Larry Summers gets a big “F” for AIG…
March 17, 2009
by Amy Siskind
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As we have discussed time and time again on this blog, Larry Summers is incompetent.
We wrote a piece titled Larry Summers: 3 Strikes, You’re OUT! in October 2008 when Summers was first rumored to be a candidate for Treasury Secretary. Just to recap:
- While President of Harvard University, Summers infamously said: “There are issues of intrinsic aptitude, and particularly of the variability of aptitude, and that those considerations are reinforced by what are in fact lesser factors involving socialization and continuing discrimination.” In other words, according to Larry, boys are better than girls at math – they’re just born that way.
- Summers silenced Brooksley Born when she sounded alarms about the derivatives market which would ultimately lead to our current economic crisis.
- While at the World Bank, Summers tried to implement a plan to export pollution to less developed countries.
I must stop here and ask out loud, if a woman had made all of these mistakes (and others), would she be given the chance to be a major player in running the US economy? NO way! But somehow Larry Summers skated by to become director of the National Economic Council. And might I note that President Obama hand picked Summers for this position, knowing full well that the position did not require Senate approval.
In his current position, despite his known shortcomings, Summers has been given a lead position in running our country’s economy. Newsweek recently described Summers position as follows:
He has daily access to the president, and he is widely viewed as a more substantive (or at least more convincing) Big Picture economic adviser than Treasury Secretary Tim Geithner. Summers and Geithner are good friends and tennis partners, and if there is any friction between them, it hasn’t surfaced.
So back to the fiasco at AIG. Many of the commenters on our blog today have expressed anger about the $165 million in bonuses paid to AIG executives. Here’s what I have to say: you are all being played for fools. Larry Summers, Timothy Geithner and gang are being sent out there to change the subject. The bonus amount of $165 million (yes million, not billion) is chicken feed compared to the bigger problem.
Summers and gang have completely and utterly failed to police where the $170 billion (this time billion, yes billion) in taxpayer money went. Approximately $30 billion (yes billion) of taxpayer money has essentially gone down the drain under Summer’s watch! No wonder Summers and Geithner are so desperately trying to change the subject to $165 million of bonuses, while our president is trying to talk about anything but the economy.
Here’s how taxpayers got ripped off. AIG had derivative contracts outstanding with Wall Street firms (remember derivatives – the stuff that Brooksley Born warned us about). Basically, AIG had written insurance policies against defaults that AIG could not honor without government assistance. But with taxpayer money in hand, AIG went back to their Wall Street counterparties and honored their obligation. Recall – these counterparties knowingly took on risk when they entered into contracts with AIG. For example, using taxpayer money, AIG paid Goldman Sachs $14 billion for securities that had a market value of $8 billion. Essentially, AIG used taxpayers money to give Goldman Sachs an extra $6 billion that otherwise Goldman would have had to take as a write-down. So, not only does Goldman get an extra $6 billion of taxpayer money, it gets this money with no TARP strings attached!
Joining Goldman Sachs as recipients of AIG monies are a bevy of other financial institutions, some US based and some foreign banks such as Societe Generale, Deutsche Bank and UBS. In other words, foreign banks were given US taxpayer funds to the tune of billions!!!
With a screw up of this type, it is no wonder that Summers and gang are trying to whistle Dixie and change the tune to the ever popular Wall Street bonus music. But give me a break. Let’s explain first how billions in taxpayer funds have evaporated under Larry Summer’s watch. Or more importantly, why does this guy have a job running our economy?
Re #1, Here is Summers’ actual view, in plain English:
pumaforsummers.blogspot.com/2008/12/summers-clarification-i-did-not-say-and.html
Re #3, That memo was satire.
pumaforsummers.blogspot.com/2008/11/1991-satirical-memo-pollution-to-africa.html
Flora,
With due respect, one of TNA’s co-founders, Dr. Nancy Hopkins was a professor at Harvard at the time of #1 and she sat in the room when the comment was made.
And #3 is hardly a satire.
well done Amy!! It’s breathtaking how the old boy’s club gets to continue screwing everything up so royally with total impunity.
We’ve been told Geithner and Summers were the only ones who could fix the current “economic disaster.” And people have been so terrified that they have been looking for someone who will save us—–a scary proposition itself. How can we continue to be so blindly putting our trust in these incompetents? Thanks for this expose!!!!
