Geithner-Summers Tag Team Op-Ed

In an op-ed piece published in tomorrow’s The Wall Street Journal, U.S. Treasury Secretary Tim Geithner and Director of the National Economic Council Larry Summers clearly indicate the worst is over for the economy, since they take a tremendous amount of credit for the manipulated recovery that has occurred to date. They write:

Thanks to strong, decisive and coordinated action, President Obama and the other G-20 leaders have achieved significant progress since the London meeting. The global economy, which was then contracting at an unprecedented rate, is now expanding, and world trade has increased by more than 20% over the last 15 months.

This turnaround has been especially dramatic in the United States. At the time of the London summit, the U.S. economy was shrinking at an annual rate of 6%. Now it is growing at a rate in excess of 3%—the largest swing in U.S. growth in 50 years.

At the start of last year, the U.S. was losing more than 700,000 jobs a month, and today the private sector is generating new jobs. Recovery was only possible because we took action to repair our financial system, driving down borrowing costs for homeowners, consumers and businesses, and put in place the Recovery Act, which increased demand by cutting taxes for families, helping unemployed workers, and investing in public infrastructure.

Among the points they fail to mention is that the jobs number has been manipulated upward by census hires, which appear at least in some cases to be counted as hires 2, 3 or 4 times, and in any case are just short-term work.

As for the housing sector, the manipulated housing upward push is over. Indeed analyst Meredith Whitney argues that a double-dip in housing is upon us.

Basically, all Geithner and Summers can hope to achieve at the upcoming G-20 is a patch job that may have a half-life of weeks, if not days. There are too many holes in the dike and it's all going to come tumbling down, in the not too distant future.

The full Op-Ed is in the EPJ Vault, here.

Larry Summers: "Small business is in a quiet depression."

This morning on CNN  Larry Summers, President Obama's chief economic adviser stated that "Small business is in a quiet depression."

Not only is this true, but blamed has to be laid at the very Obama Administration policies that Summers is promoting. You can't take hundreds of billions of dollars and re-direct them to investment bankers, like Goldman Sachs, and the auto industry, and not expect a huge impact in some other sector of the economy. It turns out that other sector is small business/

Iris Mack Expands Global Reach

For the international part of her "Why Larry Summer Is an Idiot" World Speaking Tour, Iris Mack has decided to sign with ICMI Speakers and Entertainers agency in Australia

Iris Mack Speaking Demand Goes Global

Oh, this is going to be a fun summer for Larry Summers, the demand for Iris Mack has gone beyond the U.S. and is now global.

On May 11th she is a guest speaker in a University of Zurich finance class.

On May 19th she speaks in at the Center for Quantitative Finance program. The Center that was founded by Paul Wilmott.

"Why Larry Summers is an Idiot"

It's going to be a hot summer for President Obama's top economic adviser, Larry Summers, in more ways than one.

Charlie Gasparino reported last week that:

Larry Summers, who heads the White House’s National Economic Council, has been described as unhappy in his job, and is suggesting in conversations that he may leave the administration by the end of the year, according to Wall Street executives who deal directly with key members of President Obama’s economic team.

What Gasparino has probably been picking up is Summers reading the writing on the wall that the President is likely to throw him overboard after the mid-term elections.

Summers' whispers to Wall Street are likely his attempt at positioning his departure as his own doing.

Any way you look at it,though, it is likeky only to get worse for Summers in the months ahead. The woman,  Iris Mack, that was fired at Harvard after she warned Summers in an email about dangerous derivatives trading going on with Harvard endowment money, has signed on with a powerhouse speakers bureau. World Class Speakers and Entertainers is now representing her.

If you look at the list of topics that Mack will be speaking on for WCSE, half of them are coded versions of the same topic, "Why Larry Summers is an idiot.":

Dr. Iris Mack - summarizing her experiences in the derivatives markets

Ex-employee says she warned Harvard Management Company of risky moves

A Woman Silenced

If nothing else, this should help Larry stay awake this summer.

This Is Connected

Nouriel Roubini reports he is attending a meeting with Chinese Premier Wen.

Not to mention that in the U.S., he is close to Larry Summers, Timothy Geithner and Ben Bernanke. In fact, Summers was on his payroll.

A Cry for Help From Larry Summers?

Bob Murphy points me to a curious blog post by Greg Mankiw. In the post, Mankiw tells us that he has received an email from:

One of my many friends working for President Obama...

The gist of the email is that what is going on inside the White House, versus outside views, are two totally different things, but that outside views have taken on a momentum of their own and may result in dumping two very good men, Larry Summers and Timothy Geithner.

Hmm, I wonder who Mankiw knows in the Obama Administration that is concerned with the careers of Summers and Geithner? Say didn't that guy Summers, for a bit, run Harvard University where Mankiw teaches?

Here's some of what Mankiw's "inside friend" wrote to Mankiw:

My perspective here has given me an unusual window into the looking-glass mirror of how things I see on the inside are interpreted on the outside.

The most vivid case in point is the recent policy announcements about implementing the Volcker ideas about separating investment and commercial banking.

