Sunday, September 15, 2013

The End of Summers

Even in announcing that Summers has withdrawn his name from candidacy for the Fed chair, the media consistently avoid mentioning the Harvard-in-Russia mess and Summers's role. David Warsh recapped it last night.
As a journalist, part of my job has been to keep alive the memory of Summers’s role in Harvard University’s Russia scandal.  In that strange affair, Shleifer and his wife were caught trying to go into the Russian mutual fund business for themselves in 1996, while leading a Harvard team advising the Russian government on market design on behalf of the US Agency for International Development. Summers, their close friend, was deputy secretary of the Treasury at the time and, sson thereafter, Secretary. Harvard defended Shleifer to the hilt, both before and after Summers returned to the university as president. (At a certain point, Summers recused himself from the matter.) In 2004 a federal judge ruled that both Harvard and Shleifer had breached their contract to provide disinterested advice.  He ordered the university to return its fees. 
By now, even the most casual reader of newspapers will have noticed that Harvard’s Russia scandal doesn’t come up in most discussions of Summers’s fitness to lead the Fed. Only theWSJ, which originally reported the story, has kept up with it. The New York Times and The Washington Post didn’t cover the fracas, so they have no fistful of clips from which to reason now. The Financial Times, which hired Summers as columnist after he was forced out of Harvard, has likewise given the story a good leaving-alone. So have the authors of many books on the privatization of the economy of the former Soviet Union during the 1990s, none more conspicuously than Strobe Talbott, onetime Time magazine Moscow correspondent, in The Russia Hand: A Memoir of Presidential Diplomacy, his account of his years as Deputy Secretary of State from 1994 to 2001.  Today Talbott is president of the Brookings Institution. It’s this very invisibility that, to my mind, is the best argument against letting Larry Summers anywhere near the Fed.
(We actually know when Summers is claimed to have recused himself: June 18, 2001, a few days before he officially became Harvard's president but months after he had been chosen as president and started giving orders.) But today, the New York Times explains Summers's problems this way:
Mr. Summers’s reputation for being brusque, his comments about women’s natural aptitude in mathematics and science, and his decisions on financial regulatory matters in the Clinton and Obama administrations had made him a controversial choice.
The Wall Street Journal puts it this way: "opposition from liberals and women's groups—and, importantly, from some Senate Banking Committee Democrats—had been mounting." The last part is certainly true--Tester's opposition marked the beginning of the end. But why did Tester decide against him? Was it really mainly that Summers favors deregulation of banks?

The Washington Post attributes the decision simply to "an intensifying uproar of liberal Democrats and left-wing groups opposed to his nomination," going on to report, 
“It was just a perfect storm of bad timing,” said one person close to the White House, who requested anonymity in order to speak candidly about private deliberations. “It would have been absolute war, and the president would have had to spend all of his political capital. Larry decided not to drag him through it.”
And perhaps, in that war, a question would have been asked about conflicts of interest in a forum where Summers could no longer give an evasive answer. It is, in a way, too bad that with the spotlight off Summers and with his ambitions for high public office finally at an end, we may never know the whole backstory on Shleifer, Summers, and Rubin and the Harvard-in-Russia mess. I'll bet there is yet a good story for some investigative journalist to pursue. For example, people familiar with this area of law have told me the feds would likely have lost interest in Harvard if it had divided its case from Shleifer's--was it only Summers's protection of Shleifer that resulted in the disastrous and costly litigation against both Shleifer and Harvard, or was something worse going to come out if Harvard did not defend itself? Alas, Summers may no longer be a sufficiently consequential figure to repay the journalistic effort that would be needed to dig out the whole truth.

Saturday, September 14, 2013

Larry Summers and Ethical Compromise

One of the troubles with academics blogging about the "real world" (that is, everything outside academia) is that it is easy to dismiss what we say on the basis that we are ivory-tower pinheads who don't know how the real world works. We preach our moral and political idealism from our privileged positions, goes the argument, but the real world is messy and complex. To get anything done you have to make compromises all the time in pursuit of larger objectives, and the important thing is to stay on the right side of the law.

There is a certain truth in the premise that academics, especially the ones with tenure, have the privilege of being idealists, and that is why I am so disappointed that so few of us speak up.

But there is a huge gray area between unlawful and ethical behavior, acts that are not illegal but good people don't do, no matter how profitable or how self-serving. Of course there are no bright-line rules about where to draw a boundary. Many of the questions about Larry Summers come down to this: Does he even realize that there is a difference between unlawful and unethical?

