Yves here. One accomplishment of sorts is being part of a community that has outlasted and even marked up some bad actors. This site has managed to force the departure of three government officials. We played a small role in a group of activists and journalists in the successful effort to keep Larry Summers from getting posts he keenly wanted to occupy after his time as Secretary of Treasury, shown by how hard he campaigned for them: Fed chairman and head of the World Bank. Our 2013 post, Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound, came as Summers was rumored to be gaining ground on Janet Yellen as the preferred pick for the Fed chief, and included some of the less-well known episodes of Summers’ destructive leadership. From that post:
Summers, unduly impressed with his own economic credentials, overruled two successive presidents of Harvard Management Corporation (the in-house fund management operation chock full of well qualified and paid money managers that invest the Harvard endowment). Not content to let the pros have all the fun, Summers insisted on gambling with the university’s operating funds, which are the monies that come in every year (tuition and board payments, government grants, the payments out of the endowment allotted to the annual budget). His risk-taking left the University with over $2 billion in losses and unwind costs and forced wide-spread budget cuts, even down to getting rid of hot breakfasts. The Boston Globe provided an overview…
Without overburdening you with detail on the swaps that blew up Summers’ piggy bank (see this Bloomberg story for the particulars) let there be no doubt that Summers signed up to be a chump to Wall Street. As Epicurean Dealmaker remarked when the Bloomberg expose came out (emphasis ours):
Now forward swaps, or forward start swaps—which behave like normal swaps except the offsetting fixed and floating rate payments are scheduled to start at a date certain in the future—by themselves count as little more than rank interest rate speculation, specifically in this instance as a bet that short-term interest rates will rise in the future. They can make a great deal of sense when an issuer intends to sell bonds in the relatively near future and when the issuer wants to hedge against budgetary uncertainty by converting floating rate obligations into fixed rate debt. That being said, I have rarely encountered a corporate client who feels confident enough about both their absolute funding needs and current and impending market conditions to enter into a forward swap starting more than nine months into the future. Entering into a forward start swap for debt you do not intend to issue up to 20 years in the future sounds like either rank hubris or free money for Wall Street swap desks.
So Summers couldn’t keep his ego out of the way, bullied the people around him, ignored the advice of not one but two presidents of Harvard Management, and left a smoldering pile of losses in his wake. And serious adults are prepared to allow someone with so little maturity and such misplaced self confidence to have major sway over much bigger economic decisions?
And Summers played a role in a disaster whose reverberations live with us now: the plunder of Russia in the 1990s, which was the real reason for his ouster as Harvard president. He had promoted and continued to defended fellow economic professor Andrei Shlieffer even after a judge determined had violated conflict-of-interest rules, tried to lauder $400,000 through his father and girlfriend and submitted false claims to USAID. Harvard paid $26.5 million in a settlement and Shlieffer, $2 million. Copies of an in-depth Institutional Investor article were stuffed in the mailbox of every faculty member the morning of the no-confidence vote that forced Summers’ resignation.
Outlasting Larry Summers is an achievement of sorts. He’s less than three years older than Yves and the US misleadership class is a gerontocracy. Admittedly, despite Summers’ history of bad judgement that imposed costs on others, he was finally felled by his relationship with Jeffrey Epstein. Congress obtained e-mails that showed Summers had been a frequent correspondent with the sexual predator from 2017 to 2019 and even sought romantic advice. The American Economic Association imposed a lifetime ban. Summers resigned from all posts of consequence, not just his Harvard professorship but even his column at Bloomberg. Keep in mind Summers still had sway before his final fall from grace. He had been appointed to the board of OpenAI in 2023. He had also criticized Harvard for not being sufficiently tough on anti-genocide protests anti-Semitism and attemped to play a role in the Trump campaign against Harvard’s independence.
Mark Ames’ hardy perennial, which he wrote for our first fundraiser fifteen years ago, remains an important warning about how neoliberalism became ascendant and why those who care about shoring up social safety nets and achieving more equitable income distribution need to focus on the nerdy operations of financial and economics. Ames explains one of the reasons the left is so bad at power: its adherents saw finance as grubby and thus not worth of study. For instance, someone in asset management is twice as likely to become a billionaire as someone in tech.
While this is our analogue to Christmas staples like The Grinch That Stole Christmas or It’s a Wonderful Life. Ames’ piece is the antithesis of sappy.
And in the spirit of Christmas coming early, we hope you’ll leave something nice in our stocking, um, 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 reading Naked Capitalism for any period of time without giving back in donations—and most of us have been hooked from the time we discovered Yves Smith’s powerful, sharp voice and brilliant mind—then you you’ve been getting away with murder. Naked Capitalism is that rare blog that makes you smarter. Smarter about a lot of things, but primarily about Yves’ area of expertise, finance.
By a quirk of historical bad luck, the American Left has gone two generations without understanding finance, or even caring to understand. It was the hippies who decided half a century ago that finance was beneath them, so they happily ceded the entire field—finance, business, economics, money—otherwise known as “political power”—to the other side. Walking away from the finance struggle was like that hitchhiker handing the gun back to the Manson Family. There’s a great line from Charles Portis’s anti-hippie novel, “Dog of the South” that captures the Boomers’ self-righteous 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.
