I have some problems with Glenn Greenwald's piece from Saturday, "Larry Summers, Tim Geithner and Wall Street's ownership of government." My particular problem lies with the sneering discussion of the exorbitant ($2.7 million) amount that Summers received for speaking engagements last year. Greenwald is particularly outraged by a $135,000 speaking fee paid in April 2008 by Goldman Sachs:
That's $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama's election).
But, OK, a little overstatement, I can get past that. Google's been slow for me this week, too. Even given a dead heat or McCain advantage, there was still a fair chance Summers was going to get a job in a Democrat's White House, which would certainly provide ample reason for Goldman Sachs to invite him over to hear his thoughts. Continuing Greenwald:
Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It's basically an advanced bribe. And it's paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis.
Here is where I start to have a big, big problem with this piece. Without displaying any text from the speech in question, any insider account of the secrets that Summers shared (and having been out of government for seven years, one must wonder exactly what secrets these would have been) or the promises he made, or even any links to what he considers the pay-off for this, Greenwald basically (if he can use that as a safety qualifier, so can I) accuses Larry Summers of a crime.It's certainly possible that there's a long-term quid-pro-quo being paid off here, that in April of 2008 Larry Summers said to a room full of mimes at Goldman Sachs, listen, I know your former CEO is currently the Treasury Secretary, but in eight months, if either of the Democrats gets in, and then if he or she overcomes all the criticisms and appoints me to some important financial post, and, oh, yeah, if in September everything crashes around us and Lehman Brothers fails and AIG heads down the tubes, I promise that I will use all of the power that I can't conceivably have until January of next year to make sure that you get the best deal imaginable by somehow sneaking into meetings where I won't be between the Treasury and the Fed, and I will magically make certain that your former CEO manages to appoint another former Goldman employee as CEO of AIG, again without ever being in the room, and though I will have no power whatsoever at this point I'll make sure that you get the full amount of your contractually-obligated collateral payments from AIG and that you're reimbursed via a program that doesn't yet exist for Credit-Default Swaps which have yet to be a serious problem on your balance sheet. Also, a year from now, when the Treasury Secretary (who won't be me) proposes stricter financial oversight and regulation, I will personally make sure that it will apply directly to bank-holding companies, which you will convert to in September, even though right now in April of 2008, you're an investment bank and probably can't forsee ever putting yourself under regulation/supervision of the Fed.
Honestly, if Larry Summers was able to promise all of that in April 2008, he probably deserved more than $135,0001. And I bet Lehman execs are wishing they'd paid him more, too; he received $67,500 for a speaking engagement there the next day. If these are all advanced bribes, well, wow -- they should've doubled down. And why aren't we looking into Summers's really big-money appearances? He was paid $225,000 to speak to the Nigerian Newspaper of the Year, and made as much speaking to the American Chamber of Commerce in Argentina as he did at the aforementioned Goldman speech. Why haven't we seen some big spending in those directions? Surely, if Summers is motivated mostly by greed and bribery, we should expect TARP Part 4 to include massive allowances for these folks, as well.
Oh, and the Merrill Lynch speech that Greenwald mentions? Summers donated all $45,000 to charity, according to the same financial disclosure form [.pdf] that's apparently the source here. It's hard to spot it on the form, hiding directly under the only place where the $45,000 amount appears, so I can see why it would be excluded from the bold print accusation above. I've highlighted it below to make it easier to find.
Larry Summers has a lot of faults. His decisions so far may prove to be poor. I'm in complete agreement that if the administration is trying to skirt congressional compensation limits by creating special purpose vehicles, that's pushing the limit of the law and should be investigated. Summers may be complicit in that, and if so, that's a real story. But none of that is proven here, or in his disclosure forms, or in what Greenwald has written.
1 So -- is $135,000 a lot as a speaking fee? Yes. It puts Summers in the same pricing tier with such economic wizards as comedian Wayne Brady and Hootie and the Blowfish, "America's Favorite Corporate Band." Just the fact that anyone would pay Hootie et al upwards of $100K should have been a sign a long time ago that something is rotten in our financial system.
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Catherine Forsythe
Writer to the Stars
Emily Holleman
Iron Skillet
Leslie Harpole
old new lefty
Salon.com
Comments
In my opinion, the main policy question has been whether the U. S. financial system works better or not with a financial sector that includes Goldman Sachs, AIG, Citibank, and Morgan Stanley. The Krugmanesque critique of the "yes" position on this issue has a l0t of power, the Obama administration's view is not unreasonable and I don't think it's corrupt either. I don't have any objection in principle to throwing light on the cozy connections between Geithner, Summers, and Wall Street, but I think writers on the left should also be investigating whether or not the current financial sector can be effectively regulated so that its operations work in the public interest. What shape would a renewed regulator regime take, what are the current ideas of the Obama administration, and do they stand up to informed examination? These strike me as questions that need to be answered and I'd like to see a little more focus on them from Obama's critics on the left.