Summers has derided the attempts to set ethical rules for government officials. When deposed in the Shleifer case, he said,
I wasn't ever smart enough to predict -- things that seemed very ethical to me were thought of as problematic and things that seemed quite problematic to mere were thought of as perfectly fine. … there was no per se disqualifying of the validity or morality of advice based on the holdings of financial positions in the entity, area, place, type of investment, or anything else with which the advice was given.
I have blogged on this point before. For a professor (and especially a University Professor at the WGU), this is a devastating failure, because when a worldly professor (and particularly a rich and famous economist) questions the distinction between legal and ethical, students will follow his lead. As I wrote of Summers,
He loves to split legalistic hairs, and denies that ethical conduct exists outside the context of such hairsplitting. And he is living proof that if you do something wrong and simply refuse to acknowledge it, never apologizing and, when put on the spot, wriggling out of the question on the pretext of technicality, you can live to succeed and rise to power once again. Students are no fools; they see what grown-ups say and do and how it pays off. It will be bad enough if Obama appoints Summers, but the panting adulation he will receive in Harvard publications and Web pages will be powerful signals to Harvard students to go and do likewise.
This sort of amoral evasiveness is, of course, not all that great a quality in the Fed chair either.

Two items came to my attention this week that focused me on trying to define what exactly is wrong in this stew of personality and ethics. One piece is a post on the MathBabe blog. Its author, Cathy O'Neil, summarized Summers's involvement in the Shleifer mess quite eloquently:
Some people still think Larry Summers got fired from being the president of Harvard because of the ridiculous comments he made about women in math (see my post about this here) or because of the comments he made about Cornel West. Actually, the truth is something worse, and for which he should actually be in jail. It’s also something that makes Harvard look bad, so maybe that’s why it’s less known. … I was inspired to write this by being disgusted at continued rumors that he could get yet anotherprestigious job. It’s like this guy can’t fail spectacularly enough! Let’s give him another chance! 
Let’s set the record straight: Summers was directly involved with defrauding the U.S. Government (see below) and Russia. He admitted to not understand conflict of interest issues (see below). It is particularly appalling, knowing these things, that he would be considered for the World Bank head, which presumably requires nuanced understanding of such issues.
That's right -- she wrote this a year and a half ago, when Summers was up for the World Bank job. This week I came across an even older post, from 2011, in which she drills down on what she learned about Summers, and about herself, from working with him at D.E. Shaw. First she offers a tutorial on the concept of "dumb money":
Once you understand the mentality, it’s easier to understand the “dumb money” phrase.  It simply means, we are smarter than those idiots, let’s use our intelligence to anticipate dumb peoples’ trades and take their money.  It is our right as intelligent, imminently starving people to do this.  Chasing dumb money can take various forms, but is generally aimed at anticipating lazy fund managers:  if you know that they always wait until Friday afternoon to balance their books, or that they wait until the end of the month, or that they are required to buy certain kinds of things, you can anticipate their trades, make them yourself a bit before they do, thereby forcing them to pay more, and getting a nice little profit for yourself.  In short this works in general, since statistically speaking the anticipated trade wasn’t driving up the intrinsic value of the underlying, but rather was being affected by trade impact for a short amount of time.  If we can anticipate big trades by lots of dumb money, then the short-term market impact will be large enough and last long enough to buy in beforehand and sell at the top, while it still lasts, assuming there’s sufficient liquidity.  The subtext of taking dumb money, going back to the football team issue, is: if we don’t somebody else will, and then we will feel like fools for not doing it ourselves.
She comments that she kind of enjoyed the combative debates she had with Summers, and had nothing to contribute to the question of what he thinks about women. But, she continues,
when I think about that last project I was working on, I still get kind of sick to my stomach.  It was essentially, and I need to be vague here, a way of collecting dumb money from pension funds.  There’s no real way to make that moral, or even morally neutral.  There’s no way to see that as scavenging on the marketplace.  Nope, that’s just plain chasing after dumb money, and I needed to quit.  I still don’t know if that model went into production.
Plenty of people who work in the financial industries would giggle with delight at being able to identify such opportunities and not tell anyone else about them, while they watched the cash roll in. I'd rather not have the guy at the head of the Fed be of that mentality. At the risk of getting tarred with another stereotype of academics, as anti-capitalist anti-free-market lefties, I think the country would be better served by having someone in that role who might feel slightly sickened by the realization that certain structures and policies were incentivizing hedge funds to take dumb money from pensioners.

[Aside to Harvard folks: MathBabe also has a wonderful tribute to my colleague Radhika Nagpal, who sits literally in the office next door to mine.]

There is a terrific article by Michael Hirsh entitled, "The Comprehensive Case Against Larry Summers." Hirsh, unlike almost any other journalist who has written about Summers, actually mentions the Shleifer mess. (I have, over the past couple of months, talked to several journalists about it, and shared my copy of the deposition. No reference to Shleifer has appeared in any of their stories. It is almost as though there is some  cartel of editors making sure this thread never gets pulled on. So I consider any reference by any journalist to be good news.)

But the good thing about the Hirsh piece is not this passing reference to Shleifer, but the careful and well documented history and analysis of where Summers's bullying and other personality offenses verge into actual ethical (if not legal) problems.