That part about the hands—that would refer to the hippies’ other great failure, turning their backs on Labor, because Labor didn’t groove with the Hippies’ Culture War. So the Left finds itself, fifty years later, dealing with the consequences of all those years of ruinous neglect of finance and labor—the consequences being powerlessness and political impotence.
That’s why Yves Smith is so important to anyone who cares about politics and the bad direction this country is taking. In 2008, the Left suddenly discovered that although it could bray with the best of ‘em about how bad foreign wars are, and how wrong racism and sexism an homophobia are, it was caught completely and shamefully by surprise by the financial collapse of 2008. The ignorance was paralyzing, politically and intellectually. Even the lexicon was alien. Unless of course you were one of the early followers of Yves Smith’s blog.
It wasn’t always this way.
Back in the 1930s, the Left was firmly grounded in economics, money and finance; back then, the Left and Labor were practically one. With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We’re only just learning how politically stunted and ignorant we are, how much time and knowledge we’ve lost, and how much catching up we have to do.
Which is why Yves Smith’s Naked Capitalism is one of the 99%’s most valuable asset in the long struggle ahead: She is both analyst and educator, with a rare literary talent (especially for finance). One thing that’s protected the financial oligarchy is the turgid horrible prose that they camouflage their toxic ideas and concepts in. Yves is one of the rare few who can make reading finance as emotionally charged as it needs to be.
Naked Capitalism is our online university in finance and politics and ideology. Whereas other online universities are set up to turn millions of gullible youths into debt-shackled Wall Street feeding cows, Naked Capitalism is the opposite: Completely free, consistently brilliant, vital, and necessary, making us smarter, teaching us how we might one day overthrow the financial oligarchy. One other difference between Naked Capitalism and online university swindles: (Stanley Kaplan cough-cough!) Your donations won’t end up paying Ezra Klein’s salary.
Which brings me back to my whole “Shame on you!” point I was trying to make earlier. When it comes to fundraising, nothing works like shaming. That’s how those late-night commercials work: You’re sitting there in your nice comfortable home, and then suddenly there’s this three-legged dog hobbling into its cage, with big wet eyes, and then some bearded pedophile comes on and says, “Poor Rusty has endured more abuse and pain than you can ever imagine, and tomorrow, he will be gassed to death in a slow, horrible poison death chamber. And you—look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night.”
Now I know that this sort of appeal wouldn’t work on the Naked Capitalism crowd—too many economists here, and as everyone knows, you can’t appeal to economists’ hearts because, well, see under “Larry Summers World Bank Memo”… I can imagine Larry watching that late night commercial with the three-legged dog, powering a 2-liter bottle of Diet Coke and devouring a bag of Kettle Salt & Vinegar potato chips, calculating the productive worth of the three-legged dog, unmoved by the sentimental appeal. Larry grabs a dictaphone: “Item: How to end dog-gassings? Solution: Ship all three-legged stray dogs to sub-Saharan Africa. Africans won’t even notice. Dogs saved. Private capital freed up. Problem solved.”
So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I’m sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.
The oligarchy has spent decades on a project to “defund the Left,” and they’ve succeeded in ways we’re only just now grasping. “Defunding the Left” doesn’t mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%’s hold on wealth and power.
One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub. It’s nearly impossible to make a living as a journalist these days; and with the economics of the journalism business still in free-fall like the Soviet refrigerator industry in the 1990s, media outlets are even less inclined to challenge power, journalists are less inclined to rock the boat than ever, and everyone is more inclined to corruption (see: Washington Post, Atlantic Monthly). A ProPublica study in May put it in numbers: In 1980, the ratio of PR flaks to journalists was roughly 1:3. In 2008, there were 3 PR flaks for every 1 journalist. And that was before the 2008 shit hit the journalism fan.
This is what an oligarchy looks like. I saw the exact same dynamic in Russia under Yeltsin: When he took power in 1991, Russia had the most fearless and most ideologically diverse journalism culture of any I’ve ever seen, a lo-fi, hi-octane version of American journalism in the 1970s. But as soon as Yeltsin created a class of oligarchs to ensure his election victory in 1996, the oligarchs snapped up all the free media outlets, and forced out anyone who challenged power, one by one. By the time Putin came to power, all the great Russian journalists that I and Taibbi knew had abandoned the profession for PR or political whoring. It was the oligarchy that killed Russian journalism; Putin merely mopped up a few remaining pockets of resistance.
The only way to prevent that from happening to is to support the best of what we have left. Working for free sucks. It can’t hold, and it won’t.
There are multiple ways to give. The first is here on the blog, the Tip Jar, which takes you to PayPal. There you can use a debit card, a credit card or a PayPal account [and now Clover and Wise].
You can also send a check (or multiple post dated checks) in the name of Aurora Advisors Incorporated to
Aurora Advisors Incorporated
PO Box 110105
Brooklyn NY 11211-0105
Please also send an e-mail to yves@nakedcapitalism.com with the headline “Check is in the mail” (and just the $ en route in the message) to have your contribution included in the running tally of donations.
So donate now to Naked Capitalism. If you can’t afford much, give what you can. If you can afford more, give more. If you can give a lot, give a lot. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn’t just giving, it’s a statement that you are want a different debate, a different society, and a different culture.
Who knows, maybe we’ll win; maybe we’ll even figure out a way to seal Larry Summers in a kind of space barge, and fire him off into deep space, to orbit Uranus for eternity. Yves? Could it be financed?
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