Posted by Obama has finally gotten around to choosing a replacement for Larry Summers, and named Gene Sperling director of the National Economic Council (why he didn’t prioritize this with nearly 10% U3 unemployment is puzzling). This has been controversial since Gene Sperling, like many of Obama’s closest advisors, has ties to Wall Street. David Corn describes those ties:
At some point, according to a source familiar with the episode, Goldman Sachs approached Sperling for advice on globalization. He took this opportunity to pitch the company an idea in sync with his nonprofit work: the firm ought to invest in social capital in poorer nations. He suggested it focus on business education in developing countries. Goldman Sachs asked for a proposal. He worked one up: devoting $100 million for business training for 10,000 women in these nations. Goldman Sachs, via a foundation it operates, went for the idea and eventually asked Sperling to implement it. On the advice of friends, he requested that he be paid what the investment firm might pay a top lawyer or dealmaker: $70,000 a month. And that’s what he earned for a year or so. He did no commercial work for the investment bank.
And there’s been some controversy:
Progressive blogger Ezra Klein observes that Sperling’s Goldman Sachs haul was problematic: “You tend not to get paid that much for offering guidance to charitable endeavors. It is very hard to believe that Goldman Sachs wasn’t attempting to buy influence with a politically savvy economist who had good relations–and would later go to work for–the incoming Democratic administration.” Dean Baker, of the liberal Center for Economic and Policy Research, chimes in: “I don’t think it’s a question of outright corruption. It’s a question of orientation. Most people hear you got almost a million dollars for a part-time job, and they think there’s a problem there. But people on Wall Street say, a million bucks is chicken feed.” Democratic and Republican administrations–including Obama’s–do tend to be filled at the top with lawyers and corporate officials who have raked in millions of dollars annually for years in the private sector. Sperling is not on par with these folks. Due to his past service as NEC chief, he was able to pull in far more money than the average do-gooding Washington policy wonk. But he was no Gordon Gekko.
Felix Salmon has also criticized Sperling. For me, the issue is related to what I’ve called the Congressional Retirement Plan:
It’s simple: it’s about life after politics. One of the dirty secrets about many, if not most, congressmen and senators is that they like Washington, D.C., rhetoric notwithstanding. They want to stay in town after they leave (or lose) office. Once you’ve tasted the Capital of the Free World, do you really want to go back to Pierre, South Dakota? (Tom Daschle comes to mind…). It’s funny how many politicians, having made a career out of bashing War-Shing-Tun, don’t…seem…to…ever…leave.
I can’t blame them: I moved to Boston, and would be very happy to stay here. Places do grow on you. The problem comes, for politicians, when they have to find a job. For an ex-politician, there aren’t that many ‘straight paths’ to getting your next job: lobbyist and corporate board member are the easiest and the most lucrative.
But if you get a reputation as someone who opposes large business interests, what chance do you have of getting either of these types of jobs?
Justin Fox writes about the Wall Street revolving door:
With that kind of pay differential, Wall Street inevitably begins to emit a giant sucking sound as it hoovers up smart, self-interested people. This is apparent at top business schools, in physics Ph.D programs — and in Washington, where smart out-of-office (or just burned-out) government officials who want to secure their family’s financial future before either retiring or heading back into public service now flock to Wall Street jobs. Larry Summers did. Rahm Emanuel did too. John Snow did. Bill Daley did. Phil Gramm did. Harold Ford Jr. did. Peter Orszag is doing it. Heck, I’d probably do it if I were in their shoes. Gene Sperling, to be fair, didn’t go so far as to become a banker. But on the whole, if you believe that people respond to economic incentives, you have to believe that Wall Street’s artificially high pay scales have come to have a big impact on decisionmaking in Washington — and that this is an unhealthy development for our democracy and our economy.
As Fox notes, would someone whose quality of life dramatically improved due to a corporation be biased towards that corporation? The question I would ask Sperling is, “If a policy that could cripple or destroy Goldman-Sachs were the advice given to you by your advisors, could you fully support it?” Because, like it or not, these guys paid him a lot of money, and, while they might not expect him to support him on everything, they probably hope he would do what he could to stop their destruction.
Even if that’s what’s best for the country.
January 12, 2011
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