What do you call someone who will not admit he was wrong? There is no law requiring anyone to answer questions directly and honestly. There is nothing unlawful about obfuscating or even lying about the past. It's just dishonorable behavior, that's all -- behavior that should make you not want to hire the person to be your housecleaner, much less your arbiter of money policies. Summers has been very, very careful never to give an inch on any of his misdeeds. Hirsh describes several, for example:
Summers helped midwife a major series of policy errors dating back 20 years that led directly to what many economists now believe was the worst financial crisis ever. In particular, Summers's opponents—he faces a phalanx of opposition among Democrats on the Hill—point to the Commodities Futures Modernization Act of 2000, which effectively deregulated the global market in over-the-counter derivatives and was Summers's signal achievement as Treasury secretary. The final report of the Financial Crisis Inquiry Commission convened by Congress in 2009 puts the government's failure to rein in these derivatives at "the center of the storm." 
Summers has, since then, engaged in what appears to be an effort to deny or cover up these errors and posture as a champion of regulation—an act of misrepresentation that flabbergasts many former colleagues and congressional opponents.  
He quotes Sheila Bair, former head of the FDIC, on exactly this point. "One of the things that bothers me about Larry is that he's never really said he made any mistakes." That is so familiar. I have sometimes said, when asked about the end of my deanship, that probably Larry preferred deans around him who would tell him he was right. He loves arguments and debates--as long as the ground rules are understood: at the end, he will be declared the winner.

Hirsh has a smart comment on Summers's famous arrogance.
Summers's allies say his arrogance is more unconscious than malicious, a product of his aggressive search for new thinking. Clinton's tough-talking trade representative, Charlene Barshefsky, remembers when Summers, as Treasury undersecretary in the 1990s, humiliated her deputy in a room full of staffers, telling the deputy that he would have flunked him as a student if he'd made such weak arguments about a trade issue. Afterward, the diminutive Barshefsky walked up to the beefy Summers and said, "If you ever do that again, I'll break your fucking knees." Summers was shocked, and perhaps dismayed, that he'd offended a Cabinet official. "He didn't even know what he did," Barshefsky recalls. Summers later called the aide to apologize.
It has been speculated from time to time that Summers has a specific cognitive deficit that makes it (I am using my own language here) impossible for him to understand what it feels like to be inside the other person's skin. His mania to be smarter than you are in a one-on-one, and to be recognized as the smartest guy in a room of three or more, blinds him to the feelings of the people he is talking to. This tendency to be blinded by his own brilliance may account for the disastrous conversation with Cornel West; it could certainly account for his failure to understand how an anthropologist might take Summers's judgment that "economists are smarter than political scientists, and political scientists are smarter than sociologists." 

Hirsh catalogs a series of Summers misjudgments on financial matters, and of denials that he had been wrong. Read the article; I will quote just one, which introduces a character familiar to those who have followed Summers's career.
Even after the financial crash of 2008, Summers did not relent in his view that little else could have been done back then, despite the FCIC's report and other studies that concluded otherwise. Summers's boss and mentor, then-Treasury Secretary Robert Rubin, conceded during the post-crash hearings in 2010 that Born was "right about derivatives regulation." Even former President Clinton later admitted he should have reined in derivatives trading. 
Arthur Levitt, who ran the Securities and Exchange Commission during the Clinton years, told me after the crash that he and his colleagues had made a serious mistake in pillorying Born. "All tragedies in life are always proceeded by warnings," he said. "We had a warning. It was Brooksley Born. We didn't listen to that." But Summers was still so sure of his own correctness that, when he saw Levitt on Capitol Hill in November 2008, he fought back. "I read somewhere you were saying that maybe Brooksley Born was right. But you know she was really wrong," Summers said, according to someone who overheard the conversation, which Levitt later confirmed. "Her plan was no good. And we offered a different plan." 
In truth, there had been no other plan, at least not one that anyone ever tried to enact. Summers appeared to be referring to a vague recommendation, bandied about in 1997, to get the SEC to regulate derivatives broker-dealers, which never got off the ground. When I asked him about this encounter in a 2010 interview, Summers said, "Well, you know, I didn't say she was really wrong. I said the reasons [Levitt] took the position [he] took was that there was concern that Brooksley's approach was going to undermine legal certainty [about the legitimacy of trillions of dollars of derivatives trades already out on the market]. It wasn't that we didn't want to regulate derivatives. We offered a different approach." But even Levitt said this demurral missed the point: Born had seen danger in a market that no one else did at the time, and she deserved credit for that. A little magnanimity was in order. Legal certainty could have been addressed under Born's approach. "Rubin and Greenspan were probably right in saying there were outstanding contracts thrown into uncertainty," Levitt said. "But we could have grandfathered those and said that thenceforward we were going to regulate them."
It is this kind of evasive hairsplitting  that drives people nuts about Summers. It sounds so much like having Harvard litigate whether Shleifer was "assigned to" Russia, in a jury trial, which was costly both to Harvard and to US taxpayers, and which Harvard decisively lost. How would it play to have a Fed chair who could not be counted on to represent his past conversations fairly, and thought there was nothing wrong with twisting the retelling in an effort to bolster his own reputation?

