The Secrets of Larry Summers

Obama has promised us the most open, transparent transition in American history. But there are some murky details involving Larry Summers, the former Clintonite and Harvard president who will be the head of Obama's National Economic Council. Summers spent the last few years working at a hedge fund called D.E. Shaw, of which relatively little is known:

The firm’s core specialty is in statistical arbitrage, which involves buying and selling huge numbers of stocks in very short amounts of time, ranging from mere seconds to several days. But how they make those decisions is very closely held information.

“That’s where they get very secretive and squirrely and won’t tell you what they’re doing,” the observer said. A spokesperson for the Obama transition team declined to say what Summers had done for the hedge fund and how much he had been paid. But the Obama camp likely knows the answers, since the vetting questionnaire for applicants for administration posts requests tax returns and other detailed financial information, including the applicant’s net worth, real estate holdings, business partnerships, even gifts.

Lightly regulated hedge funds are not required to file detailed information on their financial performance with the Securities and Exchange Commission. So, it’s difficult to estimate how well or poorly D.E. Shaw has weathered the global financial crisis in recent months.

There is, fairly or not fairly, going to be a lot of scrutiny and sensitivity involving all the details surrounding Obama's economic advisers. With the current crisis, in which people who were supposed to be responsible regulators turned out to be irresponsible shmucks, we're going to need to know everything about the new people coming in - who they are, where they're coming from, what their economic philosophies are, whom they've worked for in the past, how they'll fit in as part of the Obama administration. This is all reasonable information to ask for.

I'm pretty confident that Larry Summers, who is well-known and well-respected across the board, hasn't been doing anything shady at D.E. Shaw or anywhere else. That being said, a lot of people blame him - along with some other Clinton-era guys, like Bob Rubin - for contributing to the current economic crisis. So it would be helpful if he could be as forthcoming as possible about what he's been up to lately, especially if he's been working at a hedge fund that, in the words of a source in that article, seems to be "riding out the storm" whle a lot of other companies are sinking.