy Summers, was not only wrong on the issue, he was arrogant about opposing views.   Unlike Alan Greenspan, he has never apologized for his role in the fiasco.

2.  Harvard Remarks on Women:  After alienating the faculty (let's forgive that), he made some remarks about women and math, which were probably inadvertent but which reflected an unscientific mindset and a clear bias against women.  He was pointing out the achievement gap in higher math between men and women. That's simple fact.  He argued for more research on the causes of same.  That's good.  But, then, he couldn't stop.  He said his "hunch" was that the cause of the gender gap is genetic and not environmental.  Ah, Larry. There it is.  No evidence, but your null hypothesis (needing to be disproven) was genetic male superiority!  Done as President of Harvard.  Yea!

3.  Performance in the White House during the Obama years.  Divisive, dithering, turf-conscious.  Ron Susskind's book, "Confidence Men" laid it all out.  I needn't say more.  Here is the New York Times article that describes Summers and what everyone (except the President, apparently) thought about him.  I will say no more as this item makes me wonder about my own crush on President Obama.  I don't want to go there.

The Mortal Sin:  (not mentioned in any of the news articles)

1.   The man supports the building of the Keystone Pipeline.  Why, he's such a genius that he knows about energy policy and global warming even better than the vast majority of climate scientists,   When I read his Washington Post Column (on economic growth) in which he put forth his argument, I felt obliged to write an angry letter to the Post editor asking why they print this man's drivel after his performance in numbers 1, 2, and 3 above. (I thought I was being clever, but my screed was not published.)  I have just spent a half hour looking for that opinion piece in the Post and could not find it.  But here it is, reprinted in a Reuters-India paper.

RIP, Public Servant Summers!  Enjoy retirement advising the hedge fund managers.

Back to the Summers Blame Game

Frontline had a great program on our gal Brooksley Born, sometime head of the CFTC who tried to regulate the credit default swap market and was blown down by chief bloviator Larry Summers et al. and Sen. Phil Gramm (he of the late night Christmas 2000 law to "modernize" the CDS market by rendering it beyond the purview of regulation). It's on-line at PBS: The Warning. (Read about Brooksley at links provided in my May 26 post about her.)
It got me back in touch with my inner raging populist once again to ask the question: What the heck are Congress/White House doing to reform the financial markets? Brooksley answered this question in her Frontline interview: NADA!
What needs to be reformed? Two things, in my view:

1. The laws that require insurers, pension funds and mutual funds to rely on those heinous ratings agencies (Moody's, S&P, Fitch) for directing their investments. SEC anointed those three as the chosen few, even though they (ratings agencies) were paid by the issuers of the securities for the ratings that would determine how much interest the issuers would have to pay investors. (COI!) Even the FED got into the game, telling the banks it regulated that it could treat AAA securities as good as cash.
2. The easy money policy that led to the big pot of cash for investments in these doggy instruments.

Have you heard anything lately about either of these problems being fixed by Congress? by the FED? By Larry Summers? No? How shocking!

Save, Save Save!....er, no...Spend, Spend, Spend!

Am I the only one tired of the mixed (confused?) signals our economic "leaders" (Larry and Tim and Ben) are sending about what we should do with our money? We Americans have spent ourselves into a debt hole in the past 20 years, courtesy of China, mainly, which has bankrolled us. Just a few months back, we were hearing about the crisis in credit card debt due to our profligate spending on cheap Asian goods over the past 20 years.
Now we consumers are being blamed for the failure of the economy to respond to the gadzillions being poured into it by the government. If we just save it, they whine, then all that spending won't do what they want it to do. Make the economy look better and therefore make THEM look better.
So, what should I do? Here's how I'm thinking about the save vs. spend dilemma. Part of me wants to save save save for the rainy day that I absolutely KNOW in my gut is on the way. That day will bring torrents of inflation, mainly through collapse of the dollar, but also because oil prices will gradually sneak upwards. But, if I save, I must put my money in something that's inflation-proof, and those investments are hard to find. Especially since the big guys like Goldman Sachs chew up idiots like me who might try to invest in commodities. I really do not know how to invest in commodities.
On the other hand, I've wanted a lot of gadgets that look like fun. HDTV, smartphones, laptops, kindles, fitness monitors, new big computer screen, new desktop, Wii, etc. etc. And, new furniture, too. And new PJ's. All of these are made in China now. So, once China makes good on its hints that it will switch its currency away from the dollar, all those goodies will get much too expensive for me. So, I'm on a China spending spree right now.
I'll save later-- my savings will be in the form of higher taxes paid to the government when the bill comes due. Since I can't keep everyone else from spending their stimulus-gotten dollars on cheap China, and since I'll have to share in the forced saving known as paying back government debt through taxes, I might as well have a few gizmos to show for it.

