The Wall Street Ties of Summers and Geithner

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From left to right: Treasury Secretary Tim Geithner, National Economic Council Director Lawrence Summers, and Jared Bernstein, economic adviser to Vice President Joe Biden; listen as President Barack Obama meets with Federal Reserve Chairman Ben Bernanke in the Oval Office of the White House in Washington, Tuesday, June 29, 2010. (AP Photo/Charles Dharapak)

“We should not oppose offshoring or outsourcing,” proclaimed a well-known economist at the 2011 World Business Process Outsourcing/Information Technology Outsourcing (BPO/ITO) Forum. Hundreds of corporate executives sat in on this economist’s lecture, including representatives from Morgan Stanley, JPMorgan, Deustche Bank, Pfizer, Coca Cola and other major businesses. The economist went on to proclaim that critics of outsourcing were like “Luddites who took axes to machinery early in England’s industrial revolution.”

This economist was not a Heritage Foundation scholar or Ayn Rand Institute fellow. The speaker that June was none other than Lawrence Summers, who had just finished up his role as director of the White House National Economic Council, where he was President Obama’s top economic adviser.

While working for the anti-corruption blog Republic Report last year, I reached out to conference organizer Kartik Kilachand to ask him about the speaking fee Summers was given and why his full remarks were never posted to the website (only a snippet was published). Kilachand replied that this was “confidential information” because the conference had signed a non-disclosure agreement with Summers that concealed both his full remarks and speaking fee. I also made a query to Julie Shample, Summers’s assistant at Harvard. “I wouldn’t have any information about this, you may want to check with the forum,” replied Shample.

This practice of giving private paid speeches to big corporations was nothing new for Summers. Before joining the Obama administration, he received hundreds of thousands of dollars in speaking fees from financial institutions that the White House was involved in bailing out and then shielding from more intense regulation. For Summers, the speech at the outsourcing conference was simply a relapse.

All of this is particularly relevant now that Summers is being vetted as a possible chairman of the Federal Reserve, the most important economic post in the world. If Summers is still taking big payments to speak favorably towards the world’s biggest corporations, Americans and their representatives in Congress should know about it. But Summers is under no legal requirement to disclose his most recent payments from corporations until he is officially nominated, and if he’s nominated, he’ll most likely be confirmed. No Federal Reserve nominee has ever been defeated, with Ben Bernanke coming the closest when 30 senators voted against confirming him for a second term.

Summers is not the only possible nominee with corporate conflicts of interest. Another name being floated is former Treasury Secretary Tim Geithner. Geithner, too, has used his time out of government to enrich himself, at least partly from corporate largesse. After leaving his post in January 2013, Geithner got $200,000 to speak at a Deutsche Bank conference, and $100,000 from investment banking firm Blackstone and private equity firm Warburg Pincus. Blackstone and Deutsche Bank have both been in the news for their efforts to “create and sell the first bond backed by home-rental payments,” which the Wall Street Journal warns would be “more risky than well-known securities” but would satisfy “investors…hungry for the high returns.”

This isn’t to say that Geithner and Summers will necessarily do the bidding of outsourcers or mega-banks. Both men have a history of center-right policy advocacy, and it’s likely that they’re simply ideologically aligned with corporate America. But their habit of floating in and out of government while taking in six-figure payments from large corporations gives them a powerful incentive to continue to line up their beliefs with those of their benefactors. As Upton Sinclair famously wrote, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Janet Yellen, vice chairwoman of the Federal Reserve Bank, speaks at the Economic Club of New York in 2011. (AP Photo/Mark Lennihan)

Janet Yellen, vice chairwoman of the Federal Reserve Bank, speaks at the Economic Club of New York in 2011. (AP Photo/Mark Lennihan)

By comparison, the third likely nominee for the spot, current Federal Reserve Vice Chair Janet Yellen, has few financial ties to big corporations. Her most recent financial disclosure form discloses no payments from outside corporations in recent history, although she does list a payment towards an iPhone, an iPad and a sterling silver plate she received as parting gifts from the Federal Reserve Bank of San Francisco – which altogether have a worth of $1,300 (it has been noted that her husband, George Akerlof, a Nobel Prize winner, has had numerous paid speaking engagements over the years). She also reportedly has the support of one-third of Senate Democrats, who sent a letter to Obama urging him to appoint her.

Despite the lack of conflicts of interest, Yellen has earned the support of many on Wall Street, thanks to the perception that she would continue the easy monetary policies of her predecessor. But having a record relatively free of cash payments from special interests would allow Yellen to make these decisions with the sort of independence Geithner and Summers are unlikely to have.

The real problem is that while Yellen’s status as a senior government employee mandates that she publicly disclose her current finances, Geithner and Summers are under no such requirement until they are actually nominated. This means that as Obama mulls over who he’ll nominate — who will likely be easily confirmed if history is any judge — the public will lack the knowledge necessary to judge the various potential nominees. Like the text of Summers’s speech to the outsourcers that day, his financial records and those of Tim Geithner’s are undisclosed.

