Financial industry paid millions to Obama aide
Summers earned cash last year from firms over which he now has influence
By Jeff Zeleny
The New York Times
updated 4:35 a.m. ET, Sat., April. 4, 2009
WASHINGTON - Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials.
Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments.
Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate.
The White House released hundreds of pages of financial disclosure forms, which are required of all West Wing officials. A White House spokesman, Ben LaBolt, said the compensation was not a conflict for Mr. Summers, adding it was not surprising because he was “widely recognized as one of the country’s most distinguished economists.”
Mr. Summers’s role at the White House includes advising Mr. Obama on whether — and how — to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse.
Mr. Summers, a former president of Harvard University, was Treasury secretary in the Clinton administration. He appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. He reported being paid $10,000 for a speaking date at Yale and $90,000 to address an organization of Mexican banks.
While Mr. Obama campaigned on a pledge to restrict lobbyists from working in the White House, a step intended to reduce any influence between the administration and corporations, the ban did not apply to former executives like Mr. Summers, who was not a registered lobbyist. In 2006, he became a managing director of D. E. Shaw, a firm that manages about $30 billion in assets, making it one of the biggest hedge funds in the world.
“Dr. Summers was not an adviser to or an employee of the firms that paid him to speak,” Mr. LaBolt said.
He added, “Of course, since joining the White House, he has complied with the strictest ethics rules ever required of appointees and will not work on specific matters to which D. E. Shaw is a party for two years.”
A review of hundreds of pages of financial disclosure forms on Friday evening offered an extensive portrait of the wealth of top officials in the Obama administration. The forms detail the salaries, bonuses and investments of the president’s circle of advisers, many of whom took deep pay cuts from the private sector and sold their companies to work at the White House.
David Axelrod, who was the chief campaign strategist to Mr. Obama and now serves as a senior adviser to the president, reported a salary of $1 million last year from his two consulting firms. Over the next five years, according to his disclosure form, he will get $3 million from the sale of the two firms, which provide media and strategic advice to political clients. He listed assets of about $7 million to $10 million, and reported a long list of Democratic clients and a few corporate concerns, including AT&T and the Exelon Corporation, a nuclear energy company.
The disclosure forms also shed further light on the compensation received by a top Obama aide who previously worked for Citigroup, one of the largest recipients of taxpayer bailout money. The aide, Michael Froman, deputy national security adviser for international economic affairs, received more than $7.4 million from the company from January 2008 to when he joined the White House this year.
That money included a year-end bonus of $2.25 million for work in 2008, which Citigroup paid him in January. Such bonuses have prompted political controversy in recent months, including sharp criticism from Mr. Obama, who in January branded them as “shameful.”
The White House had previously acknowledged that Mr. Froman received such a year-end bonus and said he had decided to give it to charity, but would not say what it was.
The administration said Friday that Mr. Froman was working on giving the $2.25 million to a combination of charities related to homelessness and cancer, which took the life of his son this year.
The remainder of Mr. Froman’s earnings from Citigroup included deferred compensation and bonuses for work performed in prior years, as well as a $2 million payment for waiving his carried-interest stake in several private equity funds.
The White House said Mr. Froman decided to take the buyouts to avoid having to recuse himself from foreign-policy issues related to the funds’ investments, like India infrastructure, which means he would be taxed at ordinary income rates on the money.
Millionaires work in a variety of positions across the administration, and they include Desirée Rogers, the White House social secretary. Ms. Rogers, a close Chicago friend of the Obama family, reported income of $2.3 million last year. She earned a salary of $1.8 million from People’s Gas & North Shore Gas, along with three other sources of income from serving on insurance company boards.
Thomas E. Donilon, the deputy national security adviser, reported earning $3.9 million as a partner at the Washington law firm O’Melveny & Myers. His disclosure form says major clients included Citigroup, Goldman Sachs and Apollo Management, a private equity firm in New York that specializes in distressed assets and corporate restructuring.
Mr. Donilon is also entitled to future pension payments from Fannie Mae, where he worked from 1999 to 2005.
Reporting was contributed by Peter Baker, David Johnston, David D. Kirkpatrick, Eric Lipton and Charlie Savage.
This story, Financial Industry Paid Millions to Obama Aide, originally appeared in The New York Times.