Is Larry Summers Taking Kickbacks From the Banks He's Bailing Out?

By Mark Ames, AlterNet. Posted May 29, 2009.

In spite of all of this, on April 6, 2009, Revolution Money announced the happy news: it had just successfully raised $42 million dollars in the most difficult market since the 1930s. The investors? Goldman Sachs, Citigroup and Morgan Stanley -- bankrupt institutions that Larry Summers was transferring billions in bailout funds to.

At the very same time that these three megabanks were pouring millions into Summers’ former company, Obama’s economic team, starring Larry Summers, was subjecting these same banks to a “stress test” to decide how deep in shit these same banks really were. The banks wanted the government to fudge the results for obvious reasons -- who wants the world to know how deep of a hole you’ve dug for yourself?

When the stress test results were finally released, the banks all came out with glowing reports that beat expectations and caused plenty of skepticism.

In an interview for this article, William Black, a former bank regulator who exposed the $160 billion Savings & Loan scandal and its ties to powerful U.S. Senators, remarked,“Summers wasn’t hired [by Revolution Money] for his expertise because he doesn’t have relevant expertise in this kind of credit card operation.”

“He’s not a techie. He doesn’t have business expertise," Black said. "So this is solely someone hired for the name and contacts because he’s politically active and politically connected. And that’s made all the more clear by the fact that Frank Raines was put on the board at a time when he was pushed out in disgrace from Fannie Mae. Why? Because of his political connections.”

And it worked, as the recent investment shows.

“That’s the pattern of this entity,” said Black, “Which hasn’t been doing well financially and desperately needs to get money from others, and has been able to get money from banks at a time when [these same banks] largely stopped lending to productive enterprises. But with this politically-connected entity [Revolution Money], they’re happy to dump money.”

According to a company spokesperson, Summers resigned from the board of directors at Revolution Money this January, just three months before the banks invested. On one of Revolution Money’s main websites, Revolution Money Exchange, you could still see Summers' name still listed as a director when this story was filed

(Oddly, company filings obtained for this article show that Summers wasn’t even on Revolution Money’s board of directors in 2007-8, even though both he and Revolution Money repeatedly stated that he was on the board, and only served on GratisCard’s board in 2006, “c/o Revolution GC Holdings LLC.”)

Whatever the case, Summers was pushing Revolution Money as recently as last September, in an interview with Portfolio magazine:

“I've enjoyed being involved with a number of smaller companies such as the Revolution Money venture, which has a potentially very exciting credit-card technology, using credit and debit technology, using the internet that, in a sense, brings together bricks and clicks by providing both a capacity for regular retail transactions and also for online.”

Whether or not Summers has a personal interest in the company, it still stinks that a company where the head of the National Economic Council served on the board of until just a few months ago subsequently received millions in investment funds from banks Summers bailed out. Taxpayer dollars went into these banks, and from the banks into the Summers-connected firm, a firm he was hired onto precisely because his connections could bring in this kind of money.

See more stories tagged with: obama, white house, citigroup, goldman sachs, larry summers, revolution money, national economic council

Read more of Mark Ames at the Exiled. He is the author of Going Postal: Rage, Murder, and Rebellion: From Reagan's Workplaces to Clinton's Columbine and Beyond.

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »