Wednesday, July 10, 2013

Summers to the Fed?

Politico reports that former Harvard president Larry Summers may be Obama's choice to head the Fed. Richard Bradley has an astute close reading of the Politico reporting, pointing out the fingerprints of Summers' own hands in the way people who know him muse this or that about his interest in the job.

Summers is said by those who know him to be in no way campaigning for the job, despite a recent flurry of stories about his potential nomination. His office said he was golfing with no access to a cellphone when POLITICO tried to reach him on Tuesday. People close to Summers say he has settled into his current teaching role at Harvard and is not especially eager to move back to Washington full time. …

"Settled into his teaching job" except, of course, for the time he spends giving speeches and advice to everyone from hedge funds to the Minerva Project. The New York Times reported that he had made more than $5 million in a single year from D.E. Shaw: "A Rich Education for Summers (after Harvard)". Could he be lured away, if the president begged? Informed but anonymous sources say yes:
But others say that if Obama asks, Summers would certainly agree to serve
We have seen Summers' skillful manipulation of journalists before. On March 4, 2006, New York Times columnist John Tierney published a column entitled "The Faculty Club" about the Summers presidential debacle. He quoted a "contrarian academic" as making an interesting observation about the effect of tenure on faculty appointments. I had never heard this particular point made -- except once, a few days before, when I heard Summers himself make it in his remarks to Harvard parents. It certainly looked like Summers had gotten Tierney to carry his water for him by quoting Summers himself anonymously. I wrote to the Public Editor:

I write in regard to John Tierney's column of last Saturday …. I was at the event last Friday at which President Summers gave the interesting answer to a question about tenure,
that without it we professors wouldn't hire people better than we are. I had not heard that argument before, at least not put that way. I was stunned to read almost exactly the same language the next morning out of the mouth an anonymous academic quoted in Tierney's column, immediately preceding a paragraph on the woes of President Summers. 
… I wonder about the journalistic ethics of quoting, as an anonymous source, the individual who is in fact the subject of the opinion piece. It seems to me that in this situation the reader has a right to know the conflict of interest in the opinion being quoted.
The editor responded that he did not get into the journalistic practices of opinion writers.

So it seems Summers still has his media connections working for him. If I had to guess, I would say he is not only campaigning for the Fed job, but doing so 24x7.

There is one related point about the Politico reporting with which I would find fault, though it is a common failing among journalists.

You know the classical use of epithets such as "wily Odysseus" and "pious Aeneas," where a figure is repeatedly characterized by the same memorable trait? Well, with Summers it is that he was brought down from the Harvard presidency because of his women-in-science remarks at NBER. Here is Politico's nod to that Achilles heel:

Summers, who drew criticism in 2005 for remarks as Harvard president on women’s aptitude for science, would certainly face contentious confirmation hearings.
Now it is certainly true that Summers drew criticism for those remarks, but neither this story nor any other recent Summers story I have read mentions something of greater significance to the Harvard faculty and more relevant to his fitness to lead the Fed: His passivity and prevarication about the corruption of his protegé, Harvard economist Andrei Shleifer, who conspired to defraud the government of millions of dollars through sleazy exploitation of his role in a government-funded Harvard program to help bootstrap capitalism in Russia. As David Warsh summarized,

After its mission to advise the Russian government on behalf of the US State department collapsed in 1997 amid a welter of conflict of interest charges, Harvard closed its Institute for International Development. After losing a long court battle, and partly as a consequence of it, the university relieved Lawrence Summers of his presidency (but made him a university professor) and revoked economics professor Andrei Shleifer’s endowed chair.
(Warsh's Economic Principals site has many more extensive pieces about the Shleifer affair and its significance.)