This policy process has been in the works for months, and it came to fruition in the normal course of policy operations after extensive meetings and consultations among Treasury, NEC, the PERAB board, and other parties...

Wall Street is interpreting this as "Summers, Geithner, and Bernanke are on the way out because Obama has finally decided to go populist." Honestly, that is truly not right, though I can see how from the outside it would look like it.

Oddly enough, this is one of those cases where the whole thing could be a self-fulfilling prophecy....

PS I know it's a fool's game to try to explain moves in the stock market, but I have a friend on Wall Street who tells me that the selloff in the last couple of days is more due to uncertainty caused by the sense that Summers and Geithner are losing out to populism than to specifics of the bank plan.

Mankiw closes by thanking Summers, er ah, his "inside friend":

Thanks for helping to get the true story out.

Actually, there is some truth to the comment that there is fear on Wall Street that Summers and Geithner may lose out to populism. The thinking is pretty much that Obama is a commie and that, although Summers and Geithner are bought and paid for by Goldman Sachs and haven't been much help to anyonelse on the Street, if they are gone, things will deteriorate for markets real fast.

More Fallout From Larry Summers' Push for Aggressive Investing at Harvard

Harvard University’s failed bet that interest rates would rise cost the school at least $500 million in payments to escape derivatives that backfired, reports Bloomberg.
Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. Harvard said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps.

The transactions began losing value last year as central banks slashed benchmark lending rates, forcing the university to post collateral with lenders, said Daniel Shore, Harvard’s chief financial officer. Some agreements require that the parties post collateral if there are significant changes in interest rates.

“When we went into the fall, we had some serious liquidity management issues we were dealing with and the collateral postings on the swaps was one,” Shore said in an interview yesterday. “In evaluating our liquidity position, we wanted to get some stability and some safety.”

Many of the derivative transactions were entered into in 2004, according to Harvard spokeswoman Christine Heenan. Larry Summers, now, director of Obama’s National Economic Council, was the university’s president at the time.

Ditching the Car Czar

I'd like to see some inside reporting on what was behind Obama's decision to ditch the Car Czar concept and, to instead, put Tim Geithner and Larry Summers in charge of auto industry monkey business. From a distance it looks like it is simply a consolidation of a bit more power in the hands of the Geithner-Summers wing of the White House.

Obama seems to be buying whatever those two are whispering.

Tarullo Sworn in as Member of the Fed Board of Governors

Daniel K. Tarullo took the oath of office, today, as a member of the Board of Governors of the Federal Reserve System. The oath was administered by Chairman Bernanke in the Board Room.

The Senate earlier this week confirmed Tarullo, a former Clinton administration official.

Before joining the Clinton administration, he served as Chief Counsel for Employment Policy on the staff of Senator Edward M. Kennedy, and practiced law in Washington, D.C. He also worked in the Antitrust Division of the Department of Justice and as Special Assistant to the Undersecretary of Commerce. From 1981 to 1987, Tarullo taught at Harvard Law School.

The vote to confirm Tarullo was 96-1. Only Sen. Jim Bunning, R-Ky., voted against Tarullo.

Senator Bunning's office tells me that when the Senator met with Tarullo, he was unimpressed and that the Senator felt Tarullo was unlikely to break the logjam of group think at the Fed.

This is a very curious nomination by Obama. Tarullo has a stronger background in law than in finance. Word has it that he may be tight with White House advisor Larry Summers, who may be angling for Bernanke's spot. Thus, Tarullo may have been placed to watch Bernanke, rather than the economy. Consider, Tarullo a Summers chess piece.

Here We Go Again

The U.S. economy faces “very difficult” months ahead, requiring quick passage of a stimulus package and a retooled bank rescue plan aimed at reviving lending, said Lawrence Summers, director of the White House’s National Economic Council.

“The next few months are, no question, going to be very, very difficult and it may be longer than that,” said Summers, appearing on NBC’s “Meet the Press.”

Obama to Get Daily Economic Briefing

President Barack Obama has asked his top advisers to brief him every morning on the condition of the economy, the White House reports.

The president receives a similar daily intelligence briefing.

The bad news: Keynesian Larry Summers will walk him through the day’s economic news each morning.

At the first briefing, in addition to Summers, in attendance was Vice President Joe Biden, White House Chief of Staff Rahm Emanuel, Budget Director Peter Orszag, Domestic Policy Director Melody Barnes and Biden’s economic adviser Jared Bernstein.

No Hayek, Mises or Murphy in this group.

Fire Larry Summers!

George Reisman on the man who is going to be Obama's "lead economic adviser inside the White House.”:

Summers should be fired. He’s too shallow and ignorant and his ideas too evil for him to serve in the United States Government in any capacity. Although generally viewed as a prominent professional economist, his actual knowledge of the subject is minimal. This conclusion follows from the fact that the essential subject matter of economics is capitalism. And Summers' ideas on redistribution reveal that he fails to understand the nature of the most essential feature of capitalism, namely, private ownership of the means of production and the indispensable role it plays in the standard of living of the average person.

