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Wall Street Double Standard

This week we saw more light shed on members of President Obama's economic team.
We learned a lot more about President Obama's top economic advisor - Larry Summers - and his connections to Wall Street.

It was revealed that last year Mr. Summers received $5.2 million in compensation from Wall Street hedge fund giant D.E. Shaw. Mr. Summers also received another $2.77 million in fees from speaking engagements. Many of those speaking engagements were for Wall Street giants, such as Goldman Sachs.

Does anyone seriously think that when Mr. Summers deliberates on important economic matters, that he will be looking out for the "little guy"? Does anyone think he will object to many more billions of dollars being handed over, no questions asked, to Wall Street?

Add Mr. Summers to the incompetent Treasury secretary, Tim Geithner, under whose "supervision" Wall Street pulled off all their shenanigans, and you have an economic "Dream Team". From a Wall Street perspective, that is.

The Obama economic team seems to be following in the footsteps of the Bush economic team in how Wall Street is treated. Wall Street is treated with kid gloves while everyone else is treated harshly.

Look at General Motors, where CEO Rick Wagoner was removed by the government. Mr. Wagoner was an incompetent and should have been removed. Fair enough.

But why then are 90% of the senior executives at the major Wall Street banks still in place? Aren't these guys the ones responsible for the mess that our banking industry finds itself in? Are these not the firms that have received billions of dollars in bailout funds from US taxpayers?

In fact, two weekends ago President Obama and Treasury secretary Tim Geithner met at the White House with all the major Wall Street CEOs and pledged to work closely with them. Quite a contrast to the treatment given to the GM CEO. Wall Street seems to be the "teacher's pet".

It's interesting to see how the world has reacted to this continuing double-standard. The reaction from most major global investors has been fairly uniform. Global invetors are wondering why none of the people largely responsible for this mess - senior bank executives - have been "brought to justice".

Global investors are reluctant to invest further in the US until they see that some senior management changes at US banks have been made. This reluctance on the part of foreign investors is important since the US is so highly reliant on foreign investors to purchase our Treasury securities.

Maybe President Obama needs an economic team not so closely tied to Wall Street? As always, please feel free to contact me directly with your comments or questions.

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