Larry Summers and Presidential Arrogance

By Pam Martens: July 29, 2013 

Half a decade has now passed since the great Wall Street collapse of 2008.  Millions of words have attempted to capture the epic greed, arrogance and corruption that brought on the greatest financial implosion since the Great Depression. The Financial Crisis Inquiry Commission issued 662 pages on the subject. The U.S. Senate and House of Representatives have held an endless stream of  hearings. Dozens of books by authors who had a front row seat to the chaos line our bookshelves and libraries. 

And yet, despite all this, the President of the United States can’t seem to remember who caused the collapse of our financial system; who caused the collapse of the housing market and millions of foreclosures and the resulting joblessness that still grips the country. 

President Obama can’t seem to recall that it was the financial de-regulators of the Clinton administration who bullied and ridiculed their opponents and strong-armed through the repeal of the Glass-Steagall Act. It was that repeal that paved the way for financial Armageddon in America. The outcome has left 46.2 million Americans living in poverty and the greatest wealth disparity in a century. 

Surely if the President understood how this great collapse occurred he wouldn’t  seriously be  considering putting Lawrence (Larry) Summers into the post of Chairman of the Federal Reserve. Would he? 

Summers, one of the core members of the de-regulation swat team, was at the November 12, 1999 signing ceremony for the Gramm-Leach-Bliley Act, the de-regulatory legislation that repealed the depression era Glass-Steagall Act and allowed commercial banks holding insured deposits to merge with investment banks, brokerage firms and insurance companies to become vast gambling casinos and too-big-to-fail taxpayer albatrosses.  Summers became U.S. Treasury Secretary after his former boss, Robert Rubin, left the post and headed directly to Citigroup’s Board – a post that would pay him $120 million over an 8-year span for a non-management job. (Citigroup was one of the key firms heavily lobbying for the deregulation.) 

Summers said this at the signing ceremony: 

“Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come…I believe we have all found the right framework for America’s future financial system.”

Mr. Summers was dead wrong (or maybe he was dead right for his cronies on Wall Street).  This was not the “right framework” for America; this was the right framework for the 1 percent who wanted unbridled freedom to asset strip the rest of their fellow Americans by rigging the Libor interest rate on student loans, adjustable rate mortgages, interest rate swaps sold to municipalities; scam foreclosure settlements, high frequency trading, excessive fees on 401(k) plans, and now the takeover of vast amounts of physical commodities by Wall Street’s insatiable wealth strippers.  

Summers, currently on the payroll of Citigroup as a consultant, would follow in the footsteps of Jack Lew who went from Citigroup to head the U.S. Treasury earlier this year. The top two money men in the United States would have been on the payroll of the poster child for deregulation hubris just prior to assuming the reins of power at the Fed and Treasury. Both jobs entail not just monetary policy but core roles in regulating the nation’s largest bank holding companies, which includes Citigroup, parent to Citibank. 

We don’t know how Summers’ employment contract with Citigroup reads but thanks to the Senate confirmation hearing process, we know a great deal about Lew’s interactions at Citigroup. 

Lew accepted a $940,000 bonus from Citigroup in early 2009, even though the insolvent company was subsisting solely on taxpayer bailout funds at that time. Lew was Chief Operating Officer of the division that brought down the bank. 

Another issue for Lew in his confirmation hearing was that his employment contract with Citigroup provided a bonus guarantee based on the specific requirement that he left the bank for a “high level position with the United States government or regulatory body.” 

Only a President filled with the same arrogance that toppled Wall Street would put forth the nomination of Larry Summers for Chairman of the Federal Reserve. He already demonstrated as much with the nomination of Lew at Treasury.

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