His views may qualify him to be an economic advisor to Hugo Chavez of Venezuela or Robert Mugabe of Zimbabwe, but certainly not to be an economic advisor to the President of the United States.

To see how Reisman reaches his conclusions read his full essay, here.

Speculation Larry Summers May End Up Heading the Fed

It appears Paul Volcker will be one of Barack Obama's key economic advisers. And it should not be forgotten that it has been claimed that Volcker remarked some time ago that Ben Bernanke is a one term Fed chairman.

Which makes speculation by CNBC's Albert Bozzo that Summers will end up at the Fed very interesting.

The Obama Economic Team

President-elect Barack Obama officially announced key members of his economic team today. The new appointees—and short profiles—are listed here:

Timothy F. Geithner, Secretary of the Treasury

A Rubin robot.

See full profile here.

Lawrence H. Summers, Director of the National Economic Council

A Rubin robot.

Obnoxious.

Situated in the White House, he will have regular access to Obama.

Jackie Calmes writes:

Summers, who may well end up being Obama's closest economic adviser, has been especially public in calling for a big stimulus package. Many saw his touch in Obama's call this weekend for the stimulus plan to create or save 2.5 million jobs.

Doesn't understand basic economics, see here and here.

Christina D. Romer, Director of the Council of Economic Advisors

A Keynesian, but actually appears to pay some attention to the money supply as an influence on the business cycle. See here.

Melody C. Barnes, Director of the Domestic Policy Council

A George Soros operative. She has served as Executive Vice President for the Soros front, The Center for American Progress. She also served as chief counsel to Senator Edward M. Kennedy on the Senate Judiciary Committee from December 1995 until March 2003.

Heather A. Higginbottom, Deputy Director of the Domestic Policy Council

Higginbottom founded and served as Executive Director of the American Security Project, which has been supported by the anti-war Gary Hart. Her stand on domestic policy issues is unclear.

Best hope for economic sanity out of this group is from Romer. But when you are reaching into Berkeley, of all places, for economic hope, you are obviously not talking about a Milton Friedman protege.

Possible sanity on war from Higginbottom.

It's The Rubin Robots

Jackie Calmes at IHT fills in more pieces to the puzzle:

It is testament to former Treasury Secretary Robert Rubin's star power among many Democrats that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.

The president-elect's choices for his top economic advisers — Timothy Geithner as Treasury secretary, Lawrence Summers as senior White House economics adviser and Peter Orszag as budget director — are past protégés of Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Obama have Rubin ties: Michael Froman, Rubin's chief of staff in the Treasury Department who followed him to Citigroup, and James Rubin, Rubin's son.

It's the Robert Rubin Wing Of Goldman Sachs That Will Be In Charge of Obama Economic Policy

So says WSJ:

The new economic team emerges from the Democratic Party's moderate flank, with Mr. Rubin as the common denominator. Mr. Summers was Mr. Rubin's longtime deputy at Treasury and then succeeded Mr. Rubin as Treasury secretary. Mr. Geithner was a senior aide at Treasury during this period.

Peter Orszag, who will be Mr. Obama's budget director, was the first director of the Hamilton Project, a program co-founded by Mr. Rubin at the Brookings Institution, a think tank...

Rubin was Vice Chairman and Co-Chief Operating Officer from 1987 to 1990. From the end of 1990 to 1992, Rubin served as Co-Chairman and Co-Senior Partner along with Stephen Friedman. He then served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations.

He now is Director and Senior Counselor of Citigroup where he draws an annual salary of $17 million.

The supermerger between Travelers Group and Citicorp was facilitated by the repeal of the Glass-Steagall Act (Gramm-Leach-Bliley Act). This legislation was passed under the Clinton administration, days before Rubin's resignation. Some believe that Rubin's $17 million Citi salary is quid quo pro for his role in the repeal of Glass-Stegall.

Is This An Endorsement?

"[Larry]Summers is one of a few who are at Krugman's level of intellect."

-Posted at Economists for Obama, in support of Summers being chosen by Obama as Treasury Secretary.

Dean Baker on Larry Summers

Baker writes about Summers, who is rumored to be under consideration for the position of Treasury Secretary in the Obama Adminstraton:

I have nothing against Larry Summers, but I think there is some sense to having people evaluated based on their job performance. Larry Summers thought the stock bubble was cool, ignored the housing bubble, was in favor of the over-valued dollar...

This track record arguably make Summers one of the main villains in the current economic crisis...

I have no doubt that Summers is very bright, but his brilliance did not prevent him from supporting the policies that got us into this mess. Why do we think that his brilliance will lead him to choose the best policies to get us out of it?

Alert: Obama Press Conference

US President-elect Barack Obama and Vice President-elect Joe Biden will hold a news conference at 2:30 EST on Friday after meeting with their team of economic advisers to discuss the transition to the White House.

Obama and Biden will be joined by economic advisers, including former Treasury Secretaries Lawrence Summers and Robert Rubin, former Chairman of the Federal Reserve Paul Volcker, former Securities and Exchange Commissioner William Donaldson and several others. Berkshire Hathaway Chairman Warren Buffett will participate via phone.

All major networks are expected to carry the press conference live.