No, Steve Case's PayPal Rival Is Not A Front For Larry Summers

larry summers sleeping tbi

Here’s the thing, guys. There’s so much out and out corruption in our government (academically it’s referred to as capture) that there’s very little reason to stretch to find weird conspiracy theories.

Yves Smith (somewhat) approvingly links to a slightly unhinged piece at AlterNet titled: “Is Larry Summers taking kickbacks from the banks he’s bailing out?”

Ooh, intriguing!

The basic idea is that Larry Summers was on the board of Steve Case’s online payments startup Revolution Money, which has taken some hefty investments from major Wall Street banks.

Last month, a little-known company where Summers served on the board of directors received a $42 million investment from a group of investors, including three banks that Summers, Obama’s effective “economy czar,” has been doling out billions in bailout money to: Goldman Sachs, Citigroup, and Morgan Stanley. The banks invested into the small startup company, Revolution Money, right at the time when Summers was administering the “stress test” to these same banks.

Uh. Summers hasn’t really been “doling out billions in bailout money” to these banks. The TARP infusions they received were under the last administration, and since then they haven’t taken any more cash from the government — at least not any at Larry Summers’ direction. What’s more, the banks first invested in September, 2007, well before they realised they’d need billions in bailout money and that Larry Summers would be in a position, 18 months later to be doling it out.

Now, there is kind of something to this part:

The fact that the banks invested in the company just a few months after Summers resigned suggests the appearance of corruption, because it suggests to other firms that if you hire Larry Summers onto your board, large banks will want to invest as a favour to a politically-connected director.

Kind of, but not really. It is true that Steve Case likes to get some big name dudes on board with his ventures. Franklin Raines is on the board, too. And yes, it probably helps with raising money when you have big, connected names on the board, but then, well, duh! Of course that’s part of the value of having them on the board. And really, this is par for the course with Case, who would probably have 10 boldfaced names if he invested in a lemonade stand. That’s just his style.

The author digs himself further into a whole trying to prove that Revolution Money is performing badly and that there’s no other reason for the banks to invest.

Over the next year and a half, Revolution Money didn’t quite live up to its promise of competing with PayPal or Visa/Mastercard. At least some of this could be attributed to the difficulty of starting up an online credit card company in the middle of a triple-cluster credit crunch, banking crisis and recession. But there is also evidence that the company wasn’t run well. Another one of Steve Case’s “Revolution” brand startups, “Revolution Health,” (which also features a star-studded board of directors including Carly Fiorina, Colin Powell, and several future-Obama Administration officials) essentially folded last autumn when it was sold to Everyday Health last September and merged into that company’s operations.

Wait? What does one have to do with the other? Yes, Revolution Health didn’t live up to its moniker, but that’s hardly evidence that Revolution Money isn’t living up to expectations.

Anyway, you can look through our archives and see a million examples of how government polcies have resulted in giveaways to banks (although the most egregious ones, like PPIP are non-starters {which is odd, if it really is the giant rip-off it’s supposed to be}). This is definitely not one to care mucha bout.

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