UPDATE 1-Summers' work for financial firms could hurt Fed prospects

Fri Jul 26, 2013 8:38pm EDT

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By Mark Felsenthal

WASHINGTON, July 26 (Reuters) - Former U.S. Treasury Secretary Lawrence Summers, a top contender for the leadership of the Federal Reserve, has been a consultant to large financial institutions, including Citigroup Inc, which could fuel questions about his suitability to head the central bank.

Summers has built a reputation as a brilliant economist and a shrewd policymaker. But his roles with the financial firms could give ammunition to critics who argue he has too cozy a relationship with Wall Street to maintain the Fed's vaunted independence.

The central bank plays a key role in guiding the world's largest economy and has taken on new financial oversight responsibilities following the worst U.S. financial crisis since the Great Depression.

Summers was an important economic adviser to President Barack Obama during his 2008 campaign and first term. After heading the White House National Economic Council, he left the administration in 2010 to pursue a private-sector career.

Summers, who has also been paid to write a column for Reuters, burst back into public view this week as it emerged he might be the leading candidate to become Fed chairman.

The development aroused criticism from some liberals, who link Summers to deregulatory policies in the 1990s that many feel set the stage for the 2007-2009 financial crisis.

At the same time, Summers' extensive experience in the financial world could be seen as an important qualification to lead the Fed, which requires close coordination with financial markets to help manage the economy.

A source close to the White House said the president had said he wanted a Fed chairman who would be clearly understood by Wall Street.

CITIGROUP, NASDAQ WORK

Before joining Obama's administration, Summers worked for hedge fund D.E. Shaw. In his 2009 financial disclosure form, Summers reported more than $5.1 million in compensation from D.E. Shaw, and more than $2.6 million in speaking fees for dozens of engagements.

Since leaving the White House, he has been a part-time adviser to venture capital firm Andreessen Horowitz.

Citigroup and Nasdaq confirmed to Reuters on Friday that he had also done work for them. His Citigroup and Nasdaq employment was first reported by the Wall Street Journal.

A spokeswoman for Summers declined to comment.

Citigroup said it had engaged Summers to talk to clients and staff about economic topics, but declined to say how much it paid him.

"In addition to speaking at internal meetings, we engage Mr. Summers for small private bank client and institutional client meetings, where he provides insight on a broad range of topics including the global and domestic economy," the financial powerhouse said in a statement.

Summers' ties to Citi might be the most problematic for any bid to assume the Fed helm. The bank received an estimated $280 billion in bailout funds from the government, making it one of the largest single financial firms to benefit from public backing, according to the ProPublica website.

A spokesman for the Nasdaq, Robert Madden, confirmed that Summers was an adviser to the exchange operator, but could not say how long Summers has had that role, or how much he was paid.

A person with direct knowledge said Summers had been an adviser to Nasdaq for "a number of years," but would not be more specific. The person asked to remain anonymous because of the sensitivity of the matter.

Speculation about Summers had reached sufficient volume on Friday for the White House to tamp down expectations of an announcement about the Fed.

A senior White House official said no decision had been made about what to do when the term of current Fed Chairman Ben Bernanke expires on Jan. 31. Bernanke is widely believed not to want to stay on for a third four-year term.

No announcement is imminent and none is likely before autumn, the official said.

Fed Vice Chair Janet Yellen is considered another leading candidate to head the central bank based on her long experience at the central bank and her academic background.

But Summers' candidacy is credible to many because of his strong personal ties to Obama.

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Comments (1)
quatra wrote:
Why is Obama involved in this? The Fed is a mafia of private banks and has nothing (or should have nothing to do) with the issue, unless he takes their power away.

Jul 26, 2013 11:21pm EDT  --  Report as abuse
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