Bailout

Larry Summers and the revolving door

By Felix Salmon

Joshua Green has a virtuoso piece of Kremlinology at the Atlantic today, concluding, as his headline puts it, that “Yes, Larry Summers is Leaving.” But if it’s true, where is he leaving to?

Fed chairman is out of the question, and contra the periodic blogger hyperbole, Geithner seems ever more secure at Treasury. A university presidency isn’t going to happen. So a return to Harvard, Wall Street consulting and an FT column might be the likeliest option.

My feeling is that Harvard is likely, but the FT column is less so: it always seemed to me like a long-form job application aimed at whomever was going to win the Democratic nomination.

And “Wall Street consulting” is probably a polite way of saying “a return to DE Shaw”, which happily paid Larry $5 million for one year of one-day-a-week work, and would surely cough up much more if he gave them the opportunity and a greater time commitment. But there will be other bidders, too: John Paulson, fresh off of signing up Alan Greenspan, would surely be happy to pay millions to sit him down opposite Summers and see the two debate.

The Summers exit could well be the most lucrative use of the revolving door yet seen in the short history of the Obama administration: if he was willing to work full time, Summers could command significantly more than the $10 million a year Citigroup paid Bob Rubin when Rubin left Treasury.

As a result, Obama and his chief of staff are going to have to be very careful about exactly how they manage any Summers exit. If the announcement is made before the midterms, as Green suggests it should be, then they’re going to have to make sure than any subsequent announcements about where Summers is going are delayed until after them. Otherwise it’s going to be the easiest thing in the world for the Republicans to paint the Obama administration as the party of Wall Street fat cats.

Full post as published by Macroprudential on April 06, 2010 (boomark / email).