FacebookTwitterGoogle+RedditEmail

Avaricious Brilliance for Economic Disaster

by RALPH NADER

The widening circle applauding megamillionaire Larry Summers –of Harvard University, Washington, D.C. and Wall Street – agrees on one word to describe the colossal failure – Brilliant! That circle includes Barack Obama, who appointed Summers in 2009 to be his chief economic advisor, Bill Clinton, who made him Secretary of the Treasury, and the Harvard Board of Overseers, who named him president of Harvard University in 2001.

With Clinton and his promoter, Robert Rubin, who preceded him at the Treasury post before making over $100 million at Citigroup, Summers brilliantly deregulated Wall Street in 1999 and 2000 thus setting up one of corporate capitalism’s most harmful speculative binges.

With Clinton’s approval, these men pushed for the repeal of the successful Glass-Steagall Act of 1933, which separated investment banking from commercial banking. They then blocked the regulation of mounting speculation in complex, risky derivatives that led to the tanking of Wall Street in 2008. The collapse, caused by the plutocrats, cost 8 million jobs, drained away trillions of dollars in pension and mutual fund assets, and plunged the country into a “Great Recession”.

At Harvard, Summers remained brilliant in advising the University’s huge endowment into risky investments that lost it billions of dollars. His brilliance also led him to say that women just weren’t cut out for heavy duty scientific work.

Wall Street likes people labeled brilliant. It hides their greed. So firms like Goldman Sachs, JPMorgan Chase and Citigroup shelled out over $100,000 per visit to hear him speak his brilliance. While heading for bankruptcy and taxpayer bailouts (decided in one secret weekend in 2008 by Robert Rubin, Federal Reserve Ben Bernanke and Treasury Secretary Henry Paulson [fresh from the chairmanship of Goldman Sachs]) the shaky bank was receiving, according to Citigroup, brilliant “insight on a broad range of topics including the global and domestic economy.” Soon thereafter, Citigroup went belly up into the laps of you the taxpayers.

Clearly, Summers’ brilliance did not light a path toward banking prudence and productivity for the economy. But it sure did help Summers’ bank accounts. He reaped huge fees from the hedge fund D.E. Shaw, Silicon Valley startups, including equity positions in the Learning Club that charges its debtors interest rates reaching as high as 29 percent.

Summers has cultivated brilliance. He speaks fast and can be bombastic as he exhales his experience with international crises, government, Wall St. and academic life. He is quick with statistics and has a way of making vulnerable, smart persons around him feel inferior. That intimidating style did not work with former Federal Reserve Chairman Paul Volcker, who came to the Obama administration in 2009 with Summers, but as a lesser-titled economic advisor. So Summers worked the White House to marginalize Volcker who soon left. Later, when Volcker’s proposal to develop criteria to slow banking speculation with other people’s money started moving through Congress, Summers went ballistic. But his brilliance could not stop it from becoming law.

All the above matters because Larry Summers is one of the two candidates Barack Obama is considering for the Chair of the powerful Federal Reserve when Mr. Bernanke leaves in January. Many articles are being written about the pluses and minuses of Summers and his only competitor, Janet Yellen, the quieter vice-chair of the Federal Reserve who worried about the credit markets in 2007 pushing the US into a recession. She also worries about the government and the Federal Reserve not doing enough about unemployment.

The media commentary, thus far, has heavily focused on the personalities, pronouncements and establishment ties of Summers and Yellen. Who will get along with Obama best? The Federal Reserve is supposed to be defiantly independent of the White House but has become heavily politicized with its massive expansion of powers, including bailouts and printing money better known as quantitative easing.

Who will best supervise the banks? That goes to the level of the independence of the candidates’ character. Author Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled the Recovery, who is often admiring of Summers, writes: “My own view is that Summers is too fond of big shots – he’s always wanted to be part of the most exclusive club that will have him…. In my book, I describe the pleasure he took from attending dinners with top Wall Street executives as a Treasury official in the 1990s.”

Such awe of Wall Street – that has and will butter his bread – means that he would be more “credible” in the financial markets, though his brilliance may get under the skin of the Federal Reserve Governors who set interest-rate or monetary policy.

Obama’s White House circle is pitching for Summers with whom they have worked. Unfortunately, the typical Washington horserace is obscuring the many important policy issues regarding the Federal Reserve:
What will a new Fed Chair do to:

Establish legal limits to the expanded and legally dubious powers exercised by the Fed?

Improve the Fed’s own increasingly scary financial status?

Show commitment to enforcement of consumer protection laws?

Reconcile the Fed’s awkward position of pushing banks to be prudent while being funded by banks and governed by bankers through its regional offices?