First off, Summers is living proof "change" is not the operative word in Obama's financial plans. "Retreads" is the word, and that's exactly what GS was counting on by paying Summers a ludicrous "speaking fee" -- not that they wouldn't have had access anyway.
Kent Pitman and I have consistently sung the same tune about all this: If Summers, Geithner and Obama really have a plan for how doling out trillions in bailout money and making 80% govt-backed non-recourse loans to the same people who created this mess will extricate us from this godawful mess, let's see it.
In the financial world I'm familiar with that means some sort of "pro-forma" statement that at least postulates success. Where's the document we can critique? Hell, even with the now-much-maligned no-doc loans, you were required to at least lie on a form.
You say you want a revolution, we'd all like to see the plan.
I may be in the minority, but I honestly *do* think we need *some* Wall Street people in the Administration to help figure out how to fix things. My worry is, with Geithner *and* Summers, we have entirely too many, with too few people who--as Mary Elizabeth Williams so eloquently puts it--"know what it’s like to get up before dawn to stand in a line".
Those April 2008 polls, incidentally, reflect a split Democratic electorate--most were indeed assuming at that point that there would be a route in Nov.
Everyone else -- please understand I'm not defending the system that allows such enormous payments for so little work. I can't think of anyone alive who should get $135,000 to make a speech somewhere. Bring back Lincoln, though...
As far as I am concerned Tom Cordle and a couple of others hit on the crux of the problem and it has nothing to do with Greenwald.
The foxes have been loosed in the hen house and we are the hens.
The issue is that two insiders, Summers and Geithner, and the insiders they hire to work with them, come from the same basic environment where the people who caused this mess come from.
They think the same way. They think up the same solutions. They are willing, once again, to gamble with other people's money, ours; and are coming up with proposals which will bring back the same old same old.
The rich, the same rich, will continue to get richer and the poor will still be poor and our kids will pay the bill.
That isn't a solution in my book, that is caving in to the oligarchs and telling they to just hang loose until we get things back mostly as they were. The Administration offers "transparency" and some new regulations, as yet very generalized at best.
I keep writing on this and a lot of people say that I am right, but "let's wait and see what Obama and company do." Hello? We are watching what they do. That is the whole point. If we define success as taking us back to essentially the same place then they will be successful over time.
But I am still unconvinced that either Summers or Geithner has any new ideas because they come from the system that gave us the old ideas.
Summers can go back to his $2.7 million a year hedge fund job which should be pretty rockin' by then with the new program that the government has concocted to essentially guarantee over 90% of the distressed asset purchases by the hedge funds and other private money which will bail out the banks even further.
Options? Sure. Bust the trusts, break them up and sell them off. Tell the hedge funds to go to hell, nationalize the Fed and turn it into a National Bank, and move Fanny and Freddy into HUD.
Then call it socialism or whatever anybody wants to call it. I call it giving the country a break. Who would do it?, well my replies to comments on my last post lays that out in detail. So I won't repeat that here.
Wish I could get on the bandwagon, and I am mostly in agreement with the rest of the Administration's programs, but this bandwagon is playing the same old tune.
Monte
On your point about nationalization and break up, I think the point has been well made in various publications and by the administration that it is politically impossible and illegal for the government to do this now, whether it's the right solution (which has yet to be proven to me -- I think the former FDIC chairman's op-ed about nationalization in the WSJ this weekend is terrifying) or not. But this wind-down, break-up power is exactly what the Geithner regulation plan calls for. What would motivate a pro-Wall Street greedmonger to ask for that power?
My bookmark for thinking there's been failure or widespread abdication of power to Wall Street will come with the results of the stress tests this month. Until then, I think it is absolutely too soon to say they've failed, because beyond the concrete, admitted, regretted mistakes of the compensation packages, I don't think we've yet seen actual, physical, consequential proof of failure or of corporate shielding by this administration.
I think conspiracy theories are basically out and you're right on this, Saturn.
On the other hand, since Tom Cordle invoked my name, here's what I'll say about his remarks because I agree somewhat with them as well...
It doesn't require a conspiracy theory to think that money can influence. I find that I am especially kind to people who have given me $100,000 and up for a few days' work. (Yes, days—speaking requires preparation. Saying it's a few hours is probably not really fair. Though it's possible he recycles the same material at some of these, so maybe one has to take that into accoun, too.)
