A Summers Story

Stories about Larry Summers often neglect to mention his Wall Street interlude

Exactly one month ago, the White House released financial documents on President Obama’s economic advisor, Larry Summers. They revealed, among other things, that Summers had earned $5.2 million from his work at the hedge fund giant, D.E. Shaw, where he had worked just one day a week from 2006 to 2008.

The New York Times story that delved into the two years Summers worked in the private sector in New York as a consultant and advisor, was the first of its kind—and, more or less, the last.

Though the media has spent tens of thousands of words on Summers, from his various roles in government and academia to his controversial policies, little is made of his time on Wall Street. A search on The Washington Post’s Web site for “Larry Summers” and Shaw garners just four hits—two of which are blog posts. It seems a shockingly paltry number of articles on the most recent—and perhaps most lucrative—job of the president’s economic advisor’s career.

The Times has written plenty about Summers’s past positions, but interestingly, mention of his time in the private sector rarely makes the cut. In the Times’s November article on Summers’s appointment, no mention was made of his work consulting for private funds and investment companies.

In December, an article discussing Summers’s rocky time at Harvard, and his path to his current position, made just a fleeting mention of his time on Wall Street—though that was where he was employed after his time in academia.

Subsequent articles, including one as recent as February, discuss Summers as a legend among economists and investors, but strangely dropped no reference to the paid work Summers did as an economic advisor and consultant. It’s especially odd given that there’s little new to be learned by rehashing Summer’s other credentials – his well-reported controversial tenure at Harvard, his past as an economic expert. Instead it seems that his most relevant experience to the economic crisis, and the work that could influence him the most in his advising, are underreported and overlooked.

Until recently, the other highly visible member of Obama’s economic team, Treasury Secretary Timothy Geithner, has also escaped much media criticism of his friendly ties to Wall Street. An eight-page story in the Times’s business section critiqued Geithner—after five months on the job—for his chummy business dealings with financiers during his time as president of the New York Fed.

“Traditionally, the New York Fed president’s intelligence-gathering role has involved routine consultation with financiers, though Mr. Geithner’s recent predecessors generally did not meet with them unless senior aides were also present, according to the bank’s former general counsel,” wrote Jo Becker and Gretchen Morgenson in the piece published April 26th. “By those standards, Mr. Geithner’s reliance on bankers, hedge fund managers and others to assess the market’s health — and provide guidance once it faltered — stood out.”

Despite these singular pieces exposing the economic teams’ personal and financial ties to the New York finance cabal, the articles brokered little discussion and pickup in mainstream media. That absence of coverage seems strange during a time when the President of the United States can fire the CEO of a major American auto company and record amounts of taxpayer money are being doled out to once-private companies.

While the auto industry and the banking sector are undoubtedly different machines, one has to wonder if the different standards for federal funds and different treatment of executives (Obama has yet to fire a CEO in banking or finance) aren’t tied in some way to the administration’s relationships with finance. Given their past involvement, it’s reasonable to quesion whether it’s good for America to have men with long ties to the financial industries so involved with decisions on their survival.

“This is what might be called contamination,” said Andrew Sabl, an associate professor of public policy at the University of California, Los Angeles, to the Times about Summers’s role with D.E Shaw. “Did Summers spend so much time with the hedge fund, or its investors, sovereign wealth funds and so on, that he started to think like them?”

These are the questions that need to be asked by the media, even if nothing is amiss. The cause and effect scenario should be a natural red-flag for any enterprising reporter: Obama stacks his economic team with Wall Street veterans during a crisis in bank liquidity; Wall Street gets billions of dollars in regulation free money.

As the role of the executive branch in the nation’s private sector becomes more and more complicated, administration officials’ entanglements with the private sector should be subject to more and more scrutiny. Summers’s and Geithner’s past roles with Wall Street deserve nothing less than total transparency—something best achieved through diligent reporting and inquisition.

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Kate Klonick is a journalist in New York City. She has written for ABCNews.com, Esquire, The Guardian, The Washington Independent and Talking Points Memo.