Larry Summers' December 15, 2008 Economic Memo

Summers' memo that gives some insight into what the Obama administration was thinking on the economy is available here. Here is a list of important points in the memo.

The stimulus was about implementing the Obama agenda
Team Obama knows these deficits are dangerous
Obamanomics was pricier than advertised
Even Washington can only spend so much money so fast
Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic
Team Obama wanted to use courts to force massive mortgage principal write downs
Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing

Pages 10 and 11 shows a list of what others have proposed for Stimulus amounts.
It provides another forecast about the unemployment rate would be over time with and without the Stimulus.

"Obama warned not to visit Solyndra"

Apparently Obama contributors warned Obama that Solyndra was a particularly bad investment. What Obama doesn't seem to understand is that if these were good investments, he wouldn't need to give them loans.

“A number of us are concerned that the president is visiting Solyndra,” California investor and Obama fundraiser Steve Westly wrote to Obama senior adviser Valerie Jarrett in May 2010. “Many of us believe the company’s cost structure will make it difficult for them to survive long term. . . . I just want to help protect the president from anything that could result in negative or unfair press.”

The warning, which did not convince the White House to drop the Obama factory visit, was detailed in e-mails released Monday by the Democratic minority on the House Energy and Commerce Committee. The panel is investigating a $535 million government-backed loan to the now-shuttered company.

Democrats said the e-mails demonstrate that there was no political favoritism for Solyndra or for the Obama fundraiser whose family foundation held an interest in the company. But the internal messages revealed for the first time the high level of White House interest in the startup and its faltering finances after the Energy Department backed it with $535 million in loans.

On Monday, Obama made his first public comments about Solyndra’s collapse, saying that he does not regret supporting or visiting the company as part of his administration’s backing of clean-energy companies.

“Now there are going to be some failures,” he said in an ABC News/Yahoo online television interview. “Hindsight is always 20/20. It went through the normal review process and people thought this was a good bet.” . . .

Larry Summers apparently pushed for this loan even though he believed that government wasn't a good venture capitalist.

As early as December 2009, only months after the government had finalized the loan guarantee, a partner with private equity firm Redpoint Ventures warned Summers about the investment.

Brad Jones, a founding partner of Redpoint, said the government's spending on clean energy was "haphazard," citing Solyndra as an example. Redpoint was an investor in Solyndra.

"While that (loan) is good for us, I can't imagine it's a good way for the government to use taxpayer money," Jones told Summers in an email released by the House Committee.

Summers agreed that the government is a "crappy VC" (venture capitalist). "If (you) were closer to it, you'd feel more strongly," Summers told Jones. . . .

How Larry Summers really badly botched Harvard's finances

From the Boston Globe:

Through the first half of this decade, Meyer repeatedly warned Summers and other Harvard officials that the school was being too aggressive with billions of dollars in cash, according to people present for the discussions, investing almost all of it with the endowment’s risky mix of stocks, bonds, hedge funds, and private equity. Meyer’s successor, Mohamed El-Erian, would later sound the same warnings to Summers, and to Harvard financial staff and board members.

“Mohamed was having a heart attack,’’ said one former financial executive, who spoke on the condition of anonymity for fear of angering Harvard and Summers. He considered the cash investment a “doubling up’’ of the university’s investment risk.

But the warnings fell on deaf ears, under Summers’s regime and beyond. And when the market crashed in the fall of 2008, Harvard would pay dearly, as $1.8 billion in cash simply vanished. Indeed, it is still paying, in the form of tighter budgets, deferred expansion plans, and big interest payments on bonds issued to cover the losses. . . .

In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.

Certainly, when it came to handling Harvard’s cash account, the former US Treasury secretary had no doubts. Widely considered one of the most brilliant economists of his generation, Summers pushed to invest 100 percent of Harvard’s cash with the endowment and had to be argued down to 80 percent, financial executives say. The cash account grew to $5.1 billion during his tenure, more than the entire endowment of all but a dozen or so colleges and universities.

Summers, now head of President Obama’s economic team, declined to be quoted on his handling of Harvard finances. A friend of his who is familiar with Harvard finances said Summers was warning of growing risks in the global markets by 2007, at the World Economic Forum in Davos, Switzerland. The friend, who spoke on the condition of anonymity because of Summers’s current position, said, “In the years after Summers left, market conditions and Harvard’s liquidity changed dramatically. The university’s financial strategies could have and should have changed with them.’’ . . .