The "brilliant" Larry Summers

Yes, it's Larry Summers time again. This time it's a piece in the New York Times on the workings of Obama's West Wing economics team. Here are the main descriptions of our Bad Boy in that article :

• the brilliant but sometimes supercilious Mr. Summers
• Mr. Summers, given his prickly personality,
• His argumentative style
• under Mr. Summers, meetings became “endless debating sessions,”
• “Larry Summers is one of the world’s most brilliant economists,” said Mr. Orszag,
• He enriches any discussion he participates in,
• "....pretty good at making the case against anything.’
• The arguments became so heated that Mr. Summers stormed from one meeting,
• “incredibly inclusive” and “listens to the economic arguments"

So, there, amidst the questionable traits, and some good traits, is the ubiquitous "brilliant" description. Why do economists and the press that covers them continue to describe this man as "brilliant?" I'm sick of it. The man was instrumental in fostering public policies that led directly to the immensity of our current "Great Recession" (as we're now calling it). And, he has never owned up in public to his role in it.

So, can we now start referring to him as " the inclusive and argumentative, but mentally challenged, Mr. Summers?"

I'd feel so much better if the press would stop lipsticking the pig.

A Heroine for Our Time -- Brooksley Born

When I started blogging back in October 08 with screeds against Rubin, Summers, Greenspan, and Phil Gramm (The 4 horsemen -- Hear No Evil, See No Evil, Speak No Evil, and Evil) I did mention "our gal Brooksley Born" as the voice in the wilderness back in the late 90's.
Today, the Washington Post has a wonderful profile of Born, and it's a MUST READ for 2 reasons.
First, it should make us email the White House, demanding that Larry Summers actually apologise for his role in the meltdown as a condition for keeping his job. Alan Greenspan did it, and I've forgiven him. Phil Gramm is a jerk, and he's now out of Congress, so we won't worry about him. Rubin...well, he's only in the background today, and he made a half-apology, which is good for neanderthal man. But Summers has apologised only for not having predicted an 8-year Republican administration that would 'ruin' all his great work. (Heard that one on Boston's WBUR On Point, April 3, 2008.) Is an apology enough? For that man, it's a necessary first step to humility, the economist's equivalent of sobriety.
Just as important, though, is the profile of Brooksley Born's life in the Post article, which should be read by every post-feminist woman (i.e., 20-somethings) who hasn't lived in a time when a truly extraordinary woman would face barriers at every turn. I was shaking after reading the story. She was a pioneer at a time when professions weren't open to women, and she was active in the women's movement to help open up opportunities. Sandra Day O'Connor's and Ruth Bader Ginsburg's stories we know. Brooksley Born's I didn't. I love her!

Giving Summers enough rope...

Frank Rich of The NY Times has called Larry Summers' performance on last week's Sunday talk shows a disaster, so his column is of course music to my ears. Tone deaf, is the term Rich used. Find the article at NY Times Rich. Here's one quote from Rich that resonates with my earliest anti-Summers blogs:

"The “dirty little secret,” Obama told Leno on Thursday, is that “most of the stuff that got us into trouble was perfectly legal.” An even dirtier secret is that a prime mover in keeping that stuff legal was Summers, who helped torpedo the regulation of derivatives while in the Clinton administration. His mentor Robert Rubin, no less, wrote in his 2003 memoir that Summers underestimated how the risk of derivatives might multiply “under extraordinary circumstances.”
Given that Summers worked for a secretive hedge fund, D. E. Shaw, after he was pushed out of Harvard’s presidency at the bubble’s height, you have to wonder how he can now sell the administration’s plan for buying up toxic assets with the help of hedge funds."