Finally, Hirsh takes on the claim, which you knew was coming, that Summers should get the Fed job because he has learned from his mistakes. This makes regular appearances in all Summers narratives, and sure enough, it's appearing again: That was then, but he's a changed man now!
At every stage of his career, Summers has been helped along by friends and sponsors who have assured doubters that he has matured, that he's smoothed out his rough edges. That is what his mentor, Rubin, told the Harvard search committee. ("Rubin made us confident we weren't getting a bull," a member later told The Boston Globe.) It's what Summers himself said when he joined the Obama administration, telling me in a 2009 interview: "I suspect over time there's maybe a little less of the brusqueness that people experienced when I was younger." (Romer later complained that Summers had treated her "like a piece of meat," according to author Ron Suskind.) And it is what Summers's defenders are saying about him now as a prospective Fed chief. "We're now talking about the 58-year-old Larry, not the 30-year-old Larry," fellow Harvard economist Kenneth Rogoff told me this week.  
But in the end, despite all his other sterling qualities, Larry Summers's character and temperament have never seemed to change much. And those qualities could easily run amok in the closed world of the Federal Reserve, where a single individual holds sway over the course of the entire global economy. Is that a risk Barack Obama is prepared to take?
Two new pieces have appeared in the past day. Politico reports that Senator John Tester (D-MT) has announced himself as opposed to Summers; as a seasonal resident of Montana, I am glad to see the Senator stand against the apparent preferences of his president.

And the Wall Street Journal has a kind of wet-kiss piece about Summers and his eminent uncle, Paul Samuelson, drawing on correspondence between the two. Note the editorial leger-de-main:
A few days after Lawrence Summers was forced out of the presidency of Harvard University in February 2006, he got an emotional, typed letter of consolation from his uncle. 
"I grieve for you," Nobel Prize-winning economist Paul Samuelson wrote to his nephew, who had clashed with the faculty and caused a storm by making impolitic remarks about women in science. 
"Mob psychology can be much the same on college campuses as elsewhere," Mr. Samuelson said. He counseled his nephew to avoid bitterness.
Now maybe Samuelson thought that Summers lost the presidency over the women-in-science remarks, and maybe some part of his letter specifically mentions that. But this looks to me like deceptive reporting by the Journal, playing into the heroic myth that the harpies are to blame for Summers's downfall. Let's remember the timeline. The NBER speech was on January 14, 2005. That was far in the past by February 7, 2006, when Professor Fred Abernathy asked Summers his firm but polite question in a faculty meeting (thanks to Prof. Abernathy for permission to reprint it).

President Summers and Dean Kirby,

I have been a member of this faculty for more than 45 years and I am no longer easily shocked.  But on reading the WEB story How Harvard Lost Russia, by David McClintick the author of the lead story in January 13, 2006 issue of Institutional Investor I was deeply shocked and disappointed by the actions of this University.  The story is still available at  [this link works now].

I will gladly send the URL to anyone interested in this story.

The story is said to be based on the trial records and depositions involved when the Federal Government took Harvard to court to recover the Federal funds involved in the HIID project in Russia.

Harvard and several of the project’s associates paid the Federal Government over 31 million dollars to settle the case.

The story, if true, portrays Harvard defending activities that at the very least are not consistent with Harvard’s Statements of Values, issued after the settlement to be sure,

•      Respect for the rights, differences, and dignity of others
•      Honesty and integrity in all dealings
•      Conscientious pursuit of excellence in one’s work
•      Accountability for actions and conduct in the workplace

I have sent a copy of the 37-page article to Dean Kirby and to James Houghton, Senior Fellow of the Corporation several weeks ago but I have not yet had a response.

My questions are: 
1) What is the Harvard response to this article?

2) Does the article accurately reflect the events in the litigation?

It appears to me that during the litigation, Harvard was defending the indefensible. 

Now that all of this is before the public, how do you feel about this episode?
[The Statement of Values is rarely mentioned today, but it was was one of Summers's less bright ideas, a response to the Living Wage conflict that resulted in the occupation of Massachusetts Hall in the spring before Summers became president. Turned out there were already so many policies and procedures about so many things that there was not a lot you could say that was nontrivial, universal, and consistent with everything else on the books across the university.]

Abernathy had followed protocol in providing the text of his question to the president in advance of the meeting. When Summers simply said he had recused himself, Abernathy, halfway back to his seat, returned to the microphone and asked if Summers really had no opinion about the affair. Summers' lie, that he didn't know enough about it to have an opinion, was the death blow for his presidency. Not the women-in-science speech. He survived that; he was done in by his own lying on an entirely different subject more than a year later.

So here is the Journal helping him out with more sleazy rewriting of history. Interestingly, Samuelson did acknowledge that Summers did not handle the Shleifer mess properly, but cast the blame at Rubin's feet:
… Mr. Samuelson believed Mr. Rubin, who was a member of Harvard's governing board, had failed to properly advise Mr. Summers when he was Harvard president. In particular, his uncle was upset about the handling of Harvard economics professor Andrei Shleifer, one of the issues that contributed to faculty unhappiness with Mr. Summers.…
"Rubin should have compelled Larry to stay out of the Andrei Shleifer Moscow business," Mr. Samuelson confided to Mr. [Stanley] Fischer in the 2008 letter.
This is an interesting revelation, in light of Hirsh's report that Summers acknowledged to him that he didn't answer Abernathy's question properly.
"I should have chosen my words differently at that faculty meeting. And I'll always wish that I had," Summers uncharacteristically told me in 2010.
This admission is uncharacteristic to be sure; I can't think of a single other case where Summers has gone that far in fessing up to a mistake. On the other hand, he doesn't say how he should have responded to Abernathy, only that he regrets what he did say. And one can't help suspecting that he was willing to go this far in accepting responsibility for his mistake only because he had his Uncle Paul's blessing. It wasn't really his fault anyway--Rubin should have made sure he did not get into the fix he was in.

