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Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound

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I’ve been gobsmacked to see that not only is Larry Summers on various short lists of candidates to become the next Fed chairman, but that Summers is also supposedly closing in on the favorite, Janet Yellen.

In early 2012, Summers was lobbying hard to become the head of the World Bank and didn’t get the nod. The fact that he is now under consideration for a bigger job should set alarm bells off. While Paul Krugman weighs in on both, concluding that Yellen would be the better pick, he’s still far kinder to Summers than the Harvard economist deserves.

The big problem with Summers is not his record on deregulation (although that’s bad enough) or his foot-in-mouth remarks about women in math, or for suggesting that African countries would make for good toxic waste dumps. No, it’s his appalling record the one time he was in a leadership position, as president of Harvard. Summers was unquestionably the worst leader in Harvard’s history.

Summers, unduly impressed with his own economic credentials, overruled two successive presidents of Harvard Management Corporation (the in-house fund management operation chock full of well qualified and paid money managers that invest the Harvard endowment). Not content to let the pros have all the fun, Summers insisted on gambling with the university’s operating funds, which are the monies that come in every year (tuition and board payments, government grants, the payments out of the endowment allotted to the annual budget). His risk-taking left the University with over $2 billion in losses and unwind costs and forced wide-spread budget cuts, even down to getting rid of hot breakfasts. The Boston Globe provided an overview:

It happened at least once a year, every year. In a roomful of a dozen Harvard University financial officials, Jack Meyer, the hugely successful head of Harvard’s endowment, and Lawrence Summers, then the school’s president, would face off in a heated debate. The topic: cash and how the university was managing – or mismanaging – its basic operating funds.

Through the first half of this decade, Meyer repeatedly warned Summers and other Harvard officials that the school was being too aggressive with billions of dollars in cash, according to people present for the discussions, investing almost all of it with the endowment’s risky mix of stocks, bonds, hedge funds, and private equity. Meyer’s successor, Mohamed El-Erian, would later sound the same warnings to Summers, and to Harvard financial staff and board members.

“Mohamed was having a heart attack,’’ said one former financial executive….

In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.

Now Harvard had put some of its large operating budget at risk in speculative investments starting in the 1980s, but Summers ramped it up to a completely new level. Again from the Globe:

The very thing that the former endowment chiefs had worried about and warned of for so long then came to pass. Amid plunging global markets, Harvard would lose not only 27 percent of its $37 billion endowment in 2008, but $1.8 billion of the general operating cash – or 27 percent of some $6 billion invested. Harvard also would pay $500 million to get out of the interest-rate swaps Summers had entered into, which imploded when rates fell instead of rising. The university would have to issue $1.5 billion in bonds to shore up its cash position, on top of another $1 billion debt sale. And there were layoffs, pay freezes, and deep, university-wide budget cuts

Without overburdening you with detail on the swaps that blew up Summers’ piggy bank (see this Bloomberg story for details), let there be no doubt that Summers signed up to be a chump to Wall Street. As Epicurean Dealmaker remarked when the Bloomberg expose came out (emphasis ours):

Now forward swaps, or forward start swaps—which behave like normal swaps except the offsetting fixed and floating rate payments are scheduled to start at a date certain in the future—by themselves count as little more than rank interest rate speculation, specifically in this instance as a bet that short-term interest rates will rise in the future. They can make a great deal of sense when an issuer intends to sell bonds in the relatively near future and when the issuer wants to hedge against budgetary uncertainty by converting floating rate obligations into fixed rate debt. That being said, I have rarely encountered a corporate client who feels confident enough about both their absolute funding needs and current and impending market conditions to enter into a forward swap starting more than nine months into the future. Entering into a forward start swap for debt you do not intend to issue up to 20 years in the future sounds like either rank hubris or free money for Wall Street swap desks.

So Summers couldn’t keep his ego out of the way, bullied the people around him, ignored the advice of not one but two presidents of Harvard Management, and left a smoldering pile of losses in his wake. And serious adults are prepared to allow someone with so little maturity and such misplaced self confidence to have major sway over much bigger economic decisions?

Summers’ second big problem is the scandal that led to his ouster at Harvard, which was NOT the “women suck at elite math and sciences” remarks. The university has conveniently let that be assumed to be the proximate cause.

In fact, it was Summers’ long-standing relationship with and protection of Andrei Schleifer, a Harvard economics professor, who was at the heart of a corruption scandal where he used his influential role on a Harvard contract advising on Russian privatization to enrich himself and his wife, his chief lieutenant Jonathan Hay, and other cronies. The US government sued Harvard for breach of contract and Shleifer and Hay for fraud and won. This section comes from a terrifically well reported account in Institutional Investor by David McClintick:

The judge determined that Shleifer and Hay were subject to the conflict-of-interest rules and had tried to circumvent them; that Shleifer engaged in apparent self-dealing; that Hay attempted to “launder” $400,000 through his father and girlfriend; that Hay knew the claims he caused to be submitted to AID were false; and that Shleifer and Hay conspired to defraud the U.S. government by submitting false claims.

On August 3, 2005, the parties announced a settlement under which Harvard was required to pay $26.5 million to the U.S. government, Shleifer $2 million and Hay between $1 million and $2 million, depending on his earnings over the next decade. Shleifer was barred from participating in any AID project for two years and Hay for five years. Shleifer and Zimmerman were required by terms of the settlement to take out a $2 million mortgage on their Newton house. None of the defendants acknowledged any liability under the settlement. (Forum Financial also settled its lawsuit against Harvard, Shleifer and Hay under undisclosed terms.

And while Harvard can’t be held singularly responsible for the plutocratic land-grab in Russia, the fact that its project leaders decided to feed at the trough sure didn’t help:

Reinventing Russia was never going to be easy, but Harvard botched a historic opportunity. The failure to reform Russia’s legal system, one of the aid program’s chief goals, left a vacuum that has yet to be filled and impedes the country’s ability to confront economic and financial challenges today.

