Larry Summers. (Reuters/Jason Reed)
This story originally appeared at Truthdig. Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).
The idea that Barack Obama would still consider appointing Lawrence Summers to head the Federal Reserve rather than order an investigation into this former White House official’s Wall Street payments, reported Friday by The Wall Street Journal, mocks the president’s claimed concern for the disappearing middle class. Summers is in large measure responsible for that dismal outcome, and twice now, after top level economic postings in both the Clinton and Obama administrations, he has returned to gorge himself at the Wall Street trough.
As Clinton’s Treasury secretary, he pushed for radical deregulation allowing investment bankers to take wild risks with the federally insured deposits of ordinary folks, a disastrous move compounded when he successfully urged Congress to pass legislation banning the effective regulation of the tens of trillions in derivatives that often proved to be toxic.
The first direct result of those new laws was the mammoth merger that created Citigroup. Eight years later, the federal government had to save Citigroup from bankruptcy brought on by its leading role in the sale of those toxic mortgage-based derivatives, to the tune of $45 billion in taxpayer funds and backing $300 billion of the bank’s bad paper.
At that time, Citigroup paid Summers—teaching at Harvard and yet hustling as a Wall Street consultant—$45,000 for a lecture, a piddling amount compared with the $135,000 he got per talk from Goldman Sachs. In all, while he was advising candidate Obama during the 2008 election season, Summers made off with $8 million in Wall Street compensation, with the lion’s share coming from the D.E. Shaw hedge fund.
Some might argue this is ancient history, but as The Wall Street Journal reported, Summers, after serving as a top economic adviser to Obama, has done just as well on his second passing through the revolving door between Washington and Wall Street. He rejoined the D.E. Shaw hedge fund, not having done anything to inconvenience its operation while in government, and got a gig with the operator of Nasdaq and other heavy hitters.
The Journal also revealed that Summers re-entered service with Citigroup, but neither he nor the bank has revealed his current rate of pay. The Journal did report that Summers has been paid more than $100,000 per speech for some of his recent talks to the financial industry goliaths. The newspaper also noted that at one Citigroup forum in March, “Mr. Summers expressed surprise about the persistent backlash in Washington toward big banks.… ”
Speaking of lectures, Obama should deliver one to Summers, detailing why his prior record renders him unfit for future public service. As Obama pointed out in his speech on the economy Wednesday, “The income of the top 1 percent nearly quadrupled from 1979 to 2007, while the typical family’s barely budged.” Eight of those years of income stagnation occurred during the Clinton presidency, when Summers was designing policy that led to the derivative-induced housing bubble that exploded on George W. Bush’s watch.