Increase accountability by ending its refusal to be audited by Congress?

End the Fed’s chronic secrecy?

The answers to these questions should shape Obama’s selection of a new Fed Chair. What’s my choice? Either Nobel Prize winner economist Joseph Stiglitz or University of Texas Professor of Economics, James K. Galbraith who have brilliant records and writings as if people matter.

Ralph Nader is a consumer advocate, lawyer and author of Only the Super-Rich Can Save Us! He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. Hopeless is also available in a Kindle edition.

Ralph Nader is a consumer advocate, lawyer and author of Only the Super-Rich Can Save Us! 

More articles by:
June 29, 2016
Diana Johnstone
European Unification Divides Europeans: How Forcing People Together Tears Them Apart
Andrew Smolski
To My Less-Evilism Haters: A Rejoinder to Halle and Chomsky
David Rosen
Birth-Control Wars: Two Centuries of Struggle
Sheldon Richman
Brexit: What Kind of Dependence Now?
Yves Engler
“Canadian” Corporate Capitalism
Lawrence Davidson
Return to the Gilded Age: Paul Ryan’s Deregulated Dystopia
Priti Gulati Cox
All That Glitters is Fearsome: Whatever Happens, Don’t Blame Jill Stein
Franklin Lamb
About the Accusation that Syrian and Russian Troops are Looting Palmyra
Binoy Kampmark
Texas, Abortion and the US Supreme Court
Anhvinh Doanvo
Justice Thomas’s Abortion Dissent Tolerates Discrimination
Victor Grossman
Brexit Pro and Con: the View From Germany
Manuel E. Yepe
Brazil: the Southern Giant Will Have to Fight
Rivera Sun
The Nonviolent History of American Independence
Adjoa Agyeiwaa
Is Western Aid Destroying Nigeria’s Future?
Jesse Jackson
What Clinton Should Learn From Brexit
Mel Gurtov
Is Brexit the End of the World?
June 28, 2016
Jonathan Cook
The Neoliberal Prison: Brexit Hysteria and the Liberal Mind
Paul Street
Bernie, Bakken, and Electoral Delusion: Letting Rich Guys Ruin Iowa and the World
Anthony DiMaggio
Fatally Flawed: the Bi-Partisan Travesty of American Health Care Reform
Mike King
The “Free State of Jones” in Trump’s America: Freedom Beyond White Imagination
Antonis Vradis
Stop Shedding Tears for the EU Monster: Brexit, the View From the Peloponnese
Omar Kassem
The End of the Atlantic Project: Slamming the Brakes on the Neoliberal Order
Binoy Kampmark
Brexit and the Neoliberal Revolt Against Jeremy Corbyn
Doug Johnson Hatlem
Alabama Democratic Primary Proves New York Times’ Nate Cohn Wrong about Exit Polling
Ruth Hopkins
Save Bear Butte: Mecca of the Lakota
Celestino Gusmao
Time to End Impunity for Suharto’’s Crimes in Indonesia and Timor-Leste
Thomas Knapp
SCOTUS: Amply Serving Law Enforcement’s Interests versus Society’s
Manuel E. Yepe
Capitalism is the Opposite of Democracy
Winslow Myers
Up Against the Wall
Chris Ernesto
Bernie’s “Political Revolution” = Vote for Clinton and the Neocons
Stephanie Van Hook
The Time for Silence is Over
Ajamu Nangwaya
Toronto’s Bathhouse Raids: Racialized, Queer Solidarity and Police Violence
June 27, 2016
Robin Hahnel
Brexit: Establishment Freak Out
James Bradley
Omar’s Motive
Gregory Wilpert – Michael Hudson
How Western Military Interventions Shaped the Brexit Vote
Leonard Peltier
41 Years Since Jumping Bull (But 500 Years of Trauma)
Rev. William Alberts
Orlando: the Latest Victim of Radicalizing American Imperialism
Patrick Cockburn
Brexiteers Have Much in Common With Arab Spring Protesters
Franklin Lamb
How 100 Syrians, 200 Russians and 11 Dogs Out-Witted ISIS and Saved Palmyra
John Grant
Omar Mateen: The Answers are All Around Us
Dean Baker
In the Wake of Brexit Will the EU Finally Turn Away From Austerity?
Ralph Nader
The IRS and the Self-Minimization of Congressman Jason Chaffetz
Johan Galtung
Goodbye UK, Goodbye Great Britain: What Next?
Martha Pskowski
Detained in Dilley: Deportation and Asylum in Texas
Binoy Kampmark
Headaches of Empire: Brexit’s Effect on the United States
FacebookTwitterGoogle+RedditEmail