Summers may be brilliant, but it is a hollow, debate-team kind of brilliance. The record of policy failures, followed by evasive retellings of history, don't make the case for the kind of brilliance that deserves respect. Only in an amoral world could one feel satisfied with success by evasion. That does seem to be the world of academic economics -- as a student said of Andrei Shleifer when he resumed teaching after the court found he had conspired to defraud the government,
“He is an excellent professor and does remarkable research and those to me are the two main criteria that you should be using in deciding whether or not he’s going to be a valued professor,” [a student] said. “The other stuff, that is for other people to worry about.”
In the real world, people do worry about the other stuff. As economist Joseph Stieglitz puts it, "brilliance is not the only determinant of performance. Values, judgment and personality matter, too."

[Revised 10:40 PM on 14 September to include Hirsh's quotation of Summers and the student's assessment of Shleifer. Thanks to the reader who directed me to the Hirsh quotation.]
[Revised 2:50 PM on 15 September to include final version of Abernathy question as actually read.]

Sunday, September 8, 2013

A Summers Miscellany

The week has seen some good and some bad reasoning about why Summers should not be appointed Fed chair. I have blogged several times that the attacks on Summers as being anti-woman were a favor to him, distracting attention from his corruption and lack of self-control, not to mention his poor track record in crisis management. I cringed and the photo of the women in congress lined up to oppose him. So when I read Prof. Sue Goldie's piece in Politico, I rolled my eyes. I think it will be helpful to Summers not because it will change anyone's opinion on Summers's attitude toward women, but because keeping that ball in the air shifts attention away from the real issues. Goldie writes,
I’m responding to comments that have categorized the former Treasury secretary as dismissive of the opinions of others and particularly disparaging of women. The latest example comes from the editorial board of the New York Times, which declared Friday: “Summers’s reputation is replete with evidence of a temperament unsuited to lead the Fed.” Simply put, this is not the Larry Summers I know – and, as one of the many female faculty members whose opportunities were advanced by Larry during his tenure as Harvard president, I’m in a position to know.
If you read the editorial, natch, it doesn't mention women at all.  Goldie is playing three-card monte here. Some of my women friends will hate me for saying this, but I would be happy to stipulate that he doesn't treat women worse than he treats men. The Times editors state it perfectly:
He is known for cooperation when he works with those he perceives as having more power than he does, and for dismissiveness toward those he perceives as less powerful. 
That's about right, and I'll bet he has dealt with more powerful men than powerful women during his career.

I have little interest in completing the character study. Larry's mean-spiritedness verges sometimes into bullying, though I am sure President Obama has never witnessed it. Brooksley Born certainly did. As Michael Greenberger remembers it,
 I walk into Brooksley's office one day; the blood has drained from her face. She's hanging up the telephone; she says to me: "That was Larry Summers. He says, 'You're going to cause the worst financial crisis since the end of World War II'"; that he has, my memory is, 13 bankers in his office who informed him of this. "Stop, right away. No more." ... It was not done in a tactful way, I'm quite confident of that.
Of course, Born might have solved the crisis; she was not the one causing it. Here is just one of many accounts of the worries over Summers as a collaborator in financial regulation.

That is the same man who, as University professor, the highest academic rank at Harvard, and as former president of the university, pleased himself and his finance-tech conference audience by calling a couple of alumni he had known as students "assholes" for wearing neckties when they came to see him:

One of the things you learn as a college president is that if an undergraduate is wearing a tie and jacket on Thursday afternoon at three o'clock, there are two possibilities.  One is that they're looking for a job and have an interview; the other is that they are an asshole.(Laughter; applause.)This was the latter case.  Rarely, have I encountered such swagger, and I tried to respond in kind.(Laughter; applause.)
I hope Professor Goldie will watch this video of, as she calls him, "The Larry Summers I Know," and tell us why she is still proud to stand by him.

These are not slips or errors or misbehaviors on Sumners's part. They are calculated and intentional, designed to put various people, including himself, in their proper places–with Summers at the top of the heap.

A few months ago it was said that if Ben Bernanke raised his eyebrow at the wrong time, markets would crash. Why on earth would the President want to risk the economy to such a self-important, manipulative, self-promoter?

