Naked Capitalism Outlasts Larry Summers

Hi, everyone. One notable achievement has been our involvement in a community that has successfully outlasted and even ousted several problematic figures. Notably, this site played a part in the departure of three government officials. We were a small part of a larger coalition of activists and journalists that worked diligently to prevent Larry Summers from securing high-profile positions he ardently pursued after his tenure as Secretary of the Treasury, namely the roles of Fed Chairman and head of the World Bank. Our 2013 article, Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound, surfaced during a time when Summers was rumored to be a top candidate for the Fed chief, shedding light on lesser-known aspects of his destructive leadership. Here’s an excerpt from that piece:

Summers, overly confident in his economic background, dismissed the guidance of two consecutive presidents of the Harvard Management Corporation (the internal fund management entity filled with well-qualified and compensated money managers tasked with investing the Harvard endowment). Unwilling to let the professionals handle things, Summers insisted on speculating with the university’s operating funds—money that is generated yearly from tuition, board payments, government grants, and a portion of the endowment allotted for the annual budget. His reckless decisions resulted in over $2 billion in losses and exacerbated budget cuts, even leading to the elimination of hot breakfast options. A detailed overview was provided by the Boston Globe here…

To avoid inundating you with intricate details about the swaps that devastated Summers’ financial strategies (for specifics, refer to this Bloomberg article), it’s essential to state that Summers fell prey to Wall Street manipulations. As noted by Epicurean Dealmaker following the Bloomberg reveal (emphasis ours):

Forward swaps, or forward start swaps—which function similarly to regular swaps except that the fixed and floating payments are scheduled to commence at a future date—amount to little more than sheer interest rate speculation, particularly in this context as a wager that short-term interest rates will rise. They can be quite sensible when an issuer plans to sell bonds soon and wants to hedge against budgetary uncertainties by converting floating rate commitments into fixed-rate debt. However, I’ve rarely found a corporate client confident enough about their absolute funding requirements and current or upcoming market conditions to engage in a forward swap commencing over nine months into the future. Committing to such a swap for debt not intended for issuance for up to 20 years seems to reflect either extreme arrogance or a chance for easy money for Wall Street swap desks.

Thus, Summers allowed his ego to cloud his judgment, pressured his subordinates, disregarded the counsel of two presidents of Harvard Management, and left a trail of significant losses in his wake. How could anyone rational allow a person with such a clear lack of maturity and misplaced self-assurance to wield substantial influence over important economic decisions?

Summers also played a role in a catastrophic event with enduring consequences: the exploitation of Russia during the 1990s, which was a principal factor behind his ouster as Harvard’s president. He staunchly defended his fellow economics colleague Andrei Shleifer even after a judge ruled that Shleifer had breached conflict-of-interest regulations, attempted to launder $400,000 through family and a romantic partner, and submitted false claims to USAID. Harvard settled for $26.5 million, with Shleifer personally liable for $2 million. Copies of a comprehensive Institutional Investor article were distributed to every faculty member the morning of the no-confidence vote that led to Summers’ resignation.

Outliving Larry Summers is, in itself, an achievement. He is only three years older than I am, and our country is undoubtedly led by a gerontocracy. Despite his history of poor judgment that has imposed costs on others, Summers ultimately fell from grace due to his connections with Jeffrey Epstein. Congressional investigations revealed that Summers had been a constant correspondent with the latter from 2017 to 2019 and even sought romantic advice from him. This led the American Economic Association to impose a lifetime ban. Consequently, Summers resigned from all significant positions, not just his professorship at Harvard but also his column at Bloomberg. Notably, before his ultimate downfall, Summers still held some influence, having been appointed to the board of OpenAI in 2023. He criticized Harvard for not being stringent enough regarding anti-genocide protests anti-Semitism and attempted to intervene in the Trump campaign against Harvard’s independence.

Mark Ames’ timeless piece, written for our inaugural fundraiser 15 years ago, serves as an important reminder of how neoliberalism became dominant and why those passionate about strengthening social safety nets and striving for more equitable income distribution must delve into the intricate workings of finance and economics. Ames articulates a key reason the left struggles with power: its members often viewed finance as disreputable and unworthy of study. For instance, individuals in asset management are twice as likely to become billionaires compared to their tech counterparts.

This piece stands as our version of holiday staples like *The Grinch That Stole Christmas* or *It’s a Wonderful Life.* However, Ames’ work is anything but sentimental.

In the spirit of early holiday cheer, we encourage you to consider leaving a generous gift in our stocking, or rather, Tip Jar!

By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.

If you’ve been following Naked Capitalism for any length of time without contributing, and many of us have been captivated since we discovered Yves Smith’s incisive insights and remarkable intellect, it’s time to rectify that oversight. Naked Capitalism is a unique blog that educates us. It enhances our understanding of many topics, primarily focusing on Yves’ expertise in finance.

Due to a series of unfortunate historical circumstances, the American Left has gone two generations without grasping finance or even bothering to understand it. It was the hippies who, half a century ago, deemed finance beneath them, thus willingly ceding the entire field—finance, business, economics, money—essentially political power—to the opposing side. Abandoning the finance struggle was akin to a hitchhiker unwittingly handing a weapon back to the Manson Family. A memorable line from Charles Portis’s anti-hippie novel, *Dog of the South*, perfectly captures the Boomers’ disdain for “figures”:

He would always say—boast, the way those people do—that he had no head for figures and couldn’t do things with his hands, slyly suggesting the presence of finer qualities.

