Comment: Summers the super salesman
It has just emerged into the public domain that Larry Summers, director of the National Economic Council for President Barack Obama, earned more than USD5m from hedge fund manager D.E. Shaw over two years, working just one day a week.
Following his eviction as president of Harvard in 2006, Summers advised a team of maths and quant specialists developing investment strategies for D.E. Shaw, supposedly primarily as a sounding board for the firm's traders. However, Summers' role may have been more complex, reportedly regularly appearing for private consultations with clients.
That suggests Summers, Treasury secretary under Bill Clinton and a former chief economist at the World Bank, was a glorified salesman for D.E. Shaw. And why not? If he was bringing money into the company, why shouldn't they pay him USD5.2m?
Summers said in an interview that his experience gave him valuable insight into the practical realities of Wall Street. 'I have a better sense of how market participants think and react to things from listening to conversations and the way the traders at D.E. Shaw thought,' he said.
He plans to put this insight to use in shaping economic policy in Washington, perhaps a welcome change from the methods of the past. While most hedge funds lost money last year, D.E. Shaw's macro fund returned around 7 per cent. If Summers can help the Obama administration do half as well with the money it has pumped into the financial sector, the taxpayers will have plenty to smile about.
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