The scandal, which was extensively documented by David McClintick in his Institutional Investor piece "How Harvard Lost Russia," played a major role in turning the Harvard faculty (including some who thought the tempest over the women-in-science remarks was overblown) against Summers. The Crimson accurately reported the dramatic moment in the February, 2006 faculty meeting when Summers lied to the faculty about his involvement with Shleifer and his self-dealing in Harvard's name:
The article, in the January issue of Institutional Investor magazine, suggests that Shleifer’s relationship with Summers shielded the professor from the consequences of the scandal while at Harvard. 
At Tuesday’s meeting, many professors let out murmurs of disbelief when Summers said he was not sufficiently familiar with the facts of the case to comment on it. 
“I have taken no role in Harvard’s activities in the courts, nor...familiarized myself with the facts of the situation,” Summers told Abernathy. 
“Do you have no opinion of this situation?” Abernathy queried in response, having already stepped away from the microphone. 
“I am not knowledgeable of the facts and circumstances to be able to express an opinion as a consequence of my recusal,” Summers said, eliciting more murmurs from the audience. 
The murmuring in the room was indeed audible. The consensus of the chatter after the meeting was that the Summers presidency was cooked. It was one thing to make a mistake, or to be loyal to a friend; it was another thing to lie about one's awareness of a financial scandal that cost the University of which Summers was president tens of millions of dollars in penalties.

Why do journalists always use the women-in-science incident but not the much more serious Shleifer incident when giving the thumbnail of Summers' problems as president? Of course the Shleifer affair is hard to explain quickly, and unlike the women-in-science remarks for which Summers eventually issued an apology, Summers has never said anything about the Shleifer affair (except in depositions), so a cautious journalist might feel there was another side to the story that should, in fairness, be allowed for. And once one or two journalists tag Summers with the women-in-science epithet, the easy thing for the next lazy journalist is just to repeat the same description.

But I suspect that there is another reason journalists (with very few exceptions) never bring up the Shleifer affair. It's because Summers, and his nameless but well connected friends, like the women-in-science explanation for his Harvard problems. It makes him more acceptable to certain segments of the right, for whom slaughter at the hands of feminist harpies would be a heroic form of death. And most of all, it utterly distracts attention from the bigger and more significant scandal, the pussy-footing with financial corruption and the inability to tell the truth about it.

Summers has been so successful in getting the press to do his bidding, that I suspect the women-in-science trope is one of his own promotion.

After Summers stepped down from the Harvard presidency, quite a few people thought that he might wind up in Washington some day, but probably not in a role that would require Congressional confirmation, because that McClintick article would get dredged up again. But perhaps bygones will prove to be bygones, and almost everyone will have forgotten. After all, Shleifer's wife Nancy Zimmerman, a hedge fund manager also involved in the Russian affair, was reported by the New York Times to have been part of Obama's inner circle of economic advisors. 

Suddenly, Republican obstructionism doesn't sound like such a terrible thing to me.


  1. Not to get in the way of Summers bashing, but the tenure point was made by my former colleague Lorne Carmichael in a well-known paper published in 1988. Not new to Larry, and certainly possible he wasn't the source. Lots of economists could tell the same story -- and they do.

    1. Thanks for this, which I did not know, and nobody else has pointed out even though Richard Thomas noted it in a letter that was published in the NYT in response to the Tierney column. The letter will be hard to find online now so I link here to Richard Bradley's blog post about it:
      The timing was very striking at the time -- if I remember correctly, Summers' talk to the parents was on a Friday afternoon and the Tierney column was published Saturday, or maybe it was Saturday and Sunday. It suggests to me, though surely does not prove, that this meme was in the air between Tierney's informants and Summers and whoever he was talking to.

  2. Of course, you realize that Death by Harvard Faculty is also a heroic form of death to many on the right.

    Which brings to mind something that sticks in the back of my mind. Maybe you could provide some help in sourcing an apocryphal Dershowitz quote for me:

    "Politically, I am left of 95% of the U.S.A. but 95% of the Harvard Faculty is to the left of me."

    It's cute. But I'd like to have source for that if it rings any bells for you.

    1. I always thought it unfortunate that the "no confidence" motion was made by one of the leftier members of the faculty, since the opposition to Summers was more broadly based. Yes, there are Harvard faculty who are not lefties. In fact, if the faclty in the Engineering School (where Prof. Abernathy and I reside) have a political leaning, I wouldn't know what it was.