Amy,
I’d rather not clutter the TNA blog by pursuing this in great detail at the moment. At my Summers blog you can see how much of the material I’m familiar with (sorry it’s a mess).
Evidence for #3 being a satire is posted at the url I gave.
I have to say, I’m wondering if Geithner is on the chopping block. Is Summers manufacturing a hostile takeover? The Obama administration seems to be taking pains to distance itself from his performance, but is still supposedly “supporting him.” Remember when Bush was in office and you’d hear something like that and two weeks later the person would be out?
Really interesting observation Anna Belle.
Geithner is still a bit toxic to Wall Street folks because he brings a tax snafu yet runs the IRS. Say all you will about Wall St, but once you get tripped up like that, you are permanently on the out’s in some form.
Summers is about Summers. I won’t be surprised if this wasn’t an engineered end-around.
I wouldn’t be surprised if some people are out to set Geithner up (as a scapegoat if nothing else). This story suggests it’s the Axelrod people (and likely Obama himself).
http://www.nytimes.com/2009/02.....ilout.html – dated Feb 9
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Hope for Geithner’s sake that his home in Larchmont didn’t sell yet! Things are getting bad. Scape goats will be needed.
OT: Possible good news:
Tauscher to State
By Al Kamen
Word is that Rep. Ellen Tauscher (D-Calif.), chair of the House Armed Services Committee’s subcommittee on strategic forces and a staunch superdelegate for presidential candidate Hillary Rodham Clinton, is in line for a top post at the State Department, most likely for the undersecretary for arms control and nonproliferation slot.
The other scary thought is that if the government does try to go in and change those contract bonuses – we have a situation where government can go in and change contract law without due process. CNBC was all over that today.
Obama’s biggest mistake – choosing Geithner and Summers. Many qualified women could have had at least one of these posts.
Amy,
I agree that bonuses are not the real problem here, but if government wants the American people to focus on them, why don’t we add fuel to that fire?
Can TNA give a “shout-out” to the Women’s Council on this? Maybe Amy/Sheryl can give an interview with one of your media contacts (CNN?) and plant a seed about how the bonus numbers would be helpful in illustrating the pay inequities on Wall Street—and how helpful this information would be to the Women’s Council? And, gee, it would be great if they started looking at this?
I’m not a lawyer, but it seems to me that any company taking Federal funds cannot engage in discriminatory practices. I think Cuomo is trying to get bonus info from all the TARP recipients. These bonus lists will no doubt show not only that women were paid less, but how few women there are in senior positions.
The “Women’s Council” should be clamoring for these lists—even with the names redacted—because it will demonstrate definitively the “female discount.”
Think about it…
Thank you, Amy. The subject of the AIG bonuses are, as Obama would say in other conversations, “a distraction”.
You nailed it.
Also, er, did anyone in Congress or the media even bother to read the Stimulus Bill? The AIG bonuses are IN the stimulus bill thanks to Chris Dodd!
Amy,
“Larry Summers, Timothy Geithner and gang are being sent out there to change the subject. The bonus amount of $165 million (yes million, not billion) is chicken feed compared to the bigger problem. Summers and gang have completely and utterly failed to police where the $170 billion (this time billion, yes billion) in taxpayer money went.”
That’s a really important insight. Thanks for giving us that perspective, which is lacking in the MSM. My own two cents is that it’s a shame to have something with such current news relevence burried so far down in the piece. But your explanation of how the taxpayers are being ripped off is gripping. Are there ways in which this rip-off affects women in particular?
More circus antics and bluster from Washington. You absolutely nailed that this is a distraction pure and simple and just another excuse to demonize anyone making any money. Heads have already rolled at AIG over getting into this mess – the senior execs are all gone. These bonuses were set up as a retention tool so that the company could hold onto some individuals lower down in the ranks that actually understand how they work as they unwind them. I was completely against the bail out and think we should have suffered the short term pain of seeing AIG fail. BUT if you’re going to give them hundreds of billions of dollars – I have no problem with spending a few hundred million on people who actually have a prayer of salvaging the situation, and returning some of OUR money. If you don’t want those folks just let the company blow up and stop sending them money.
Amy – Why don’t we see your writings and those of other contributors here, on the editorial pages of newspapers across this country? I know the answer to this, but want to make a point. I hope the “New Feminist Media” is going to be able to try to get more articles and essays included in main stream print outlets. I wish we had current feminist columnists, like Ellen Goodman used to be, whose writings were part of the MSM. Is there any column like that already in newspapers? Is it possible for us to promote and encourage such writers? I want us to be able to reach the widest audience possible and print media is still powerful, especially at local levels.