And while Summers was not responsible for Shleifer getting the contract, he was a booster and later protector of Shleifer:

Summers wasn’t president of Harvard when Shleifer’s mission to Moscow was coming apart. But as a Harvard economics professor in the 1980s, a World Bank and Treasury official in the 1990s, and Harvard’s president since 2001, Summers was positioned uniquely to influence Shleifer’s career path, to shape US aid to Russia and Shleifer’s role in it and even to shield Shleifer after the scandal broke. Though Summers, as Harvard president, recused himself from the school’s handling of the case, he made a point of taking aside Jeremy Knowles, then the dean of the faculty of arts and sciences, and asking him to protect Shleifer.

And the protection Shleifer got was considerable:

Knowles tells Institutional Investor that he does not remember Summers’ approaching him about Shleifer… However, not long after Summers says he intervened on the professor’s behalf, Knowles promoted Shleifer from professor of economics to a named chair, the Whipple V.N. Jones professorship.

Shleifer’s legal position changed on June 28, 2004, when Judge Woodlock ruled that he and Hay had conspired to defraud the U.S. government and had violated conflict-of-interest regulations. Still, there was no indication that the Summers administration had initiated disciplinary proceedings. To the contrary, efforts were seemingly made to divert attention from the growing scandal. The message from the top at Harvard was, “No problem — Andrei Shleifer is a star,” says one senior Harvard figure…

One instance was a meeting early in the academic year that began in September 2004, less than two months after the federal court formally adjudicated Shleifer’s liability for conspiring to defraud the U.S. government. A faculty member asked [Dean] Kirby why Harvard should defend a professor who had been found liable for conspiring to commit fraud. The second confrontation came early in the current academic year when another professor asked Kirby why Harvard should pay a settlement of $26.5 million and legal fees estimated at between $10 million and $15 million for legal violations by a single professor and his employee, about which it was unaware. On both occasions Kirby is said to have turned red in the face and angrily cut off discussion.

On at least one other occasion, Summers himself told members of the faculty of arts and sciences that the millions of dollars that Harvard paid in damages did not come from the budget of the faculty of arts and sciences, but didn’t say where the money came from. Those listening inferred he meant that the matter shouldn’t be of concern to the faculty and that they shouldn’t raise it, a curious notion, given that Shleifer was one of their own…

Shleifer has never acknowledged doing anything wrong. Summers has said nothing. And so far as is known, there has been no internal investigation or sanction. “An observer trying to make sense of the University’s position on Shleifer, Ogletree and Tribe is driven to an unhappy conclusion. Defiance seems to be a better way to escape institutional opprobrium than confession and apology. . . . And most of all being a close personal friend of the president probably does one no harm.”

But for the faculty, which had already had frictions with Summers, the Russia scandal was the final straw. Copies of the Institutional Investor article were stuffed in the mailbox of every faculty member the morning of the no-confidence vote that forced Summers’ resignation.

And that’s before we get to Summers’ role in the ouster of Brooksley Born over credit default swaps, and his role as Treasury secretary in supporting the passage of Gramm–Leach–Bliley and the repeal of Glass Steagall (admittedly so shot full of holes at that point as to be close to a dead letter, but still necessary to allow Traveler and Citigroup to merge). Yet Sumers has refused to recant any of these actions.

So with this record, it’s hard to watch Paul Krugman yet again tarnish his good reputation endorsing, even in a careful way, a colossally failed proposition like Larry Summers (Krugman put both Yellen and Summers in the “I know and admire” category). Take that back. Summers is your man if you are a banker, looter, or plutocrat.

But given that (per the Ron Suskind book Confidence Men), Obama increasingly couldn’t abide Summers, and Obama wouldn’t nominate Summers for the less influential World Bank position, one has to wonder why his name is suddenly being bruited about as a strong contender for the Fed chair. It may simply be the dint of Summers’ PR efforts.

But I worry another play is afoot. As much as Yellen and Summers are expected to take largely similar postures on monetary policy, Yellen is anticipated to be less of a bank booster than Summers. So Wall Street is likely to be pushing Summers’ candidacy. But the real play may be that the insiders know that Summers won’t hold up well under protracted scrutiny, and at a late date, Timothy Geithner will be pushed to the fore. I can only hope that Geithner (due to his lack of monetary economy chops) won’t be seen as an acceptable alternative, but I would not bet on being so lucky.

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109 comments

  1. Kokuanani

    Please, Yves. Dogs are important, even those unfortunate enough to end up in the pound. Larry Summers should not be allowed anywhere near them.

    A toxic waste dump, perhaps. But not the pound.

    1. jake chase

      I read through most of these comments and it seems nobody has bothered to say what a fantastic piece Yves has put together here. Let me just say, Bravo! I have made a small career out of watching the peregrinations of Larry Summerstock, and the only thing I can say about him is that you could not make him up and have anyone believe he was even a decent caricature of the pompous empty suit academic charlatan toadying up to big money and shoveling in as much as he can for as long as he can.

      And he needs a haircut, too. He looks like the Maestro on Seinfeld.

    2. Emma

      Agreed.
      Paradise and Inferno together in a poem are more than welcome, but Summers and dogs together? Never!
      Summers is too barking mad for a doghouse and is most suited to a slaughterhouse, preferably one where the animals revolt and slowly sever him to smithereens.

      1. AndyLynn

        the management of both dog pounds & toxic waste dumps IMHO requires competence, imagination & humaneness – none of which are Mr. Summers’ apparent strong suits. isn’t he a “made man” by now, with *millions* on his balance sheet?

        can’t we just force him into retirement, and let him drink himself to death – in contemplation of how history will measure his legacy?

    3. Eric Zuesse

      Summers shouldn’t run anything; he should be cleaning latrines somewhere, like India’s untouchables are (but unjustly) forced to do; he should be in prison in a democracy, instead of be a whore to the aristocracy in a plutocracy (the U.S.).

    1. Yves Smith Post author

      Dogs have teeth, and so should elicit better treatment from Summers than middle class Americans can.

      1. Dan Kervick

        If Summers ran a dog pound, he would get into arguments with the pooches about the best way to mark territory.

