…as Secretary of the Treasury?
Prior to joining the Obama administration (initially as a Deputy Secretary of State, later as White House Chief of Staff), Mr Lew worked at Citigroup, where his employment agreement contained an interesting provision…specifically, a provision protecting his accrued bonus money in the event that he left the bank to take “a full-time high level position with the United States government or regulatory body.”
Suppose you were running a business, the XYZ Company, and were considering hiring for a key position a person who was working for one of your customers or suppliers..and you found out that he had an employment agreement providing special bonus protection in the event that he takes “a full-time high-level position at the XYZ Company.” Would you hire him? Might you be just a little bit concerned that your customer/supplier was trying to implant in your company an individual who would steer the business decisions in favor of that customer or supplier, rather than focusing resolutely on the interests of XYZ Company itself?
This New York Magazine article argues that we shouldn’t be overly concerned about this clause in Lew’s employment agreement, noting that the agreement also protects his bonus if he leaves after “a significant reduction in your title/function or responsibilities” or “a relocation of your principal place of employment to a location that is not within a commutable distance in the New York City area.” But these latter clauses are pretty standard in executive employment agreements…if the company makes your job much less desirable, then you can leave without forfeiting accrued compensation, which is pretty reasonable.
The New York Magazine article also argues that Citi had a vested interest in ensuring that Lew not leave and go to work for, say, Goldman Sachs, or “the hedge fund down the street,” while it had no such interest in ensuring that he not go to work for the government. But that could have been handled by the more typical language of forfeiting the bonus if he did go to work for a directly-competitive organization, as defined by a list of names and/or organizational attributes. (In any event, if the concern was competitive employment, why protect the bonus only if his new employment was with a high-level position?)
I’m not accusing Jack Lew of corruption. Most likely, he will honestly believe in whatever policies, however misguided, he pursues as Treasury Secretary. But Citi, like other major Wall Street firms, clearly believes it to be in its interests to have a friend at court. And the more dominant a factor government is in the financial markets, the stronger these interests will be.
What is especially disturbing is the ever-tightening nexus between high-level government employment and highly-profitable Wall Street employment. The WSJ article linked about notes that “Wall Street has become a get-rich-turnstile for Democratic political operatives,” and goes on to say:
Citi has been an especially nice landing spot for big-shot Democrats. Former White House budget director Peter Orszag is now a Citigroup vice chairman and somehow finds time to write a column for Bloomberg News. And there was former Treasury Secretary Robert Rubin, who was paid more than $115 million while encouraging the risk-taking that would have destroyed Citi if not for a taxpayer rescue.
The article also notes that “Mr. Rubin was Mr. Lew’s patron at the bank.”
It has not only been Democrats, of course, who profitably hop back and forth between Big Government and Big Finance, but the tendency seems particularly pronounced under this administration, despite any rhetorical hostility directed against “Wall Street.” And in any event, the unrelenting Democratic focus on “more regulation–more regulation–more regulation” makes every industry increasingly dependent on the goodwill of government officials and hence acts to make ever more profitable the back-and-forth dance between public and “private” sectors. With Obama’s new-found interest in manufacturing, we will probably soon see similar opportunities for people to jump back and forth between various subsidized manufacturing companies and various government czardoms.
Obama may project hostility toward “the rich,” but he’s not really against ALL the rich…only those who have obtained their wealth without employing the Four Cs. Which are:
—credentials, in the form of “elite” college degrees
—connections, with government officials and with powerful political families
—compliance with the political worldview of the administration in power
—conformity with current social trends: for example, being in a currently-fashionable industry
Hit the Four “C”s test, and Obama will be much less likely to object to your wealth.
Also, as I noted in a comment at this Ricochet post:
Note that there is not much concern (by Democrats) about power inequality. Barack Obama says there comes a point where you’ve made enough money, he never said there comes a point where you have enough power.
Yet power is always convertible into wealth. Sometimes this is an in-kind conversion, as with the dachas, cars, and special stores available to Soviet officials. Sometimes the conversion is in the form of money, as in the $200,000 per-event speaking fee that Hillary Clinton will reportedly be getting.
To a large extent, the issues being raised about economic inequality are a smokescreen for the attempts of certain elites to centralize and dominate political power and to enjoy the personal rewards thereof.
The increasingly tight connection between banking and government is harmful in several ways. It encourages excessive risk-taking by banks who believe (as do their investors) that their friends in government will always bail them out. It skews the market in favor of larger banks that can afford major lobbying efforts and can offer more profitable post-government employment to “public servants.” And it harms both fairness and economic efficiency by encouraging bank hiring based more on connections and less on talents.