“These bonuses were set up as a retention tool so that the company could hold onto some individuals lower down in the ranks that actually understand how they work as they unwind them. I was completely against the bail out and think we should have suffered the short term pain of seeing AIG fail. BUT if you’re going to give them hundreds of billions of dollars – I have no problem with spending a few hundred million on people who actually have a prayer of salvaging the situation, and returning some of OUR money. If you don’t want those folks just let the company blow up and stop sending them money.”
—————————————————————————————–
OK, I admit that my business expertise was NOT in derivatives, but AIG just paid 100 cents on the dollar to their counterparties. 100 cents!!
So, what exactly are these “retained” geniuses doing? With THIS kind of help, I’d let them walk…..
I’ve worked on Wall Street and so I understand the “group think.” I would argue that the people you want to keep at AIG were the ones who saw the train wreck coming and tried to object to the deals or at least raised some annoying, pesky questions.
THOSE are exactly the type of people who are laid off when the company “restructures.” The ones who are kept then try to “double-down” their bets to prove themselves right on their original positions…or, they do nothing, hoping that the market comes back…The place needs to do a good housecleaning….
More opportunities for women to move in, too….
I don’t understand why people think BObama would radically change anything around the economy — for one, he is a free market Chicago boy. And look at who funded his campaign! You don’t really think he’s going to allow Wall St. to implode. To paraphrase Noam Chomsky: to put Summers and Geithner in charge of the bailout is like putting the Taliban in charge of the war on terror. Appoint a woman! Don’t make me laugh.
Amy, wonderful essay. You are on a roll, so articulate and reasoned. And your financial background is useful in these scary times. Please keep on doing this. Love it – fills a void.
Obama is surrounded by clueless lawyers and academics, nobody from the world of (honest) business who can lend weight. He is getting duped by gleeful hedge and i-banking types, like taking candy from a baby as they nudge him along. They were big donors, of course.
Larry Summers was not put in as Treasury chief since his confirmation hearing would have re-aired his dirty laundry. Women at Harvard fared poorly in tenure selection under his watch. He continues to insist – insist – that he misspoke about women in science only because he was trying to play “provocateur” in an intellectual debate. Not that he thinks women are not suited for rigorous intellectual careers. Nope, he was just sayin’. Riiiiight.
Can you imagine anyone making those type of stereotyped statements trashing, say, Jews? Veterans? The disabled? Blacks?
They’d be run out of town on a rail. Not respectfully deferred to, and ushered into the Oval Office by a president so tone-deaf to gender issues. It’s fine with this president that his top advisor is proud of his sexist statements and rationalizes them. Wink, wink.
He is the power behind the economic decision-making at the WH, such as it is. They tried to tuck him behind the Wizard of Obama’ curtain but I can see him standing there. Damning us with his presence.
“I don’t understand why people think BObama would radically change anything around the economy…”
Those people don’t understand why they think that, either. They have no reasons when you ask them. They are somehow oblivious to the heavy-handed marketing campaign that has been selling them Hope for two years.
NEW YORK (Reuters) – The names of 200 highest bonus earners at Merrill Lynch & Co last year are not a trade secret and can be made public in an investigation by New York’s top legal officer, a judge ruled on Wednesday.
————————————————————————-
Now, THAT will be an interesting list !!
Florida Lady said, ” Women at Harvard fared poorly in tenure selection under his watch. He continues to insist – insist – that he misspoke about women in science only because he was trying to play “provocateur” in an intellectual debate. Not that he thinks women are not suited for rigorous intellectual careers. Nope, he was just sayin’. Riiiiight.”
Very concise summary.
May I quote it? (Not that I agree with your take altogether.)
Flora – O.K.
quote me where?
just wondering.
[...] wrote a couple of weeks back about Larry Summers spoke out against the AIG executives were collecting millions of dollars in bonuses. We wrote how Larry, Timothy Geithner and President [...]
[...] Geithner have managed to have the country transfixed on $165 million of AIG bonuses, while – POOF – $30 billion of taxpayers funds given to AIG goes out the door to domestic AND foreign banks (yes, foreign [...]
[...] public relations. The widespread reaction to Larry Summer’s interview on CBS–judged “tone deaf” by many–characterizes that brief turn of public opinion, now [...]
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