  2. Freddie Thunders

    Fatso was employed by Obama first thing, even as his reputation preceded him, such as deregulation of derivatives contracts. But for his critical neo-liberal work in Russia and the alure of the corrupt Clinton administration, most criticism was that he was uncooth, as opposed to evil.

    1. Andrew Watts

      He could’ve gotten his job in the Obama administration because of his links to the Clinton faction of the Democratic Party. Instead of his past “successes”.

      I’ve always wonder what backroom dealing went on in 2008 between Clinton and Obama.

  3. run75441

    One Summers quote in testimony to Congress on Born’s attempts to regulate the derivative market:

    “casting a shadow of regulatory uncertainty over an otherwise thriving market.”

    He in conjunction with Rubin, Levitt, the grand Maestro – Greenspan, Gramm, etc. can bear the brunt of the blame for 2008.

    I hope he does not succeed either. I wrote my reps and the Pres when Summers was being considered for Treasurer. He needs to stay on the side lines with Geithner.

    You did forget Iris Mack who was fired (or let go) from Harvard for emailing Summers and suggesting Harvard not be so aggressive in investing in WMDs.

  4. profoundlogic

    Perhaps he’d make a good filler for Purina SmartBlend. They can just re-label and call it SmartAssBlend.

  5. PaulArt

    The problem is, Is anyone in Washington listening? We are vacationing in the capital and everywhere I see a vibrant economy, thriving, booming, bustling. Small business franchise eateries are not able to keep up. I waited for 20 minutes for my order to come up at a Japanese sit-in/take-out. This is in Alexandria to boot. The Keynesian magic of Gubmint largesse is working wonders. Unemployment rate in April 2013 was 4.1%. Nobody here gives a toss about what is happening outside the Citadel walls and Larry Summers is talking to the people who matter inside the Citadel walls while we are going around and around on the outside. We need a Joshua and some Horns.

    1. QT

      We need an election that includes non-party candidates. I doubt that if the status quo felt threatened by such an election martial law wouldn’t be immediately imposed. The lock-down of Boston was a dress rehearsal.

    2. Bud Vase

      Paul we’re right in there with the MIC. Let’s take a drive down South Capital across the river, we could take another tour and wave to the hookers as we leave the third world part of Baltimore too. Don’t forget the pockets, and food banks in the ravaged suburbs.
      Who can forget during the CCCP era when all the schoolkids were reminded that the troubles, the social problems, were all conveniently swept away from view, but they were huge – behind the Iron Curtain. We lead in incarceration, and homeless people can’t stay in or near Starbucks. If you got the money, you’re in.

      1. Juan

        Bud, I think you got it — the dual nature of cities like DC [and even small towns in the SW and southern IL. The extreme differences in job quality, income, wealth are not particularly noticed/understood by either Sommers or Yellen [or...........]yet will be overcome. It’s only a matter of methods.

    1. CB

      I agree about permanent retirement, but I’m guessing Larry is a very wealthy man and SS would be the proverbial pocket change.

  6. Thor's Hammer

    Twitchy Timmy or Larry “Harvard Wrecker” Summers? They both are perfectly qualified for the position in Obama World.

  7. QT

    We are totally screwed if we can’t see this (and other) sociopath(s) for what he/they is/are.

    Abject failure and self-enhancement/enrichment follow this pariah like baby ducks, yet he keeps on keeping on, while those who know and care about his dismal record can only shake their heads in disgust and disbelief.

    I wouldn’t hire this shitbag to run a trash compactor at a landfill.

    1. Lambert Strether

      That’s good. He’d wreck the run off water, not to say the groundwater. And then there’s the odor. Landfills are important.

      Why not pay Summers and put him in a room with nothing to do, like they do in Japan?

      Or, better yet, give him some subordinates so he can boss them around and order up reports? But isolate him, so the subordinate don’t actually do anything and all the reports are fake. Rather like Hitler in his bunker, ordering phantom armies to attack.

      1. Ms G

        Yes. Summers belongs in a basement at the Hamilton Institute with Greenspan, Rubin, Lloyd, Pandit, Geithner, Weill, Mankiw and a couple of others. Locked room — some air circulation — no windows; but a free Monopoly set and fake money. They can play, bet, swap, derivatize, and pretend they just took over all real estate in Asia and sold the debt to Americans on Medicaid … but it is all fake. All of it.

        If they behave, they get toy blackberries unconnected to anything outside, where they can text and SMS each other inside information and nasty deals for muppets to their heart’s content.

        I’d ask Hasbro to be the financial sponsor for this facility.

        And a non-gourmet catfood maker from BigAg to provide the food supply for these gentlemen’s breakfeast, lunch and dinner until they keel over and die.

  8. John F. Opie

    Suprising that no one sees the common theme here: cronyism. Crony is as crony does. At least some of the elites talked about here are so thoroughly and completely corrupt that they no longer see what they are doing as actually being corrupt, but rather as part and parcel of how things work.

    Of course, for their peer group, or, more exactly, their desired peer group, that is how things work, and is symptomatic of the endemnic corruption of ethics and morals in the pursuit of getting real money in the best way possible, screwing it out of others. Yves has documented the mindset in her book.

    Of course Summers screwed over Harvard: he did it because his arrogance and greed, driven by an overwhelming ego, are the only things that matter to him. He’s the perfect candidate, in the eyes of Wall Street, for the Fed: they know exactly how to play him so that he thinks he’s god’s gift to finance and their way to even more billions pillaged from the government’s coffers.

    Of course, given the sycophantic press we have today, we’ll here laudatio after laudatio for Summers and willful ignorance how there could be anything questionable about the man. If you were looking for a better way to ruin the country’s finances, you’d have to look hard to find someone worse than Summers.

    Ye gods of the copybook headings.

  9. QT

    A good, conservative friend of mind recently remarked that he wouldn’t vote for a candidate that was not “smart” enough to use elected office to advance their own wealth and power.

    Psychopathy seems to be an acid test for electability.

