The Odyssey of Larry Summers

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Glenn Greenwald once lashed out at me for asking an "ignorant" question on a topic I admitted I didn't understand.  A petty person would point out that his post on Larry Summers displays not only ignorance, but a total lack of awareness of any gaps in his understanding.  And there, I guess I just did.

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).  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.

That speech would, of course, have been arranged months before April 2008, when no one knew who was going to be the Democratic nominee, and more importantly, when Larry Summers was still widely assumed to be tainted by his disastrous departure from Harvard.   Basically, the financial crisis rehabilitated his political career, just as it was killing Bob Rubin's. They weren't paying him an advanced bribe.  They were paying him because A)  Larry Summers is really, really smart  B)  He knows a lot about global financial markets and C) Bankers, like everyone else, like to be near famous and powerful people.  Larry Summers is the Brangelina of finance.

In fact, Larry Summers is exactly what we ought to want in a Treasury Secretary:  a lifelong academic with no vested interests in the financial system. Following his tenure in office, Summers retreated to a University Presidency, not a lucrative job in finance.  He went to DE Shaw to make money only after the Harvard debacle, when he (and everyone else) had concluded that there was no possibility he was going to occupy a prominent political role again.  There's no reason to think he is guilty of any ethical breach; in fact, he went to great lengths to avoid any potential for one, until it seemed moot.

There are legitimate questions about whether government officials should be allowed to take money by essentially auctioning off the prestige of their office to private sector jobs and speaking engagements--but Greenwald isn't asking them.  And there are real problems with the fact that the greatest experts on financial markets are the people who participate in them--but  Greenwald doesn't name them.  Instead he retreats into the crudest sort of conspiracy theorizing. 

But the relationships between business and officialdom don't work that way--they're subtler, and therefore more insidious.  The most upright banker in the world cannot overcome the subtle ways his thinking has been shaped by the culture and the people he operated with.  The conundrum of the Wall-Street-Treasury nexus is not one that can be cracked by an investigative journalist.  It wants a sociologist or an anthropologist to interrogate its insidious operations.


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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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