So, Frank Rich agrees with me, Janet, Lupi, Bob, and some others, too, who've been emailing and blogging our disgust with Summers. Hopefully, our president will catch on too. I can conjure up a Summers apology speech that would turn me around, though. "I would like to apologise to the American people for my positions taken in the period 1998-2000 regarding regulation (i.e., none is better than any) of the financial markets. In formulating the policy of the Clinton administration, I was most concerned about ....xxxxxx..., which turns out to have been an utterly stupid reason to let the bubble grow. I have decided to give up the practice of economics and become a documentary film maker, focusing on the life of academic economists and their families."
I would forgive old Larry and not mention him again in this blog or in any side emails.

Who should have a retrospective 90% windfall tax?

What really gripes me is not the robbers on Wall Street -- that's their job, (to rob legally) and we all knew it. And we loved it when our kids or their friends got big bucks with hedge funds or whatever. Wall Street is what it is.
BUT, the CONGRESS! It is what it says it isn't! What it isn't is the representative of the people's interest. What it is is an institution rife with craven, cowardly, corrupt and even lazy thespians, who created the very institutional framework that has brought us down. Imagine an institution that votes on December 15, at the very end of a President's term (2000), on a bill to prohibit all regulation of CDS's (credit default swaps) or CDOs (collateralized debt obligations), which has neither been reported out of a committee or subjected to ANY debate on the floor -- throws that bill into a 12th hour appropriations bill to keep the government running -- and approves it overwhelmingly (292 to 60 in the House--see how your congressman voted) and by "unanimous consent" in the Senate. (See the awful story in Wikipedia.)
If those yea'ers and consenters and no-show-ers argue that they didn't know because the bill was slipped into a vote at the last minute, couldn't shut down government by denying appropriations, or depended on their leadership to have done the homework, we should figuratively string 'em up by turning them out of office. But, if even one were to issue the following statement:

"I want to apologise to my consitutiuents; I let this happen because I was ignorant, [acceptable alternatives: asleep at the wheel, overly dependent on hedge fund PACs for campaign contributions, completely uncurious about how the financial system works, happy that I could get my own bills slipped into law in the dead of pre-Christmas recess night, unwilling to challenge a system that works so well for my own longevity in Congress, thought that the pros in the Clinton Admin (Rubin/Summers) were taking care of things]. All I really cared about at the time was staying in office and getting home early for Christmas. I let you, my constituents down, and to make up for it I will work diligently to force my party and institution to change its rules regarding last minute piggy-backing of bills onto appropriations bills. I will never again vote for an appropriations bill that contains anything but appropriations. I will also introduce legislation to impose a retrospective 90% windfall tax on my salary of 2000-2008 to pay back the taxpayer for my misdeeds."
I would stand up and vote for such a congressman. (And maybe even send him/her $10 donation!)

No more Larry Summers Watch

Cindy and Lupi both emailed to tell me Summers is out for Treasury, and Tim Geithner is in. A question from one of them: Is that good? Geithner was a protogee of Summers at Treasury, but what if we were all judged by our past bosses? We should let Geithner make his own mistakes; then hang him out to dry. Point is, Summers was a disaster at Treasury on his first watch, given his fatal policy choices (akin to invading Iraq -- except without human casualties, at least so far). So, rewarding him would have been too much. Now it appears Summers will be housed in the White House as "Senior Economic Advisor" to the President. (WashPost, Sat11-22) There, he can do more damage if not controlled, but at least he'll have less of a podium (we hope) for pontification. And, maybe Geithner, having acted with authority at the Fed, will have his own voice. (Of course, we don't know whether that will be any more effective than the bailout moves so far.) We'll have to watch and listen. Papers say Summers is being considered for Fed Chairman when Bernanke's term expires. Let's let the feminists and environmentalists work their magic over the next couple of years to scupper that one. As a self-appointed Madame DuFarge, I'm officially off the case, but still knitting.
Email me at jwagner@bethesda20817.net or leave a comment below.

What to do about Larry Summers?

We all know that Pres-Elect Obama is on fast track to appoint a new Treasury Secretary. Yes, we do need someone who understands the global financial system, but we DON'T need someone who was a major policy architect of the meltdown in the first place! That's Summers, in short. (see my previous posts for the evidence.)
To let the Obama people know that you won't feel happy if Summers, with all his baggage, is appointed as BIG MONEY-Spending Czar in the new administration, you can contact the Transition at http://change.gov/page/s/yourvision and just spill your guts.