The Summers propaganda machine is in full-court press. In Washington, David Axelrod has been called out to testify to Summers's wonderfulness. But the facts don't back up the claims that Summers was a genius about the crash. As David Warsh says, referring to the fall of Lehman Brothers five years ago,
in the aftermath of the panic, Summers didn’t get it right. Under his tutelage Obama gave no clear explanation of what had happened on the eve of the election, offered no convincing narrative of events afterwards, failed in large measure to successfully manage expectations, and, even now, doesn‘t seem to really understand the sequence of events .
Warsh thinks the tide is turning against Summers. I hope he is right. And I hope the President realizes, after all that has been remembered about Summers over the past few months, a confirmation hearing could be a disaster. Does he really want Summers to explain to the Congressional committee that would have to confirm him that government ethical rules are arbitrary and incomprehensible? That there was nothing wrong with his protege Shleifer's self-dealing, even though Shleifer was found to have conspired to defraud the government? That the ridiculous list of lucrative activities in which Summers was engaged while working full time for Harvard poses no worries about conflicts of interest should he re-enter government service?

On to your second choice, Mr. President. You don't need this and neither does the country.

Tuesday, September 3, 2013

The Charade of Liberal Arts Campuses in Authoritarian States

Jim Sleeper has two terrific pieces on universities selling their souls to authoritarian states. I touched on this in my piece in the South China Morning Post, but Sleeper dives much deeper into the issues, and puts the argument squarely on first principles. Happily, on this one I can be a disinterested observer. I am quite proud that Harvard has resisted the temptation (it surely must have gotten a pitch or two) to set up Harvard College East, and has instead contented itself with opening research centers and other venues for collaboration. In the meantime, Harvard is admitting lots of international students. (Though some of the reporting about the lives of Chinese students in the professional schools makes one wonder if there might not be more than one way a university can sell its soul to authoritarian states.)

Sleeper's shorter piece was in the Sunday New York Times. He probes mercilessly at the hypocrisy of claiming to run an institution devoted to the liberal arts in the place where political discourse is severely constrained. His main focus is on the Yale-NUS [National University of Singapore] venture, which Yale President Levin probably hoped would be his crowning venture, but which may well turn into an educational nightmare. Consider this quotation from the head of the Yale-NUS governing board:
“We must look at ‘liberal’ in the sense of broad, rather than free,” Kay Kuok, a businesswoman who leads the Yale-N.U.S. governing board, told the government-controlled Straits Times. “It’s freedom of thought; I’m not necessarily saying freedom of expression.”
Huh? What does that mean? That you can think anything you want--you just aren't allowed to say what you are thinking? On pain of arrest?

The longer piece, on a site called OpenDemocracy, is called Globe-Trotting Universities Serve Diplomacy and Markets, not Democracy. It is hard work trying to figure out how these arrangements with authoritarian regimes are really governed--of course American universities tend not to be awfully transparent about their funding, and the nexus surrounding enterprises in China and Singapore is even more obscure. But there is no free lunch. As Sleeper says in a sidebar Huffington Post piece,

It's devilishly hard to track arrangements under which China, Kazakhstan, Abu Dhabi, and Singapore are "buying" liberal education's prestige by bearing all or most costs of constructing the campuses, paying faculty salaries, and subsidizing students' tuition to lure American university leaders who, thinking like the business corporations on whose boards they also serve, are eager to expand their colleges' "brand names" and shares of burgeoning new markets among Asian middle classes. 
For example, the contract between Yale and Singapore for the brand-new Yale-National University of Singapore College that opened last month remains secret, despite repeated Yale College Faculty demands that it be opened. 
Also secret are many of the funding arrangements. "Yale has had no part in financing Yale-NUS, which is largely funded by the Singaporean government, in addition to private contributions," notes Yale undergraduate Cindi Hwang in"Exporting the Ivory Tower" on the website Foreign Policy in Focus, but not until Kenneth Jeyaretnam, the brave secretary general of Singapore's oft-harrassed Reform Party, read the official Budget documents for 2013, did anyone tell me that the Development Expenditure for the National University of Singapore had shot up from S$19 million [Singapore dollars] in 2011 to S$54 million in 2012 and estimated to be S$43 million in 2013.  
"That could be the cost of construction of the Yale-NUS campus. So, close to S$100 million in capital expenditure likely was spent on building the new campus," notes Jeyaretnam, who holds double honors in economics from Cambridge University and ran a successful hedge fund for several years. But none of what he has observed has been officially disclosed or discovered by the country's cowed or government-controlled press.
If you sleep with dogs you'll wake up with fleas. The OpenDemocracy piece has this stunner about fiddling with admissions data:

Although the Yale-NUS admissions office claims that it culled its inaugural class of 157 from among 11,400 eager applicants, making the new college one of the most highly selective of its kind, 9,000 of those applications were made thanks solely to the Yale College admissions office in New Haven’s decision to put a small box on all application forms to Yale that, if checked, would forward the same application, automatically and without elaboration, to the Yale NUS admissions office in Singapore. 
 “Despite the Admissions Office’s assurances, applicants may have felt that their decision of whether or not to check the NUS box might affect their chances of admission at Yale in New Haven,” wrote Diana Rosen in the Yale Daily News. “Or, the Yale-NUS option on the application may have simply served as way of convincing applicants that they were improving their chances of receiving a diploma with the name ‘Yale’ on it. It’s deceiving and it’s wrong.”
The last thing Yale should want is to have the integrity of its admission numbers compromised by connection to something so sketchy. Such a sad ending to the Levin era. I am so glad that the Harvard Corporation, President Faust, and Vice-Provost Jorge Domínguez have largely kept Harvard out of this business.

