Following on Saturday’s weather balloon detailing the Wall Street pay of Larry Summers, today the Times ran a piece on Summers’s work at the hedge fund DE Shaw. Replete with color from inside sources and spare in its critical content, the article is a striking example of journalistic capture; after discussing Summers’ ludicrous compensation ($5.2 million for a year in which he worked one day a week), the piece follows the lead of its sources in functioning to allay concerns about potential conflicts of interest that Summers faces as the chief architect of Obama’s economic policies.
Ironically, given Summers’ infamous remarks on women and science, the article was written by Louise Story, the same journalist who once “reported” that more women with Ivy League degrees were choosing to become stay-at-home moms. Jack Shafer of Slate immediately called that one out as a “bogus trend story,” pointing to its reliance on nebulous “weasel words,” and the piece subsequently became a favorite punching bag of media critics.
Today’s Summers piece does not necessarily set new lows the way that one did; beyond the gratuitous color bits (DE Shaw employees are really smart and wear jeans to work) and laudatory accounts of Summers’ one-day work week, it delivers some useful, previously undocumented information about Summers’ work at DE Shaw and the key relationships he cultivated while there. These relationships can now be viewed on his LittleSis page.
But the way Story and the Times handle this information is highly irresponsible, considering the prime real estate this piece got and its likely effect on shaping public opinion about Summers’ ties to Wall Street. The takeaway is that Summers made lots of money for not much work; the serious conflict of interest issues raised by Summers’ relationships are barely addressed.
The following sequence, from page two of the story, is particularly problematic. In it Story offers up revealing information about who Summers consults with these days:
At Harvard and at Shaw, Mr. Summers cultivated a small circle of financial professionals — particularly hedge fund managers — to serve as an informal brain trust. He consults with them on policy matters from his perch in the White House.
This information should raise red flags about Summers’ habits as a policymaker and his fitness to serve in his present post. The people he consults with on a regular basis run hedge funds that are likely benefiting from bailout money passed through zombie financial institutions; these same hedge funds are also likely to profit from the Treasury’s toxic asset plan.
Story apparently senses the need to address the potential conflict of interest issues at work here, and so we get the following paragraph (this is the only time the phrase “conflict of interest” is mentioned in the piece):
Friends of Mr. Summers say he has always been meticulous about avoiding conflicts of interest and that he was just as careful at D. E. Shaw. For instance, Mr. Summers went to lengths to pay the Social Security taxes on payments he made to even occasional babysitters from the 1980s, said Jeremy Bulow, an economics professor at Stanford, who has known Mr. Summers since graduate school.
This is appallingly bad reporting on a number of levels. First, it is inappropriate to rely on the testimony of friends when addressing someone’s conflict of interest issues — especially friends who stand to profit directly from Summers’ economic policies. Second, paying social security taxes to babysitters may reveal his meticulousness, but obviously has nothing to do with conflict of interest.
Not knowing what a conflict of interest even is would certainly impair Story’s ability to report on how Summers has handled such conflicts in the past. A recent and revealing example is the case of Andrei Shleifer, an economist at Harvard and good friend of Summers who was found liable in 2004 for conspiracy to defraud the U.S. government while advising Russia on economic reforms in the 1990s. Summers came under scrutiny after suspicious were raised that he abused his power as president of Harvard, and the university resources that came with it, to shield Shleifer from punishment for his fraud. Read more in the Harvard Crimson.
It’s painful how easy it would have been for Louise Story to segue into an account of the Shleifer affair. In her article, she reports that a Boston-based hedge fund manager named Nancy Zimmerman is a member of Larry’s inner circle of hedge fund advisers; Zimmerman, as it turns out, is Shleifer’s wife. In fact, she was named in the original conspiracy to defraud case, but was later dropped as a defendant.
The Times can barely even bring itself to ineptly discuss conflicts of interest in Obama’s economic team, while some sharper observers are already comparing our breakdown in economic accountability to that in developing countries. Glenn Greenwald, in an excellent piece on Geithner, Summers, and Wall Street’s ownership of government, has this to say:
This corruption is so tawdry and transparent — and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity — that it is mystifying that it is not provoking more mass public rage.
While all this may be perfectly transparent to those who go looking for it, these ties and the corruption that they point to are consistently submerged, deflected, and discounted in the prevailing media analysis. Instead, outlets like CNBC and the New York Times continue to mindlessly portray Summers, Geithner & Company as devoted public servants whose integrity are beyond reproach, despite overwhelming evidence to the contrary.
Story’s article is just the latest chapter in this embarrassing and costly tale of journalistic failure — corrupt in effect, if not intent.