One of the leading contenders to be the next chairman of the Federal Reserve, Lawrence Summers, has been a paid consultant to Citigroup and other financial institutions. Opponents of his nomination are sure to seize upon this.
Summers advises or consults for other financial firms such as Nasdaq OMX Group (NDAQ), hedge fund D.E. Shaw, venture-capital firm Andreessen Horowitz and asset-management and advisory firm Alliance Partners. His consulting for Citigroup and Nasdaq hadn't been previously disclosed.
The recent financial crisis has drawn attention to the Feds role as a financial regulator and has also focused on its shortcomings. Summers work for Citigroup, in particular, is sure to be cited by critics suspicious of him for his advocacy of financial deregulation during his years in the Clinton administration. Some critics said the recent financial crisis had its roots in deregulatory efforts. However, others with ties to big finance have ascended to the Fed chairmanship: Alan Greenspan, for instance, was a director of J.P. Morgan & Co. before he went to the Fed in 1987.
"Optics mean a great deal," said Arthur Wilmarth, a George Washington University law professor who has written about the revolving door between Washington and Wall Street. "The Fed chairman...has such extraordinary power and influence on the economy. It would certainly be desirable for the Fed chair to be above any possible suspicion that he or she would favor any particular economic or financial interest," Wilmarth said in a statement.
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