Career Milestones and Controversial Actions of Larry Summers
Career Milestones and Controversial Actions of Larry Summers
Timeline of career as well as policy and executive actions cited by opponents of Larry Summer's candidacy for Chairman of the Fed.
1991-93 As Chief Economist of World Bank Summers in significant measure authored technical assistance and lending programs supporting Russian transition to market economy. Economic policy advice and conditionality guidelines to Russian government contributed, in the view of critics, to mismanaged privatization of Russian state-owned companies during 1991-94.
2010 At end of his tenure as Chair of National Economic Council Summers reportedly influenced drafters of Dodd-Frank bill to dilute Volcker Rule provisions limiting participation of banks in speculative trading in securities markets. Volcker Rule of Dodd-Frank Act, authorship attributed to former Fed Chair Paul Volcker, sought to reinstate, in part, bank restrictions on speculative trading activity which had removed by Gramm-Leach-Bliley Act of 1999.
1975 MIT awards Summers B.S. In Economics. Member of debating team.
1982 Summers awarded Ph.D. in Economics from Harvard. Dissertation topic: An Asset-Price Approach to Capital Income Taxation.
1983 Summers becomes one of youngest tenured professors in Harvard’s history. Not clear what extra-ordinary achievements had earned this exceptional promotion.
1993 Summers awarded John Bates Clark Medal of American Economic Association. Awarded bi-annually to leading U.S. economist under 40. Not clear if award based on specific contributions.
1995 Summers becomes Deputy Secretary of the Treasury in the Clinton Administration, having served from 1993 to 1995 as Undersecretary for International Affairs. Involved in international issues, including intervention in Mexican and Russian currency crises of 1998; opposed U.S. endorsement of Kyoto Protocols; advocated deregulation of financial markets, opposed proposals to upgrade oversight of financial derivatives
1999 Summers becomes Secretary of the Treasury. Supported Gramm-Leach-Bliley Act lifting important restrictions of Glass-Steagall Act of 1933; continued to oppose initiatives to regulate financial derivatives; together with Enron CEO Ken Lay reportedly influenced California Governor Gray Davis to relax state’s environmental standards; promoted Commodity Futures Modernization Act limiting regulation of OTC derivatives.
2001 Summers becomes president of Harvard University. Strongly promoted by Robert Rubin, at the time member of Harvard Corporation.
2001-06 Against the advice of Harvard Management Company’s CEOs Jack Meyer and Mohammed El-Erian, Summers influenced Harvard University to invest in risky mix of stocks, bonds, hedge funds, and private equity, including interest rate swap contracts. When financial markets collapsed in 2008 Harvard incurred losses of at least $1.8 B in capital and termination fees, was forced to borrow to cover margin calls and operating costs as well as make budget cuts.
2000 Summers promotes Commodity Futures Modernization Act (CFMA). Co-authored unfavorable report preceding introduction of bill, lobbied for passage of new law limiting regulation of OTC derivatives.
2000 Role in Enron corporate scandal.Rejected changes of manipulation of energy markets by Enron, included provision in CFMA to preclude regulation of energy trading, opposed Califonia Governor Gray Davis’ proposal for energy price controls.
1999 Summers actively supported Congressional approval of the Financial Services Modernization Act (FSMA), sponsored by Republicans Phil Gramm, Jim Leach and Thomas Bliley. Asserted that it would create financial regulatory system “for the 21st century” and “promote stability in our financial system.”
FSMA of 1999 accomplished the following:
Repealed the limitations on banks to affiliate with securities and insurance firms. Enabled creation of “financial holding company,” non-banking subsidiaries of which allowed engaging in insurance and securities underwriting. Allowed banks with a federal charter to conduct non-banking activity through new "financial subsidiaries."
1999 World Trade Organization (WTO) Doha Round on Agreement on Financial Services in Seattle Controversial agreement advocated by U.S. foreign policy makers to facilitate access of American financial companies to global markets. In view of many had detrimental effect on emerging economies, with less emphasis on introducing competition by allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents. Summers participated in negotiating WTO Financial Services agreement which opened global markets to derivatives and other financial products, thus making it harder for signatory nations to regulate banking in the public interest. In WTO agreement, which was negotiated behind closed doors, the United States effectively pledged to get rid of the 1933 Glass-Steagall law which was seen as a barrier to U.S. market entry by many foreign banks .
2002 Summers remarks before Securities Industry Association on November 9, 2000: “As I have stated before, it is the private sector, not the public sector that is in the best position to provide effective supervision. Counterparties and creditors have more knowledge of their counterparts, more skill in evaluating risk and greater incentives than any public regulator will ever have.”
1998-2010 Summers has various quotes attributed on unemployment issues. Some statements were critical of government safety nets as incentivizing unemployment while others took a more balanced approach.
2007 Summers advises President against signing Kyoto (to protect the economy) In Financial Times op-ed on May 2007 Summers argued that Kyoto program, based largely on cap-and-trade, was unrealistic and politically not feasible in U.S.; also argued that Kyoto had modest results on carbon abatement among European signatories; in separate interview suggested Kyoto obligations would make U.S. business non-competitive
1991 Summers comments on environmental pollution. As Chief Economist of World bank quoted as suggesting that African countries due to low population density and lack of pollution would make good dumps for toxic waste. Later retracted and apologized.
2005 Summers comment on women in science and engineering. At 2005 conference of National Bureau of Economic Research Summers argued, citing various research studies, that women are under-represented in tenured science and engineering faculty positions due to lower aptitudes among females for these disciplines.
2009 Summers held responsible by various pundits for concealing assessments of Obama’s senior economic advisers, including Chair of Council of Economic Advisor Christine Romer, about scale of size output gap in U.SD. Economy and stimulus funds required to offset the shortfall by 2011. Romer’s figure was reportedly $1.8 trillion, scaled down under questioning to $1.2 trillion. Politically acceptable figure of $650-850, 00 billion was presented in memos screened by Summers to president, and ultimately to Congress, without including the higher estimates. Romer reportedly was personally offended by Summer’s dismissals of her views.
2005-2009 Interim work with financial companies, speaking fees raise net worth from $900,000 to $17-39 million. Managing Directorship with hedge fund D.E. Shaw at $5 million salary over 16 months; $2.8 million in speaking fees from large financial institutions, Goldman Sachs among others.
2013 Selected comments on Fed candidacy. In the views observers, including Joseph Stieglitz and Mohammed, El-Erian Summers history of favoring Wall Street could make Fed policy more sympathetic to financial sector’s concern about low inflation than to boosting employment.
2010-13 Work with financial institutions. D. E. Shaw hedge fund, Citigroup, NASDAQ OMX group, Square, Andreesen Horwirtz, Lending Club.