Believing that America’s two great political parties are not shades of grey requires a vivid imagination. A baby step to the left of an ultra-right wing party is another right wing party. This might not be a democratic ideal but it’s ideal for Wall Street.
Slipping into the corridors of power quietly so as not to disrupt the pleasant daydreaming of Obama’s credulous minions is, as The Who sang, the same boss as the old boss. There’s not one boss, of course, but a multitude. But the herd is one breed and that breed comes from the same bonus-besotted financial institutions that have played craps with the global economy.
As widely reported, many of top officials orchestrating the administration’s response to the financial crisis come from the same Wall Street firms responsible for it. Treasury Secretary Tim Geithner, whose role in the lead-up to the crisis while head of the Federal Reserve Bank of New York deserves closer scrutiny, has brought on a series of well-heeled advisors that includes Gene Sperling. Sperling made $887,727 last year from Goldman Sachs. His pay, according to the Financial Times, was for “work on a philanthropic project.”
Sperling supplemented his curiously lucrative humanitarian work by making rounds on the Wall Street lecture circuit. Some of his patrons included Houston-based Stanford Group headed by Allen Stanford, who stands accused of running a seven billion dollar ponzi scheme. This might sound like guilt by association until one considers the number of such associations.
Mathew Kabaker, another Geithner protégé, earned $5.8 million at the prominent private equity firm Blackstone Group just before going into government while Lewis Alexander, yet another Treasury advisor, previously plied his trade at TARP-dependent Citigroup. And let’s not forget Larry Summers, Obama’s chief economic advisor, who struck gold at a hedge fund ahead of his appointment. Summers’ previous stint at Treasury during the Clinton Administration was defined by his laissez-faire views, including towards derivatives, those complex financial instruments that Warren Buffet memorably called “financial weapons of mass destruction.” Closing the incestuous loop is Mark Patterson, Geithner’s Chief of Staff, who previously lobbied on behalf of Goldman.
It’s not just Treasury where Wall Street looms large. The new Undersecretary of State for Economic, Energy, and Agricultural Affairs at the State Department, Robert Hormats, held a top post at Goldman while Philip Murphy, another high-flyer at Goldman, is now ambassador to Germany. Yet another Obama appointee, Gary Gensler, who heads the Commodity Futures Trading Commission, which plays a crucial financial oversight role, also cut his teeth at Goldman.
Obama’s Wall Street-heavy lineup is not unusual. Geithner’s predecessor, Henry Paulson, spent 32 years at Goldman, six more than Robert Rubin, Clinton’s Treasury Secretary. Donald Regan resigned as Merrill Lynch’s CEO to become Reagan’s Treasury Secretary. Poaching talent from Wall Street is justified on grounds that the expertise possessed by those in high finance is invaluable. Who better to know the industry than those from it?
The argument has some merit. But the overwhelming preponderance of men (and it’s almost always men) with similar pedigrees overseeing the nation’s economy runs the risk of best and brightest groupthink. And will an administration with such a monochromatic hue take on Wall Street when so many of its ranks include those who not only failed to foresee the financial market meltdown but in some cases helped facilitate it? Obama promises that “we will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.” The problem is that he’s already gone back to those who supped greedily at the trough to craft a solution, a concern magnified by the apparent weakness of an administration white paper issued earlier this year detailing possible financial sector reforms.
The Democrats’ reliance on Wall Street largesse feeds the cynicism. In recent years, the party of the workingman has raised far more from Wall Street than have Republicans. This year alone, Democrats have netted $5.4 million from the finance industry compared with just $2.7 for the GOP. The financing piece closes the loop: Wall Street barons are recruited into government to fix Wall Street while Wall Street barons finance the party in power promising to fix Wall Street. Is this “Change We Can Believe In?”
The story goes that a Brit returning home after visiting the US was asked to describe America’s two great political parties. One, he explained, resembles the Tories, and so does the other. The anecdote might well be apocryphal, but given what we’ve seen so far from an administration promising to break with the ways of the past, it is spot on.