  10. Dino Reno

    Savior Alert. Can there be a more dangerous guy? An institutional operator who thinks he is a player. Obama has a nice fat retirement in mind courtesy of the Fortune 500 so a Summers’ appointment is a fait accompli.
    Krugman has even signed on to this WTF appointment and Ivy League love fest. And all this propelled by rumors of Summers’ monster intellect, so big and complicated it has never been shown for public viewing for fear it would upend our most basic assumptions about man and nature. I’m in awe of the audacity.

  11. whatclaptrap

    Foot in the mouth remark about women and math?

    His “remarks” were right on the money. It is absiord to claim otherwise.

    You would undderstand this if 1) you actually knew anything about Math or Science

    2) You actually knew anything about the history of Math or science, not to meantio the history of Mankind.

    and

    3) Were not pumped up with your idiotic feminism hogwash.

    You must really stop confusing the passable mediocrity of the “better” female members of the Left’s “Nomenklatura” with real, world historical accomplishment. Your sex does not have a Gauss,Hilbert of Newton within it.

    This valorization of fmeales where there is no real accomplishment will just further push us behind as a nation, and nowhere could this be clearer than in Math and Sciene. Our competitors in the world are not half so foolish.

    Nothing more clearly illustrates the disatrous narcissim of the the Establishment Left or their capacity for delusions then their idiotic notions about females and real intelllectual accomplishment. It amounts to so much cosmetics.

    But then if you did that you would have to face how wrong you are about everything else.

    Oh, and if that imbicile Krugman recommends someone oone can pretty much guarentee that that person os worse than useless.

    1. F. Beard

      Autistics can be great at math, no?

      Wouldn’t want to marry one though.

      Vive le difference!

      1. Juan

        ”I’d also guess that economic theory does not require much in the way of math anyway.”

        Take a look into econometrics and mathematical econonomics. Overall [and by my thought, icorrectly] there’s been an increasing use of math in economics.

    2. F. Beard

      I’d also guess that economic theory does not require much in the way of math anyway. Steve Keen is doing wonders with differential equations and even I can model a bank with a spreadsheet.

    3. ohmyheck

      Note to Lambert: PLEASE do not delete this comment. I love mysogynists who cannot spell! Don’t you? The amusement factor alone is worth it, imho.

      1. sd

        I thought it was kind of cool that Larry Summers took the time to comment. Though, he should have waited for tbe lunchtime martinis to wear off.

    4. Mickey Marzick in Akron, Ohio

      Claptrap,

      Normally I wouldn’t waste my time with your claptrap..

      But do the names Marie Curie and Lise Meitner in PHYSICS ring a bell or is that feminist propaganda as well?

      1. jurisV

        Claptrap’s ‘comment’ was a doozy ! The best thing I can say that about it is that it might be a totally disastrous attempt at ‘humor’ — but if so, it’s a total FAIL

        @Mickey — I liked your response because it made me remember that the BEST Math Professor I had (for an advanced math class) was a woman!! One of my current math idols just happens to be Cathy O’Neil, aka mathbabe — http://mathbabe.org/

      2. Nathanael

        I’d also mention Rear Admiral Grace Hopper.

        And one of the greatest mathematicians of all of world history, Emma Noether.

        The impact of her work is still not fully understood, because it is so great. It redefined the relationships between different fields of mathematics.

    5. craazyman

      they can’t even count past 39! That’s when I stopped counting too. Faaak. just eat right and exercise and you’re 39 forever.

      Now that everybody has calculators and computers what difference does it make if women can do math? Nobody needs mathematicians. It’s like being a blacksmith. Forget about it already. Society has moved on.

      Put Professor Summers in charge of the Bigfoot Field Research Organization. It needs a genius if they’re ever gonna find one.

    6. Moneta

      You are right.

      There is a difference between men and women. Men tend to be more heavily represented at the extremes of the “intelligence” distribution. So there are less infamous women also.

    7. Yves Smith Post author

      You’ve apparently never heard of nature v. nuture. There’s tons of evidence (expectancy theory) that people who are expected to do badly at certain tasks (or conversely, to do well) have their performance significantly affected by those attitudes.

      Women continue to show gains v. men in math performance as hostile attitudes are increasingly seen as retrograde. I know women my age and younger who were discouraged from going into math even though they exhibited considerable potential. So with talented women being forced out of the sample. tell me how you can conclude anything? In addition, transgendered women to men in the sciences report that their work as a man (same work!) is commonly touted by people who don’t know of the gender change as superior to their papers as a female (the usual remarks are: “Oh, Tom is really good, I’m not impressed with his sister Theresa’s papers” when Tom and Theresa are the same person, just after and before the gender change).

      And despite all your angry bluster, I suspect you don’t have the intellectual chops to rebut this:

      http://www.nakedcapitalism.com/2012/02/cathy-oneil-women-in-math-and-the-stereotype-threat.html

      Oh, and this gives an idea of the enormous obstacles for talented women to get anywhere in elite math historically, so don’t try talking history, that sample is even more biased:

      http://mathbabe.org/2012/03/23/today-is-sonia-kovalevsky-day/

      And this paper debunks the supposed performance gap at the high end of the spectrum using cross cultural analysis:

      http://www.news.wisc.edu/20125

      1. CJ

        It works the other way as well. I am post-op trans MTF 15+ years, and 25+ in high tech. As soon as I transitioned, the bar went up, as in way up. I was expected to prove what in the past would be accepted at face value based on my word.
        And I have. But men that make these bogus claims of superiority are in my opinion some of the most pathetic people on the planet.

    8. Juan

      Some claptrap always helps – But I’m fairly confident my late sister, with a Doctorate in Nuclear Engineering and working at Los Alamos, would have disagreed with large portions of your comment. Be Calm.

  12. Onemoretime

    So as they come around the 1st turn it’s Timmy coming up on the outside, Larry is falling back and Yellin is still in the lead.

  13. indio007

    Summers as head of the FED scares me to death. Then again, maybe he’s just the incompetent fool we need to finally bring it down.

  14. JGordon

    Much like dying trees in a forest need fungi, cockroaches, and other beneficial decomposers to help them along in the proces of death and decomposition for the good of the ecosystem, Larry Summers is an important agent in the destruction of empire and the decomposition of the current putrid, rotting system.

