Monday, December 27, 2010

Larry Summers' role in derivatives deregulation and his relationship to Enron

A few days before Christmas, Kevin Connor, Co-founder of the Public Accountability Initiative, pointed to a few emails, circa 2000, from Enron lobbyists that show the key role Larry Summers played in preventing regulation of financial derivatives. References to "Lee" are to top Summers aide, Lee Sachs, who was Counselor to Treasury Secretary Timothy Geithner from January 2009 until March 2010, when Sachs left for a relatively less public position at the "liberal" think tank, the Brookings Institute. The reference to "Ken" is to Ken Lay, then chairman of Enron.
As you know, Ken has talked to Larry Summers about serving on Enron's Board of Directors. Larry told Ken that in light of his selection to head Harvard, he wants to hold off going on any corporate boards for now. My understanding is that Larry will most likely accept Ken's offer at the end of the year.

In the meantime, let me suggest a candidate for Enron's Advisory Committee. Lee Sachs was Assistant Secretary of Treasury for Financial Markets under Bob Rubin and Larry. Lee coordinated the energy negotiations for Larry at the end of the Clinton Administration. You probably met Lee at those meetings. Lee is brilliant. He was a Managing Director at Bear Sterns before joining the Treasury team. He is a huge fan of Enron and is constantly telling me how extremely well positioned Enron is for the future. He has done considerable research on our business model and is constantly talking to his buddies on Wall Street about us. Lee will undoubtedly be a significant player in any future Democratic Administration. I know he would be an invaluable addition to this Committee. He has not decided what he is going to do next, but has several extremely good offers on the table from large investment firms and hedge funds. None of these would conflict with this type of activity. I thought I would plant this suggestion with you not knowing exactly how these things are done.
There is a lot more detail, and a few more damning memos, in Conner's short article, Celebrating Ten Years of Derivatives Deregulation. It's well worth the time to read the entire article.

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