The FP of today's NYT print edition contains a detailed profile of Larry Summers and his activities since he left the WH at the end of 2010. Surprisingly enough, this story has yet to be diaried. I will, accordingly, pick up the baton while trying to minimize editorial content.
Summers's career goals for the past 2.5 years have been pretty clear:
In addition to rejoining the Harvard faculty in 2011, he jumped into a moneymaking spree. His clock was ticking partly because he knew that the Fed chairmanship, to which he has long aspired, was likely to open up in early 2014, when Ben S. Bernanke’s second term will come to an end.Summers had an estimated net worth between $7-31mm before his last govt. gig. He has clearly increased it in recent years, although we won't know by how much unless he's nominated.
“With Larry, my wife always says that it’s hard to be happy if you want to have the most money because you’ll never have the most money,” said Jeremy I. Bulow, an economics professor at Stanford University who is a friend and co-author of academic papers with Mr. Summers. “He’s kind of been going about his life just on the basis of ‘who knows what’s going to come next?’ and just sort of maximizing his experiences, given the opportunities in front of him.”
The opportunities have been many over the last two years. Mr. Summers, 58, has been employed by the megabank Citigroup and the sprawling hedge fund D. E. Shaw. He works for a firm that advises small banks as well as the exchange company Nasdaq OMX. And he serves on the board of two Silicon Valley start-ups: both financial firms that may pursue initial public offerings in the next year. One of them, Lending Club, offers loans to consumers and small businesses by making arrangements directly with online investors, a new business model that falls into a regulatory gap that consumer advocates say may lead to risky borrowing.
There are Dems who are concerned about an ardent deregulator oversee the writing of some key Dodd-Frank regulations:
[S]ome senators are speaking out against Mr. Summers. They are raising questions about potential conflicts of interest and noting his role in the repeal of the Glass-Steagall law, which limited the sorts of activities banks could undertake, and his opposition to regulating derivatives in the 1990s — decisions that many critics say contributed to the financial crisis.Questions have been raised about the practices of Lending Club and Summers being on its board:
“I start from a position of being extraordinarily skeptical that Larry Summers is appropriate to chair the Fed,” said Senator Jeff Merkley, a Democrat from Oregon. “I have serious doubts that Mr. Summers, who as a committed deregulator drove policies that set the stage for the Great Recession, is the right person for a key regulatory position.”
Lending Club falls into a tricky space in financial regulation. The company itself is not regulated as a bank. But it has teamed up with a bank in Utah, one of the states that allows banks to charge high interest rates, and that bank is overseen by state regulators and the Federal Deposit Insurance Corporation.I will let the rest of the article speak for itself. I will merely observe that Summers joining the board of a ninja lender undercuts the idea that he learned any lessons from the boom/bust cycle that his past policies encouraged. I will further note that Summers being on the Fed Chair short list is troubling in and of itself, esp. given Yellen's visibly superior qualifications. I hope that an attack of sanity will break out that will lead to her ultimately being chosen for this vital post.
Consumer advocates said Lending Club was so new that they had not yet seen many examples of its loans and collection practices in action. But Sarah Ludwig, the co-director of the New Economy Project, a nonprofit in New York, expressed concern that the company did not verify all borrowers’ income and employment.
“This should be another red flag,” Ms. Ludwig said of Mr. Summers’s involvement. “What is he doing on the board of this company? What is a potential Fed chairman doing on the board of a company that doesn’t check if people can afford loans?”