    I hope Larry Summers is appointed to the Federal Reserve. And not only that, but if Larry then goes on to run for president (that is, if we do still have the facade of a democracy after the Obama regime leaves power), then I’ll be the first to cast my vote for him.

  15. kaj

    Yves is wrong when she says that Summers would follow the same easy money policies as Yellen. FT had a Summers column about 7-8 months ago which suggested that he would be “a middle roader,” that is he would tighten, now that the economy had recovered somewhat. Summers is boot-licker of the worst kind, a Wall-Street toady and he would do anything to satisfy Wall Street finance geniuses, however wrong they may be. Just like Obama, he would be looking out for what alliances to make to be as rich as the Clintons after his term in office. These people are dreadful bores and equate their welfare with that of the society and humman-kind.

    I am not for an easy money policy uniformly applied but I think that absent a good and fruitful Keynesian Fiscal stimulus covering a national grid, infrastructure developmemt, education, medicare for all with constraints on physian and hospital pay, higher income taxes for family incomes over $150,000, lowered military spending, etc. the wealth effect generated by Bernanke has helped the economy advance, albeit, in a disjointed fashion. Summers is essentially too arrogant and gutless man unlike Bernanke to mount a Bernanke like efforts.

  16. peace

    Insert expletives here!

    Narcissist, bully Summers’ worldview includes himself before anything else – his status, his reputation and his promotion cloud his judgment and decision processes.

    Krugman completes his transformation from contrarian to crony. His judgment, partiality and endorsement is based on biased gossip among the “others I talk to.” Post-Nobel-Krugman is more conformist and less contrarian probably due to the deference and status based praise that comes with a Nobel title. Krugman’s contrarian fiscal conservatism regarding U.S. debt gained him a post-bust Nobel nod, but the Nobel legitimized and transformed Krugman. This process may be due to rubbing elbows with elites or due to ego-boosting, status-blinded, brown-nosers. What irritates me most is how Krugman so nonchalantly waves his magic wand on the NYTimes’ OpEd page and magically reduces all possible contenders to two individuals who are “head and shoulders above anyone else I’ve heard mentioned [in my circle of elites]”

    Non-democratic appointments are one reason the U.S. central bank malfunctions – or should I say – why it functions in favor of elites.

    (I’m aware my praise of others on this page may unintendedly bloat egos.)

  17. Propertius

    Speaking as a Harvard faculty brat with a great affection for canines, I’d much rather Summers were in charge of Harvard than any dog pound. Dog pounds are much more importnt than Harvard.

  18. liberal

    But given that (per the Ron Suskind book Confidence Men), Obama increasingly couldn’t abide Summers…

    My takeaway from that book was that Geithner was so bad, he made even Summers look good…

  19. Susan the other

    Larry Summers, appears to be a collaborator with outright fraudsters, from Schleifer, to the derivatives scam, to the axing of Brooksley Born. And probably now the inhumane austerity that is being imposed on Europe by none other than the banksters. I read a blurb about Schleifer a while ago and wondered why it didn’t have legs. I hope this post is a prosthetic. Summers probably belongs in prison. Nice to hear that the Harvard Faculty dumped him. But disconcerting to think that in one year Summers would bring down everything Bernanke has tried to keep together. And to remember that Timmy is Summers very own protege like Tiberius and whats his name. And another question – what did Timmy tell Jack Lew that made Jack Lew jet off to Athens and congratulate the Greek “government” on its successful enforcement of austerity? Was it Summers, speaking thru Timmy?

  20. craazyman

    Maybe they can put him in the next season of “Game of Thrones”.

    I’m just trying to be helpful.

    If he checks out the clip on HuffPo he might say “whoa!” and tell Obama to forget the Fed.

  21. scraping_by

    Summers has one great effect for the Ditto administration: no longer will the Blogosphere be debating “Obama: Stupid or Evil?” Much of the post and comment center on the question of a career of fuckups and fuckovers as the result of his self-referential blindness (stupid) or his symbiotic and paraphillic connection with Wall Street’s looting class (evil, by definition).

    Of course, ‘both’ is the answer best covers the facts, but corrupt bedwetters who are obvious and unsympathetic would take the pressure off our emotional, feeling President. Give Barry a chance to show his emotional nature and reveal his deep inner feelings while taking care of all that math stuff. Become the fall guy for not taking care of technical details while the gusher-in-chief goes around feeling about things.

    Ms. Yellen might make a good punching bag for the loot-n-scoot crowd, justifying the well-known condescension by our national emotional identifier, but a fat white guy completely invulnerable to reality could make more noise and take the fall with a much larger splat.

  22. redleg

    Summers, Geithner, Rubin, et al., to quote Douglas Adams out of context, are “a bunch of mindless jerks who’ll be the first against the wall when the revolution comes”.

  23. dcb

    1) there will never be another good head of the fed, wall street won’t let it happen, and they are too big a donor for it to happen as well.

    2) Having written to the nYtimes more than I can count krugman blinds himself to almost any and all corruption, esp if it is on the democratic side. He never comments on the corruption under bernanke, ignores the fed regulatory role, pretends evidence that conflics or doesn’t support hsi views doesn’t exist. the list is endless. He is all about protecting the status quo. cleearly anyone disruptive of the status quo won’t be invited to policy or advisor circles. So I think for krugman it’s about himself.
    – No economist worth a damn can’t understand what’s bad about olgiopoly systems. regardless of all the rate fixing scandals, foul play by banks, too much political power, and good economics, krugman hasn’t been a major voice in breaking up too big to fail. This is the role he should have been playing for three years instead of exclusively bashing republicans and supporting bernanke.
    3)The reality is Yellen is just as bed, they won’t put anyone in to really reform the system, the answer will be to print. That’s the only thing that will be allowed into that position.

    the good choices fischer, hoenig (who has the best long term track record of being right) aren’t even in the running. the fed is the worst example of group think, institutional corruption I can think of, and it seems none of them even grasp how corrupt they are.

