Conflict of Interest

The continuing sage of Lawrence Summers, head economic advisor to President Obama:

Not surprisingly, Lawrence Summers is convinced that he deserved every penny of the $8 million that Wall Street firms paid him last year. And why shouldn’t he be cut in on the loot from the loopholes in the toxic derivatives market that he pushed into law when he was Bill Clinton’s treasury secretary? No one has been more persistently effective in paving the way for the financial swindles that enriched the titans of finance while impoverishing the rest of the world than the man who is now the top economic adviser to President Obama.

It is especially disturbing that Summers got most of the $8 million from a major hedge fund at a time when such totally unregulated rich-guys-only investment clubs stand to make the most off the Obama administration’s plan for saving the banks. The scheme, as announced by Treasury Secretary Timothy Geithner, a Summers protégé, is to clean up the toxic holdings of the banks using taxpayer money and then turn them over to hedge funds that will risk little of their own capital. At least the banks are somewhat government-regulated, which cannot be said of the hedge funds, thanks to Summers.

It was Summers, as much as anyone, who in the Clinton years prevented the regulation of the hedge funds that are at the center of the explosion of the derivatives bubble, and the fact that D.E. Shaw, a leading hedge fund, paid the Obama adviser $5.2 million last year does suggest a serious conflict of interest. That sum is what Summers raked in for a part-time gig, in addition to the $2.77 million he received for 40 speaking engagements, largely before banks and investment firms, and on top of the $587,000 he was paid as a professor at Harvard.