Monday, September 2, 2013

Email Privacy Redux

It has been a quiet summer on the Harvard email privacy front, even as we have been inundated with Snowden revelations about the extent of surveillance of electronic communications by the US Government. Today's report in the New York Times that the Drug Enforcement Agency has even more telephone metadata at its disposal than the NSA does, and that it has AT&T employees under contract to answer subpoenas, only heightens the sense that if there is any way for the government to do any kind of surveillance under terms that are arguably legal, it's already being done.

Which makes the work of the Barron Committee on privacy policies for electronic communication at Harvard even more important.

Since the Barron Committee could not finish its work over the summer, President Faust issued some interim guidelines on August 22. I am glad to have something in place, since the FAS faculty policy was apparently never officially on the books, notwithstanding that the university CIO told the FAS IT committee in 2006 that it was.

Here, in any case, are the guidelines.

  1. Any search should occur only after careful institutional consideration and in response to legitimate institutional interests. Each School or central administrative unit should ensure that any search is subject to an approval process that accords with the University's values and that fully satisfies the other requirements set forth below.
  2. Any search of electronic information should be done by or with the involvement of either University or School CIO.
  3. The University CIO and the School CIOs are accountable for ensuring that any search is conducted narrowly and that all data accessed is safeguarded.
  4. An authorization to conduct one search is not considered authorization to conduct additional searches. Any search must be independently approved.
  5. The OGC, HUIT, and the School CIOs will ensure that records are kept of any searches. The records must include a description of why the search was initiated, who authorized the search, and how the search was conducted. The University CIO will be responsible for consolidating and maintaining these records.
  6. During this interim period, HUIT and the OGC will meet regularly with the School
    CIOs to review any records and to clarify appropriate practices as needed. 
Now I am not really sure that this says anything different from the policy that was on the books already, the one in the employee manual:
 Privacy/Management's Right to Access Information
Employees must have no expectation or right of privacy in anything they create, store, send, or receive on Harvard's computers, networks or telecommunications systems. Although many employees have individual computers or computer accounts, and while employees may make incidental personal use of University technology information systems, ultimately Harvard University has ownership over, and the right to obtain access to, the systems and contents. Incidental personal use is permitted so long as it does not interfere with job performance, consume significant time or resources, interfere with the activities of other employees or otherwise violate this policy, the rules of an employee’s local unit, or other University policies. Electronic files, e-mail, data files, images, software and voice mail may be accessed at any time by management or by other authorized personnel for any business purpose. Access may be requested and arranged through the system(s) user, however, this is not required.
Well, I suppose the guidelines speak grandly of the University's values without saying what those are, and of legitimate institutional interests without saying whether those are any different from "any business purpose" as the employee policy characterizes the threshold. The guidelines come nowhere near the "extraordinary circumstances" foreseen in the would-be FAS faculty policy. If anything, they lower the "high … bar" that was surpassed when the Resident Deans email was searched last year, even though that search was conducted out of ill-founded anxiety about leakage of nonconfidential advising information to the Crimson.

Glaringly missing from the interim guidelines--and I hope it will not be missing from the final policy--is anything about notice. The abandoned FAS faculty policy required the people whose email was searched to be notified that the search had been conducted. The guidelines not only say nothing about notice; they do not offer to update the community with any general information about how many email searches have been conducted.

I think notice is essential, and I have a theory about why it is going to be hard to achieve.

The reason I think notice is essential is that it is the only way to keep the policy implementers honest. We have seen, at Harvard and in the federal government, that mere words do not suffice to restrain the abuse of the power to read email. The only restraining force that might work is the necessity, later on, to tell the person whose email was read. If you are going to have to tell Prof. X that you read his email, you are less likely to do it. But it should not make any really essential search impossible. Suppose the departmental checkbook doesn't balance and you suspect X has been spending the money on wine and women. You read his email, and after the fact, even if he wasn't, you can show him why your suspicions were justified. A clear mandate to inform the resident deans of the email searches a year ago would have prevented everything that happened, as they would surely have been informed that their email was going to be searched, even before it was searched.

It is, of course, easier to peek and not tell anyone. And that ease is exactly what requires the speed bumps that the notice requirement would lay down.

Which brings me back to the annoying fact that to this day, there has been no report of the frequency of past email searches at Harvard. I suspect that is for several reasons. At one level, probably no one knows. Email did not use to be as centralized as it now is. Finding out whether some boss in some small Faculty had a search done might not be so easy, with no record keeping and a great deal of turnover in I/T personnel. (Note, by the way, that decentralization also makes searches easier to do, because the chain of command required to carry out a search is shorter.)

Still, the president apparently felt comfortable assuring the faculty of Arts and Sciences that email searches were "rare." How rare? Here is why I think we may never find out.