    1. Banger

      Generally speaking, the “liberal” and “progressive” nomenklatura do not believe serious corruption is possible in the government. This is another of the more remarkable features of American Exceptionalism as a mass delusion. This very fact has made massive and systemic corruption easy as pie.

      1. Juan

        Daniel Kaufmann [WB for a decade, Brookings, etc] specializes in ”State Capture” while also looking into some [all?] corruption [incl. 'advanced' nations]. Very dif. rankings than Transperency Intl.

  24. ScentOfViolets

    I guess this local epitome of brilliance has never heard of Emmy Noether. Who is she? Only the mathematician who made most of modern physics what it is today, for example, relating conservation laws to different types of symmetry.

    1. MaroonBulldog

      Hilbert recognized the genius of Emmy Noether and everything he could to promote her career.

    2. Andrew Foland

      Emmy Noether’s work on Noether’s Theorem was mentioned, and in my professional opinion (speaking as a former physics professor in the August Institution under discussion) it is the deepest result in physics.

      (And let me concur in the assertion that while the women-in-science remarks were the proximate cause of the holding of the no-confidence vote, they were only a fraction of what drove the animus.)

      For whatclaptrap: it turns out I actually DO know something about math and science. And so did my Ph.D. advisor, who had twice as many X-chromosomes as you.

    3. Nathanael

      Noether’s impact goes way beyond physics. Her impact on pure mathematics is still not fully understood, as people are still trying to catch up with the implications of her work for the structure of analysis. (Analysis is a technical term in math, for those who don’t know.)

  25. Francois T

    There’s only one logical** choice for next Fed Chair.

    It’s to have a Fed Chairwoman: And no! her name wouldn’t be Janet, but Susan!

    J’ai dit!!

    **Please, try not to laugh too hard because I used this word. I understand that logic and Washington are antithetical, but hope springs eternal.

  26. Francis

    Everyone’s missing the point. Shut down Harvard! Seriously, a lot of boiler plate damage exits here, same with Georgetown, A lot of good too, but a lot of pro-hegemonic militarism, debt violence and status quo. I see this is other schools, the most vapid pigs in law and business. That’s why the US is f$%ked up. Summers is a hero to owner-ruler class. The MoveOn types only have his boorishness to complain about.

    1. JTFaraday

      If the Harvard faculty was so concerned with the financial damage Summers did to Harvard, you would think that they would have spoken out publicly when Obama made him such a central part of his Administration.

      Will they take this second opportunity to make good? Anyone taking bets?

      Meanwhile, Robert Rubin still sits on the Board at Harvard. The Harvard faculty can’t connect the dots between Summers, Rubin, damage to Harvard, and damage to the national and global economy?

      Tenured faculties are an insular bunch who like to whine and claim victim status when they think something directly impacts them or when they think something to which they’re entitled is being withheld from them.

      This is exactly what you see going on at NYU right now, where “the faculty” have belatedly woken up to the idea that the real estate expansion plans of the Board may be jeopardizing the fiscal soundness of the institution to which an aging tenured faculty has irreparably tied its fortunes. :)

      Now NYU tenured faculty are pretending innocence to exactly the matters of university governance with which they’ve actively collaborated for years because they believed doing so would benefit themselves at the expense of the underlings they view as being there solely to serve them– namely, over enrollment and resulting poor conditions for high tuition paying students, personally over working underpaid staff often in direct violation of union contracts while absenting themselves from campus, and poor working conditions and pay for adjuncts, 90% of whom they treat like some other species.

      Now, thanks to the expansion plans of the Board, they’re afraid all that hard work is in jeopardy.

      Tenured academic faculties never stick their necks out when something is of relevance to anyone or anything other than themselves at their own institutions. One can hardly expect such compromised people to speak out when something is of relevance to the broader public.

      Needless to say, this is not the public purpose of tenure.

      1. Bobito

        The problem is not tenure. That’s a red herring.

        It’s instructive to compare US universities with high quality universities in other countries. What jumps out is that faculty salaries are much, much lower. In the US a top professor in engineering or science can make 300K a year. 200K a year is not uncommon, and something around 140/150 is quite standard for senior faculty in technical disciplines. Such salaries seem incredible in even such rich countries as Germany, France, or England, where something around 50-60 euros annually is about all a professor can aspire to. Also the striation is not evident. In most other countries all faculty at the same rank are paid roughly the same – maybe there are variations up to 20%, but they are based mainly on seniority and administrative bonuses – and there is nothing like the 200% variation one sees in many US departments.

        In Europe most professors are something like civil servants, essentially unfireable, as if they had tenure. This in and of itself is not the problem.

        Also, salaries in US universities are very high. This creates dynamics not present in the traditional university. Among other things, one can get rich as a university professor. This helps select for a higher density of venal and ambitious people and a lower density of the traditional scholarly sort (which is who educates students and often does the best research). These absurd salaries go hand in hand with the absurd tuition charged by US universities. And all this money serves to perturb the objectives of universities.

        How much of Harvard’s administrative energy is dedicated to managing its enormous wealth and how much is dedicated to managing teaching and research?

        Lower faculty pay and more parity in faculty pay would lead to healthier and cheaper universities. The star system fomented by administrators serves interests transverse to the core objectives of a university, which are education and research.

        1. JTFaraday

          “The problem is not tenure. That’s a red herring.”

          In this particular case, I didn’t say “tenure was the problem.” Rather, I said they weren’t even using their tenure.

          In this particular case, the Harvard clerics have tenure in order to speak out against the careerist ambitions of their biggest D-Bag students (and a corrupting alumnus) without getting fired like an ordinary peon, a power they apparently prefer to disregard in the hopes of making a bet similar to that made by tenured faculty at NYU.

          This despite the fact that the NYU faculty muppets are starting to wonder if they’re really still winning that bet– collaborating with the administration it whines about while lying about it in public in the hopes of a nice and continuing pay-off– or if they’re going to get their faces ripped off in the end instead.

        2. Nathanael

          It’s not the faculty salaries which are the problem.

          Go look at the administrative costs. They’ve been exploding for decades. A lot of it goes into pyramid-building, but a lot is just paying administrators.