This issue of labor, which the hippies discarded as it clashed with their Cultural Revolution, has consequently left the Left grappling with the repercussions of neglecting finance and labor for the past fifty years—consequences that manifest as powerlessness and political impotence.

This is why Yves Smith is critical for anyone concerned about the troubling trajectory of our country. In 2008, the Left was caught off guard by the financial collapse, despite its ability to vocally criticize foreign wars and social injustices. This ignorance stifled political and intellectual understanding, leaving us with a lexicon that felt foreign—unless, of course, you were an early follower of Yves Smith’s blog.

It wasn’t always this way.

In the 1930s, the Left firmly understood the significance of economics, money, and finance; back then, the Left and Labor were virtually synonymous. Armed with a foundation in finance and economics, the Left grasped labor, political power, ideology, and organization much more effectively than today’s Left, which, at its best, only responds to the thoughtless vitriol that the Right specializes in hurling our way. We are only beginning to comprehend our political limitations and ignorance, recognizing the knowledge we’ve lost and the extensive catching up we must undertake.

This is why Naked Capitalism, spearheaded by Yves Smith, is an invaluable asset for the 99% in the struggle that lies ahead. She embodies both analysis and education, possessing a rare literary talent for elucidating financial matters. One factor that has shielded the financial oligarchy is the convoluted prose that encases their insidious ideas. Yet Yves stands out as one of the few who can make financial reading emotionally resonant.

Naked Capitalism serves as our online institution for finance, politics, and ideology. In contrast to other online platforms that aim to mold millions into debt-laden participants of Wall Street’s machinery, Naked Capitalism operates differently: entirely free, consistently insightful, essential, and intellectually enriching. It empowers us with knowledge that could possibly one day allow us to overturn the financial oligarchy. Moreover, unlike those educational schemes (Stanley Kaplan, cough-cough!), your contributions won’t be financing lofty salaries for figures like Ezra Klein.

This brings me back to my earlier point about “shame on you.” In fundraising, nothing stands effective like a little shaming. Just as those late-night commercials exploit our empathy with images of suffering animals, we might think about our role in supporting Naked Capitalism. Unlike those with no compassion, many of us understand the crucial role Naked Capitalism has played in enlightening us. The other side is acutely aware of the threat posed by a site like this. As we become more educated and politically astute, we increasingly endanger the status quo.

The oligarchy has invested decades in an initiative to “defund the Left,” achieving results we are only beginning to comprehend. “Defunding the Left” isn’t about withholding funds from the faltering Democratic Party; it’s about stripping resources from anything that poses a threat to the 1%’s grip on wealth and power.

One of their significant victories, whether intentional or not, has been the decimation of journalism, constricting it to a manageable size where integrity can be suffocated. Making a living as a journalist today is nearly impossible. With the journalism industry’s economics plummeting like the Soviet refrigerator industry in the 1990s, media outlets become increasingly reluctant to challenge authority, and journalists are less inclined to confront malfeasance, resulting in widespread corruption (see: Washington Post, Atlantic Monthly). A recent ProPublica study highlighted this trend: In 1980, there was a 1:3 ratio of PR representatives to journalists. By 2008, that ratio became 3 PR individuals for every journalist. And that was before the fallout from the 2008 financial crisis hit the journalism sector hard.

This is the reality of an oligarchy. I witnessed a similar dynamic during Russia’s Yeltsin era: When he assumed power in 1991, Russia boasted the most courageous and ideologically diverse journalism landscape I’ve ever encountered—a low-tech, high-energy counterpart to American journalism of the 1970s. However, once Yeltsin created a class of oligarchs to secure his re-election in 1996, they seized control of all independent media outlets, methodically eliminating anyone willing to challenge their authority. By the time Putin rose to prominence, many prominent Russian journalists I knew had left the field for public relations or political servitude. The oligarchy was responsible for suffocating Russian journalism; Putin merely extinguished the last remnants of resistance.

The sole path to preventing a similar fate is to support what remains of our media landscape. Working for free is unsustainable and cannot continue indefinitely.

There are several ways to contribute. The first is through our blog’s Tip Jar, which directs you to PayPal, where you can utilize a debit card, credit card, or PayPal account [plus Clover and Wise].

You may also send checks (or several post-dated checks) made out to Aurora Advisors Incorporated to:

Aurora Advisors Incorporated
PO Box 110105
Brooklyn NY 11211-0105

Additionally, please email yves@nakedcapitalism.com with the subject line “Check is in the mail” (and just the amount en route in the message) for your donation to be tallied in our contributions record.

So donate now to Naked Capitalism. If your finances are tight, contribute what you can. If you have the means, consider giving more. If you’re in a position to donate generously, we encourage you to do so. Whether your contribution is $5 or $5,000, it will yield returns—you have my word. This isn’t merely a donation; it’s a commitment to fostering a new dialogue, a different society, and a reformed culture.

Who knows? Perhaps we’ll even discover a way to send Larry Summers into orbit, where he can endlessly circumnavigate Uranus. Yves? Is such a venture financially feasible?