I'll bet Larry Summers was reading faculty email during the troubles at the end of his presidency.

Worries about that were bruited among the faculty in 2004 and 2005, but I never used to think it had happened. My initiative to have FAS adopt a faculty email privacy policy was born of prudence in the face of legitimate anxiety, not reaction to anything I had heard. I never heard of an email search being conducted, except in case of research fraud or criminal conduct (or a missing person).

I now think it more likely that Summers did have searches done. He was a controlling figure, and he knew he had the authority under the University policy quoted above. As a man who was quite prepared to split hairs over rules and policies, and to act any time it was convenient and not prohibited to do so, nothing would have stopped him. The queasiness in the stomach that would have given pause to a more ethical person would not have slowed him down.

And that would explain the insistence on leaving at "rare" President Faust's description of when searches have been conducted in the past. Nobody wants to acknowledge that the searches of Resident Deans' email last year were small potatoes compared to what Summers had done to faculty he regarded has his enemies.

OK, that is all speculation. I have no evidence. Nobody has told me that Summers was having searches done. The theory just helps connect some dots.

One final thought was suggested by a comment on the Crimson story about the Faust guidelines. Guideline 5 says that records will be kept of any searches. If the search was of a student's email, is that an "educational record"? I should think, for example, if a search was conducted to determine what email a dean had been exchanging with a Crimson reporter about an advising matter, that would be an educational record. Under FERPA, students have a right to see all their educational records. They do not, however, have a right to be told proactively what records are being kept on them, I think.

So it seems to me that if records are going to be kept of searches of students' email, students have a legal right to ask and be told whether there are records showing that their email has been searched. Why not do the right thing, then, and tell students whenever their email has been searched, rather than having all 1650 graduating students ask during Senior Week for that to be disclosed to them? And if students are told when their email is searched, shouldn't other members of the community be given the same courtesy?

And don't forget those email forwarding addresses that so many alumni have taken at Harvard's encouragement. Do those fall under the Faust guidelines? I am sure, as the Campaign ramps up, that alumni might not be amused to think that the university could ever have any "legitimate interest" in reading their email.

David Warsh Nails It

There will probably not be many more chances to blog about Larry Summers and the Fed, since Obama's decision is probably near. On the other hand he has a few other things on his plate over the next week or two, so maybe he can keep the Fed appointment up in the air awhile longer.

David Warsh's column today ends with a point that explains my exasperation over the possibility (nay, the likelihood) that Summers will be appointed to the Fed. After all, I am in no position to comment on monetary policy, or even to have any credibility on the question of whether the infamous Harvard debt swaps were a bright idea or not. They say you need steady hands at the Fed, and I can attest to the fact that Summers's smartest-guy-in-the-room instincts are uncontrollable, but other people say they'd rather have the smartest guy anyway. 

I keep coming back to the Shleifer affair, about which I was one of the first people at Harvard to speak out, and which, after all these years, continues to be about the last think any journalist brings up about Summers. Here is Warsh's bottom line on it.
Finally, there is an issue of serious corruption.  Harvard’s Russia scandal isn’t on the order of a paid toast at a dinner for Bashar al-Assad [which Ezra Klein joked might be the only thing that could keep Obama from nominating Summers]– it’s more serious. Summers’s best friend and foremost protégé, Harvard professor Andrei Shleifer (and Shleifer’s hedge-fund operator wife) attempted in 1996 to steal from better-qualified competitors Russia’s first license to sell mutual funds – all the while leading Harvard’s State Department mission to teach Russians American-style market fair play. The mission was shut down amid much embarrassment after their actions were revealed; the US Justice Department sued Harvard and Shleifer and got its money back. Summers’s role in the affair and the subsequent investigation, heretofore almost completely ignored, presumably is about to get a good going over in the administration’s “vetting” of his candidacy, in the newspapers, and in whatever comes next. …
I don’t mean to be apocalyptic. Yellen may be chosen. Whatever her shortcomings may be as a battle captain, she is a proven leader within the Fed. Summers may be nominated and confirmed. The sun will come up every morning if he is. There will be plenty of good stories for those who cover the Fed. He may even serve with distinction; the risky course sometimes works out.  But even if Summers succeeds, United States prestige will have been diminished by the rise of a man who, when his friends cheated the government they represented and got caught, backed them to the hilt and, unrepentant, still climbed to the top.
That last sentence is the killer for me. The real reason I hate to see Summers ascend to be the head of the Fed is not even the fate of the country; I have to take others' word for his qualifications as an economist. It's that he is a terrible example to our students for how they should live their lives. He loves to split legalistic hairs, and denies that ethical conduct exists outside the context of such hairsplitting. And he is living proof that if you do something wrong and simply refuse to acknowledge it, never apologizing and, when put on the spot, wriggling out of the question on the pretext of technicality, you can live to succeed and rise to power once again. Students are no fools; they see what grown-ups say and do and how it pays off. It will be bad enough if Obama appoints Summers, but the panting adulation he will receive in Harvard publications and Web pages will be powerful signals to Harvard students to go and do likewise.