          1. Lambert Strether

            As I keep saying, the great State of Maine spends one-third of the university budget on “The System,” and yet nobody can explain what it does, over and above the individual campus administrations.

    2. Bobito

      As a Harvard grad, I partly share your sentiments. The only benefit to me of attending Harvard was the strength of my classmates in the technical discipline I studied (they were very, very good – I’ve never been around such smart people since, and I am a university professor now). The attention to actual education was minimal and a large chunk of the student body were horribly ambitious people with aspirations to be President of Country X or Chief Justice (and some of them will be, which is I think your point …). A typical classmate was R****T M******’s son, a useless lout who now runs a multibillion dollar enterprise. He was hardly alone, and some of those who came from humbler backgrouns were no better. Talent there was, but it was constantly told that it was the best and the brightest and therefore entitled to control and lead, and much of it believed that nonsense.

  27. casino implosion

    Christ, the most usual of the usual suspects. Is there anything this schweinehund’s hoofprints aren’t all over??

    Hey, can anyone recommend a good book on the Russian privatization?

  28. Mike Hall

    Could it be that if Summers is as rotten as the Schliefer affair suggests, his dirty secrets, doubtless known to Wall St. elites make him an eminently maleable candidate to their interests?

    Indeed, bearing in mind the extent of information gathering revealed by Snowden, is this not the likely basis of many ‘public’ appointments in US % Europe both?

    How many of all these slime balls in the top few percent & their useful idiots have clean hands?

    Is not knowledge of that the ultimate power?

  29. Hugh

    “So Summers couldn’t keep his ego out of the way, bullied the people around him, ignored the advice of not one but two presidents of Harvard Management, and left a smoldering pile of losses in his wake”

    Isn’t this exactly the kind of person the powers that be are looking for to head the Fed, especially the part about smoldering pile of losses?

    “So with this record, it’s hard to watch Paul Krugman yet again tarnish his good reputation endorsing, even in a careful way, a colossally failed proposition like Larry Summers”

    Krugman is a member of the tribe. His allegiance has always been to the Establishment to which both he and Summers belong, the same Establishment that loots us.

    1. Z

      krugman is more interested in serving his tribes than the truth. That’s extremely obvious.

      His tribes are:
      1. The jewish elite
      2. establishment economists
      3. the democratic party

      And if you are a jewish elite establishment economist who is a democratic party partisan he will lie his ass off to protect/serve your personal interests. Think bernanke, think larry summers, think jonathan gruber.

      Z

      1. Nathan Tankus

        anti-semite, go away. You’re insulting my dead (holocaust victim) relatives by implying a commitment to orthodoxy or our modern democratic party has anything to do with Judaism or being Jewish.

  30. Conscience of a Conservative

    Anyone associated with Robert Rubin need not apply.
    We need someone like Sheila Bair or Thomas Hoenig.

  31. allcoppedout

    My dog, Maxwell, would not go to any kennels run by this man. Summers lacks dog pound quality. The Establishment needs to go. The question is how we effect constitutional change before we get back to voting. I think we should be looking at such as how we abolished slavery or got to one person one vote, and these not being much of a solution as well as the right things to have done.

  32. allcoppedout

    I mean in the sense that we didn’t get these improvements from people like Summers, or even Jefferson types or other Aristos (British slavers got such big payoffs one might suspect it was a way to subsidise the end of unprofitable trading). There is no one to trust in this class. Check out Harvard ethics wallahs and their rationalisations. There are no candidates for these jobs until we can insist of transparency. It’s less than 200 years since they paid slave owners not slaves compensation. Paying the banks now is the same thing.

    1. Nathanael

      Actually, it’s not similar….

      Paying off the slave owners was a way of ending slavery without a bloody domestic war. Slavery had become an issue likely to create bloody domestic wars.

      *The chief interest* of intelligent members of the elite is avoiding a bloody domestic war. They are unpredictable, and elites tend to lose their heads in such wars, and if not their heads, their money.

      The English nobles have been quite clever about avoiding this bad outcome since… well, since Charles I screwed up and got his head chopped off for his arrogance. I guess perhaps they have learned from history.

      The French and Russian nobles didn’t do so well.

      Now, what would be similar would be paying the banksters to (a) get out of banking and (b) get out of politics — pension them off. That’s not happening; they’re still committing the same damn crimes, and doubling down on those crimes. As a result, people are getting madder and madder. The elites are heading straight for the guillotine and most of them don’t even realize it. Idiots.

  33. steve from virginia

    It’s really a no-brainer if you follow the money … the Goldman-Sachs money.

    Bill Dudley will be the next Fed Chairman … Mark Carney is in the UK … Mario Draghi at the ECB … squid, Baby, squid!

  34. Tim

    “a man unafflicted, former colleagues say, with self-doubt in matters of finance”

    a.k.a. a financial fool

    A wise person considers the opposing view to their own before proceeding.

      1. skippy

        Love Foolosophy

        http://www.youtube.com/watch?v=7Hiy-E5w9eE

        Baby Baby, I feel these sweet sensations
        Honey honey, looks like a superstar
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        Who you are

        When this love, Fool, osophy is killing
        Previous illusions that
        I had in my mind about you
        Seems so true, all the lies you’re telling
        Tragically compelling and
        My love it means nothing to you
        So maybe I’m still a love Fool

        She shimmers like a California sunset
        Lady lady, glitters but theres no gold
        She carries sweetly infectious magic formulas
        I’m so delirious, is she that serious?
        Or is she bringing me on, I’ve been waiting so long

        And this love, Fool, osophy is killing
        Previous illusions that
        I had in my mind about you
        Seems so true, all the lies you’re telling
        Tragically compelling and
        My love it means nothing to you
        So maybe I’m still a love Fool

        I don’t want the world I want you
        I don’t want the world I want you
        I don’t want the world I want you

        Love, Fool, osophy is killing
        Previous illusions that
        I had in my mind about you
        Seems so true, all the lies you’re telling
        Tragically compelling and
        My love it means nothing to you
        So maybe I’m still a love Fool
        My love it means nothing to you
        So maybe I’m still a love Fool

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        skippy… chariots at the bottom of a sea as seen on DVD… roflmmao~~~

  35. Hester M. Nieves

    There is no need to dwell on Wedel’s book, especially since it is now available in a new edition. But Wedel should be credited with blowing a whistle not just on the Shleifer case, but also on the entire U.S. post-Cold war policy. Suffice it to say that she describes the entire U.S. approach to reforming Russia as exhibiting strong anti-democratic, anti-free-market, and elitist features. To give an example, HIID’s Russian reform project got most of its $57.7 million without competitive bidding. Why? Perhaps, no other American university could match the “brightness” of “shock-therapy” prescription to Russia? In any case, it was not for a lack of bright and honest people elsewhere. According to Wedel, “foreign policy” considerations–that is, the national security of the United States, were cited as the reason for the waiver of competitive bidding in favor of Harvard.

