Lawrence Summers’s personal website includes two biographies and traces his career from Harvard University president to director of President Barack Obama’s National Economic Council. The site says he’s now teaching at Harvard and serving on corporate and nonprofit boards.
What’s not mentioned: Summers’s current and previous work as a paid consultant to financial firms including Citigroup Inc., Nasdaq OMX Group Inc. and hedge fund D.E. Shaw & Co.
Consulting work helped make Summers a wealthy man between the time he left government service in 2001 and when he returned in 2009. When President Bill Clinton nominated him to be Treasury Secretary, he listed assets of about $900,000 and debts, including a mortgage, of $500,000. When he returned to serve in the Obama administration, he reported a net worth between $17 million and $39 million.
Summers’s finance industry ties are gaining new scrutiny now that he is among the leading candidates to succeed Federal Reserve Chairman Ben S. Bernanke. He could find himself overseeing his former colleagues while the Fed is at the center of efforts to rein in bank risk-taking.
“Summers is going to have a very sympathetic approach to Wall Street,” said Dean Baker, an economist with the Center for Economic and Policy Research in Washington, a nonpartisan organization that describes itself as politically progressive. “These are people he has a background with. I think it’s certainly a negative.”
Desirable ‘Training’
At the same time, Summers’s Wall Street ties are typical for potential appointees to financial regulatory posts, said Richard W. Painter, who served as an ethics counsel in the White House during the George W. Bush presidency and vetted Bernanke when he was first up for the job in 2006. A background working in financial institutions is “the type of training that you want,” he said in a telephone interview.
Summers’ spokeswoman Kelly Friendly declined to comment.
He wouldn’t be the only Fed official who made a private fortune first. Governor Jerome Powell, a former private-equity executive, had financial assets in 2011 of at least $20 million, according to financial disclosures during the confirmation process. Dallas Fed President Richard Fisher, a former hedge fund manager, last year disclosed assets of more than $20 million.
The Fed has supervisory authority over bank holding companies. The 2010 Dodd-Frank Act gave the Fed authority over large non-bank financial institutions declared systemically risky by a council of regulators, giving the next Fed chairman sway over decisions on capital, liquidity and risk management that directly affects banks and shareholders.