I come back to the old wisdom (there is probably an official quote, but I don't know it except by what is probably bad paraphrase): never write off to conspiracy what can more easily be explained by ordinary incompetence or stupidity. In this case, it may be that Summers is competent at this basic job, but what requires a great deal of competence and is subtle is the art of not being influenced by large amounts of money. Cognitive dissonance and all that.
Jumping somewhat wildly to the definition of a "con game", part of it involves gaining confidence. It's easy to look at this as a bribe, but the more subtle possibility is that by being generous, these companies have taken various people into their confidence and are now friends with them.
And surely companies know this, so they may sprinkle money around in the direction of likely candidates on both sides, not by way of quid pro quo, but by way of making sure the people in office are likely to give every benefit of the doubt and every deference. Because one wants to believe that one was speaking to people one respects, not people who were trying to buy a vote. And, alas, to do that, one bends a little to make that seem right. And while bending, it's hard to know exactly how you break on things. So there is a risk there that needs managing in keeping one's mind clear.
As for the issue of asking those guys for a plan, I think that's something I'd like to see, but it's not a fair criticism of what Saturn has written. She isn't saying these guys are doing everything right. She's saying it's not a known fact, nor anything anyone has advanced any plausible reason to suspect, that they did this particular thing wrong. At least the objectively defined parts of this particular thing. The parts related to a con are harder to say, since to be conned does not require intent.
I'm willing to believe, and already kind of do believe, that this is at work somewhat. Ezra Klein had a great take on this today:
"But Summers' time working with Wall Street might have influenced his thinking in much more powerful and subtle ways. It's easy to mentally correct for the influence of a check. It's harder to account for influence of a friend. He may be unduly sympathetic to, and impressed by, his former colleagues. Being paid $5 million, and heavily flattered, by the principals at a hedge fund is the sort of thing that might make you pretty sympathetic to the principals at hedge funds. Plus, these are smart guys who know more about the topic than you do. How could your perspective not be informed by those relationships."
Just want to be sure that you understand that I never called either Summers or Geithner " a mindless, greed-focused, Wall Streeter in hiding," nor did I say Geithner was "a pro-Wall Street greedmonger."
Those are either your words, or you are quoting someone else. The implication of my argument has never been to characterize the two in those ways. Ms. Huffington has an interesting argument today in her masthead column about mindset
and how it leads to inevitable types of decisions. I am making the same sort of argument, although I did not know her position until I read it about an hour ago.
In theology we talk about the hermeneutic of an author or a group of people. The hermeneutic of these two men comes from what they are familiar with and know.
Finally, it is clear to me that there is no statutory authority within the banking laws to break up and sell the banks, but it is not so clear to me that there is not such authority under the anti-trust laws. Nobody talks about those laws in this context because, again, same point, nobody who is doing the talking ever deals with them.
Even if such authority were not to exist in statutory law it is not all that clear to me that the entity, public or private, that owns more of a company than51% of its assets are worth outright on the open market cannot exercise ownership if it chooses to do so. I mean, the government essentially fired the head of General Motors without hesitation. But, even if not, the threat of doing so could lead the existing management to do so, or at least that often works in every other business than banks.
Sorry to get you a bit off of your topic, but these issues are implicit in the Greenwald endictment. And I do think he is wrong on his assessment. The real world is far more subtle than that. And won't bother you here any more, at least for this game. ;-)
You wrote a good and provocative post, otherwise I would not have been here and enjoyed a bit of sparring over an important issue.
Monte
Thanks for your thoughtful comment. I don't know enough about anti-trust regulation to respond immediately, but I'll certainly visit and read more.
Far from being unusual, advanced bribery is as American as apple pie. What else are the outsized campaign contributions that make our democracy what it is? As these things go, $135,000, or even a couple of million collectively donated, to a man very likely to be in a position to influence billions is a bargain. It seems to have worked out swell for Wall Street.
What this has to do with Obama's record on economic policy is that without an Eleanor Roosevelt-like goad, it is likely that he will take the path of least resistance. In other words, if he has to let the scoundrels keep running the financial sector to make the economy improve, he will do so--and appoint a number of them to help him do so. Who provides that goad? Who is Obama's Eleanor? I like to think that in this day and age that function is served by the progressive (and largely Internet-based) movement that elected him. So we need Glenn Greenwald to keep the pressure on Obama, and to remind us at every turn of who's beholden to whom--even if in the process Greenwald becomes a Johnny One Note. Obama can only make bricks with the straw he has, but it's important to remember what kind of straw it is in the first place. So I hope along with Saturn but am glad that Greenwald won't let go of this particular issue.
In Harry Truman's memoirs he is quite dismissive of Eleanor's liberal meddling in FDR's policy agenda. But Truman himself built on Eleanor's, not Franklin's legacy when he desegregated the armed forces. Truly game-changing, paradigm-shifting policy is the result of synthesis.