Monday, April 6, 2009

Larry Summers - No Conflict of Interest; He Pinkie Swears

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There are so many conflicts of interests in the monied few I am starting to lose track. Paul Volcker was our one hope to stand above the fray but from all indicated reports, Larry Summers has been doing an excellent job keeping him in some dusty closet. As more and more time passes, you will see how there is a small club of gentlemen, as The Atlantic most kindly pointed out - [Weekend Reading: 2 Stories Only] who intermingle... let's call the The Club. It's the club of The Connected.

So as parts of The Club devise ways to use US taxpayers money to subsidize the other part of The Club, we cheer. Because Wall Street *is* Main Street - keep repeating that. Your 401k is at hostage so unless the monied financiers get their loot, we'll take down your retirement hopes with us.

It does appear Mr. Summers does have a conflict or two. Or perhaps three. Aside from earning $5.2 million for work at DE Shaw (hedge fund) the past few years (for 1 day of work a week), he made $2.7 in speaking fees at many of the same banks he now is figuring out ways to prop up. (and folks it is NOT an either or question - we can have functioning banks without subsidizing both equity and bond holders with tax payer money)

For those who don't know DE Shaw is one of the HAL9000 quant hedge funds we so often speak of....

Shall we? Via the New York Times
  • Lawrence H. Summers plays down his stint in the hedge fund business as a mere part-time job — but the financial and intellectual rewards that he gained there would make even most full-time workers envious.
  • Mr. Summers, the former Treasury secretary and Harvard president who is now the chief economic adviser to President Obama, earned nearly $5.2 million in just the last of his two years at one of the world’s largest funds - DE Shaw. Impressive as that might sound, it is all the more considering that Mr. Summers worked there just one day a week. (nice work if you can get it... leaves 300+ days open for other things to boot)
  • Much is known about Mr. Summers’s days in Washington and Cambridge, but little attention has been paid to his two years in New York, from late 2006 to late 2008, advising an elite corps of math wizards and scientists devising investment strategies for D. E. Shaw & Company.
  • Mr. Summers and Shaw executives say his role there was to be a sounding board for Shaw’s traders. But interviews with friends and former colleagues suggest that Mr. Summers’s role at D. E. Shaw was wider and more complex.
  • Mr. Summers, these people say, was a marquee hire, a prized spokesman for Shaw. He routinely made himself available for private consultations with Shaw’s clients, an attractive perk for investing with the firm, as one client put it.
  • While at Shaw, Mr. Summers also peered into the inner workings of the $2 trillion hedge fund industry, which the Obama administration is now relying on to buy billions of dollars of worrisome assets from the nation’s beleaguered banks.
  • Some of his critics worry that such ties raise questions about whether the government’s ever-changing effort to bolster the financial industry will benefit Wall Street in general, and hedge funds in particular, at the expense of taxpayers. (nah!)
  • D. E. Shaw does not like to talk about what goes on inside its modish headquarters near Times Square. There, esoteric trading strategies are imagined, sketched on whiteboards and modeled on supercomputers by an elite corps of math wizards and scientists, most of them unknown to the outside world.
  • He (Summers) seemed to fit in among Shaw’s math-loving “quants,” as devotees of math-heavy quantitative investing are known. Traders joked that Mr. Summers was the first quant Treasury secretary because he had once ordered dollar bills to be printed with the transcendental number pi — 3.14159... — as the serial number.
  • At Harvard and at Shaw, Mr. Summers cultivated a small circle of financial professionals — particularly hedge fund managers — to serve as an informal brain trust. He consults with them on policy matters from his perch in the White House. (hence why we have such glee on Wall Street at these plans - now if only they could be assured Congress would never come after them in the future; these toxic assets would be flying off shelves like hot cakes)
  • Among these insiders are Kenneth D. Brody and Frank P. Brosens, the founding partners of another hedge fund, Taconic Capital Advisors, for whom Mr. Summers did consulting work from 2004 to 2006. Mr. Summers reached out to Mr. Brosens in December to discuss the Obama administration’s economic priorities. This year, he campaigned to have him run the federal office overseeing the $700 billion bailout program.
  • A spokesman for Shaw said Mr. Summers’s main job was not to act as a salesman. But in the fall of 2007, as the financial crisis simmered, Mr. Summers traveled to Dubai for a series of meetings with Shaw’s marketing staff and potential investors. Bankers from across the region flew in for the event. Mr. Summers spoke at several lavish dinners and met with local parties involved in Shaw’s real estate investments in the area, people briefed on his trip said.
Just wanted to let you know whose interests we are looking out for as we plan national policy. In the last administration, Cheney took the oil executives behind locked doors (no transcripts kids) to make energy policy. Now we have the financiers "consulting" on "best actions" to fix the problems... and yes Mr. Geithner is also speaking quite often with the more common names that roll off your tongue - the JPMorgans, the Goldmans, the Morgan Stanleys... devising "best practices" go forward, of course.

Oh, I almost forgot - via Washington Post
  • Summers, a former U.S. Treasury secretary and Harvard University president, also was paid $2.7 million in speaking fees by a range of organizations and companies, including several troubled Wall Street financial firms, they showed.
  • ......had speaking fees of $67,500 from JP Morgan, $45,000 from Citigroup, $135,000 from Goldman Sachs and $67,500 from Lehman Brothers, which went bankrupt in the mortgage crisis last year.
And it's not just Summers - The Club is a most excellent place
  • The disclosure documents showed many of the senior advisers to the president earned large salaries from their companies, served in lucrative positions on corporate boards and had large holdings of stocks, bonds and mutual funds.
  • National security adviser James L. Jones earned $1.1 million last year in board compensation from five corporations, including defense contractor Boeing, in addition to $900,000 in salary from the U.S. Chamber of Commerce and hundreds of thousands more in consulting fees.
  • Valerie Jarrett, another senior Obama adviser, reported $346,687 in directors' fees, including from the consulting firm Navigant, a real estate investment trust and the Chicago Stock Exchange. Jarrett had $302,000 in salary from a company that develops and manages apartment buildings, plus $550,000 in deferred salary from the same firm, her disclosure form showed.
  • White House social secretary Desiree Rogers received a $1.8 million salary from People's Gas and North Shore Gas, where she was president, as well as $350,000 from Allstate, where she managed the social networking division. (wow! busy person! two jobs at once? two jobs at that pay at once? man, I've heard of picking up a 2nd job but not like this - I would hope these two jobs were not concurrent but the way it is written makes it sound as if it is)
  • Louis Caldera, director of the White House Military Office, made hundreds of thousands for serving on corporate boards, including $227,155 in board fees and deferred compensation from IndyMac Bancorp, the California-based savings and loan company that failed and was seized by the federal government.
And if you are wondering where our storied Mr Greenspan is now working, outside of his massive speaking fees? It's all about The Club baby.
  • Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco
Really - where else would we expect him to land? Jackpot.

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