    1. Matthew Sailhardy

      Anyone who uses Krugman as a reference should not be attended. Krugman is like a birther; he still thinks Gore won the 2000 election. You also make reference to Harvard’s man who would be a Supreme Court justice:Laurence Tribe. In spite of his hefty contributions to Democratic presidential candidates, no one nibbled. Was he on the list of Summers’ cronies?

  36. Doug of North Texas

    Thank you for this post. Real reporting (investigative, having a long memory, weighing, bla, bla) is invaluable.

    I am terrified of a Summers’ candidacy. Shakespeare and the Greeks have warned us before and you continue that tradition

  37. Chris E.

    Another point that many people seem to forget is that Larry Summers is documented as being deceptive and undermined Romer’s efforts to form a large, nearly $2 TRILLION stimulus plan, which would have helped us rebound way better than the 1/3 of that amount that ended up passing.

    http://www.newrepublic.com/article/politics/100961/memo-Larry-Summers-Obama

    When Romer showed Summers her $1.7-to-$1.8 trillion figure late the week before the memo was due, he dismissed it as impractical.

    At first, Summers gave her every indication that all three figures would appear in the memo he was sending the president-elect. But with less than twenty-four hours before the memo needed to be in Obama’s hands, Summers informed her that he was inclined to strike the $1.2 trillion figure.

    Romer was uneasy with this. She felt that $1.2 trillion was itself a pragmatic middle ground.

    But Romer was reluctant to second-guess Summers on political questions in light of his imposing government résumé. She protested, but dropped the matter when Summers held firm.

    When the economic team finally walked through the contents of the memo with the president-elect on December 16, Romer mentioned her preference for over a trillion dollars. Summers allowed that bigger would be better. But these points were made in passing. “I don’t remember that as part of the discussion,” conceded one member of the economic team in attendance. The final version of the memo had framed the debate around two basic choices—roughly $600 billion and roughly $850 billion—and these were the focus of the conversation.

    1. Nathanael

      Yep.

      This one event is the proof positive that Summers should never be appointed to any administrative position anywhere ever.

      Christy Romer, on the other hand, would make a good Fed chair.

  38. masaccio

    As soon as he left government, that slob gobbled up millions in speaking fees from the industry he so handsomely benefited. http://firedoglake.com/2009/04/03/summers-feeds-at-hedge-fund-trough/

    And don’t forget, Summers is never right about anything. Besides the examples Yves notes, Summers refused to allow Christina Romer to tell the truth about the hole the Great Crash created in the economy. http://my.firedoglake.com/masaccio/2013/05/08/larry-summers-the-intellectual-as-courtier/ As a result, the stimulus was much too low to do any good.

  39. Do

    Summers needs to be in an asylum, but not nearly so much as the man who would appoint him to be Fed Chairman.

  40. Juan

    with reason, much anti-sommers but same time, people should look into, consider, Yellen from, perhaps, a broader/deeper perspective……….she is just as much of a neolib as Summers and possibly heavier on the austerity side.

    sideline – ”One important manifestation of Greenspan’s world view can be seen in his congressional testimony of July 22, 1997, where he explained that inflation was not increasing despite the lowering unemployment rate because of “a heightened sense of job insecurity,” which he described elsewhere as reflecting the “traumatized worker,” helpful in keeping wages down. He didn’t suggest that job insecurity and the traumatization of workers involved any immoral “goad of fear” or had any negative implications for welfare.

    Actually, in this regard Greenspan’s view wasn’t much different from that of a great many mainstream economists, who were slow to recognize greater job insecurity as a key factor altering the unemployment/inflation relationship, and who were not troubled when they did recognize it. Liberal economist Janet Yellen, co-author with Alan Blinder of a book on the 1990s entitled The Fabulous Decade, told the Federal Reserve Open Market Committee in 1996 that “while the labor market is tight, job insecurity is alive and well. Real wage aspirations seem modest, and the bargaining power of workers is surprisingly low” (quoted in Robert Pollin’s Contours of Descent). Robert Pollin points out that Yellen and Blinder didn’t let this interfere with their conclusion that the 1990s were “fabulous.” Apparently these economists, like Clinton, don’t really “feel pain” as long as only workers suffer.
    In fact, they are all a throwback to 17th and 18th century mercantilists who, according to historian Edgar S. Furniss, argued that “high wages would prove destructive of national well-being because they would reduce England’s competing power by raising production costs. The prevalent doctrine held that wages should be kept at the level of the cost of physical subsistence.”http://www.zcommunications.org/neoliberalism-and-bottom-line-morality-by-edward-herman

    BTW, Real weekly wages for nunsupervisoey employees Peaked in -1972- Worth a thought…………………or two.

  41. Delong & Short of It

    I wonder why Brad Delong is in favor of Summers, the protector of Andrei Shleifer? Well, here’s an interesting story:

    http://www.thecrimson.com/article/2007/6/4/andrei-shleifer-and-j-bradford-delong/

    “In the years since Shleifer and DeLong first lived together in Weld Hall, they have collaborated on issues including trading and markets, the Great Depression, and the development of cities in America.

    But the two were working together years before they would ever publish anything in an economics journal. And their first steps on the path of academic stardom began on the east side of Harvard Yard.”

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