Here's some more ammunition: Not only did Summers actively oppose the establishment of some oversight over the credit default swap market throughout his tenure at Treasury (first under Rubin and then as the Big T himself), but he's now a managing director of DE Shaw, a very large hedge fund. (Joined it late in 2006. The fund makes money buying distressed businesses. How rich is that? Lehmann Bros invested in it, ha ha!) I finally checked out our bad boy's recent BIO on Wikipedia. Up till then, I'd thought LS was just a globe-trotting Harvard prof. with a monthly column in the Financial Times, making his living giving speeches and interviews. (You can hear him self-justify in 2007 on Boston's radio interview show On Point .)

Think I'm off the wall about this guy? Know more about him that I should researh? You can comment directly at the end of this post, or email me at jwagner@bethesda20817.net.

Election Day Update on Bad Boys of the Meltdown

Looks as though word is getting out that Rubin and Summers won't do as Treasury Secretaries under Obama -- need to punish the guilty! Lupi R sent this link to MSNBC news article.
http://www.msnbc.msn.com/id/27453836/from/ET/
If Summers gets close, we'll have to go on an anti-Summers campaign.
But, at 81, can Paul Volcker do anything more than reminisce? (Hey, hey, before you call me agist, let's remember how many times we've questioned McCain's age as a factor in his ability to handle presidency.)
There are plenty of smart 50-something people to choose from for either administration. They don't have to have worked on Wall Street for credibility.

Let's start thinking of smart people we know. How about John Brennan of Vanguard? He's retiring. Vanguard is great. John Bogle is great (but also too old.) Any other ideas? Let me know at jwagner@bethesda20817.net

The Larry Summers Bad Boy Watch

Proving once again that there's no justice in politics, Larry Summers now appears to be on the short list for Treasury Secretary in an Obama administration.

According to Tom Raum of AP on Sat Oct 18 in The Washington Post (“Next treasury secretary will feel power and stress”)...

• "Obama's team includes Buffett, former Federal Reserve Chairman Paul Volcker and the two former treasury secretaries, Rubin, now an executive with Citigroup, and Summers. "
• "Summers has been put before the public a lot by the Obama campaign. But he's not without controversy. After serving as Clinton's final treasury secretary, he became president of Harvard. He drew worldwide attention for his comments that biological differences may partly explain the dearth of women among the very highest achieving scientists, a controversy that led to his resignation. "

If you think Summers' comments about women were offensive (I read them! I did!), let me assure you they're the least of his disqualifying attributes. Most important was his adamant opposition to regulation of the credit default swap (CDS) market during his stint as Treasury Secretary. Now, our gal Brooksley Born (Chair of the CFTC at the time) saw the trainwreck coming and did her best to stop it, but (I can just see it) Summers' bloviating style overwhelmed her poor little feminine lawyerly mind. Read all about it and weep for her and yourself and your non-bloviating 401K in the Oct 15 Washington Post article ("What went Wrong?)

If you are one of the millions who gave money to Obama (I did), email the campaign and let them know that you're on to Larry S and won't feel pretty if he's a bigwig in the Obama administration. To post a comment with the Obama campaign, go to http://my.barackobama.com/page/s/mypolicy .

Finally, if you want to argue with me, drop an email at jwagner@bethesda20817.net I'll incorporate your thoughts (with attribution if you give me permission) into future blogs. I'm on a roll, and you should be too!

The Bad Boys Responsible for our Financial/Economic Meltdown

Next time you see either Bob Rubin or Larry Summers pontificating on some talking heads show (e.g., "This Week" this week), remind yourself that these two (along with Alan Greenspan and Phil Gramm) created the mess we're in by scheming to prevent the US Commodity Futures Trading Commission from regulating credit default swaps. As Michael Greenberger pointed out on NPR's Fresh Air, these securities are the poster children of the greed orgy of the past 10 years. Don't let the bad boys of US financial policy get away with it. Write to any TV or radio news show (CNN, MSNBC, CNBC, FOX, CBS, ABC, etc) that airs an interview of any of these four bad boys without demanding that they explain their positions in the late 1990's against regulating CDS's.If we all do this, their inane answers may at the least prevent one or more of them from becoming senior officials or advisors in a McCain or Obama administration.But, don't trust me. See the New York Times Oct 8 article for a full description of our bad boys' role in our financial downfall at http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html

Think I'm right? Think I'm all wet? Email me at jwagner@bethesda20817.net and I'll post your comment if it's not too raunchy.