Zaid Jilani is the former communications and outreach coordinator for United Republic and the former senior reporter-blogger for ThinkProgress. His work has also appeared in outlets including Salon and the Atlanta Journal-Constitution.
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  • http://www.you-read-it-here-first.com/ John Bailo

    This is a clear case where Obama has a chance to live up to his words. He recently made a speech decrying economic inequality. One of the greatest sources of that inequality has been the insider inflation coming from the Fed, which pumps up the value of artificial assets and leaves people in the real world who work for a living scrambling for resources. So far his choices leave me cold. The first would be an extension of the Volker-Greenspan-Bernanke troika that put us in this position. The second would be an insider bureaucrat who would perhaps soften it slightly, but with the same relative effect.

    A radical choice would be a complete outsider. Even a crazy choice like someone from Occupy. Someone who can come in and shake things up by looking it over and saying “hey, what’s going on in here!?!”

  • Steve Bell

    But having a record relatively free of cash payments from special interests would allow Yellen to make these decisions with the sort of independence Geithner and Summers are unlikely to have.

    Are you kidding me? Seriously.. that made me laugh!

  • JonThomas

    I was just contemplating how to express my sentiments about the article as your comment showed up…

    Yep, this read to me like an advocating puff piece designed to garner support. Sounded like a friend writing for a friend.

    I guess there’s nothing ‘wrong’ with that, but it’s written as if it’s journalism. Sorry, I truly enjoy M&C, and this website, but this seems a bit out of character for Mr. Moyers and his reputation.

    I have to admit, that I am like most average people. I don’t have the time to really find out what the people mentioned in the article, as potential nominees, stand for, and believe. However, I have a difficult time accepting that any economist that is already in the accepted circles is radically different.

    To say that this person will be that much better because she hasn’t given paid talks, might be also understood as her not being seen as worth listening to by anyone.

    It’s like saying…”I’ve been working in the permit office for years. No one has ever hired me, or payed me anything to actually yet build a house. Matter of fact, I haven’t built any houses, but because I haven’t built, or worked on any bad houses, I must be the best builder and the one you need to contract to build your home.”

    Anyway, this person may indeed be the best choice, I have no idea, but this article disappointed me.

    I may be jaded, I don’t know. Maybe, writers like this author, once they get involved in the system through reporting on the way things are, begin to buy into the paradigm?

    Here’s the truth…whether we like it or not…anyone who is part of the system is invested in said system. Whatever economist they choose to fill the slot, if they come from ‘within,’ will continue the same basic direction as is already in place. That’s the way of life. An orange farmer does not advocate for apple farming.

    We hoped Mr. Obama would be different, but what did we get?

    I guess hope (not the campaign advertised ‘hope’) does spring eternal, but I seem to remember a song from “The Who”…”Meet the new boss, same as the old boss…” You can sell it, and true… many people will buy it… then, even though we’ll get stuck with it, those of us who know are screaming…”We won’t get fooled again…”

    Oh well, voices in the wilderness.

  • JonThomas

    Precisely!

  • JonThomas

    I’m available.

  • PManke

    Yah! No kidding…. She just woke up one morning and was filthy rich!
    It’s like saying computers won’t lie to you because they’re logic based….

  • Grace Hazeldine

    I’m a huge Obama supporter, but I will be very disappointed if he appoints Larry Summers. How about some new blood…my vote would be for Janet Yellen if I had one.

  • Steve Eckman

    Janet Yellen is not new blood.

  • Anonymous

    I’m a huge supporter of corruption, but Janet Yellen is simply not corrupt enough to get the job done. How can I trust someone who doesn’t take 6 figure speaking gigs between public service stints? There’s just no telling what she might do.

  • Anonymous

    Summer is a shoe in because he fits the Obama MO. Summer, Rubin, Greenspan & Dodd were influencal in repealing Glass/Seagal as well as taking the regulatory authority away from Brooksley Borne, commissioner of the commodities market . She wanted to regulate derivatives, hedgefunds, & credit default swaps. Greenspan stated to congress that the market would regulate itself..REALLY. That was helpful for our financial situation in 08,, Summer will do Obama’s bidding with the big banks.. One of his power bases..Having been fired from as Pres of Harvard will also help him with Obama. Do I know this Pres our what.

  • Melwoolf

    What a dream. It would be wonderful to think Obama could do something really off the radar and do something that would shock and make Americans believe he does care about the average Joe and not simply keep the Wall Street gang going but think that is a (sadly) step too far for him. He doesn’t have the right advisors and he doesn’t think outside the box (now that he’s in one). Sadly, I think he’s been captured quite a while ago.

  • dave.lefevre

    Some people probably believe that….