If you read Chapter 6 of Culture of Corruption, you know all about President Obama’s Wall Street money men — who look an awful like President Bush’s bailout-happy money men from the world of Government Sachs and CITI. I’ll include an excerpt below.
I’ll need to update the chapter with the latest info from Bloomberg News, which spotlights Tim Geithner’s continuing inability to get his aides through the confirmation process that he himself barely squeaked through. Instead, he has been content to employ his consultants as unconfirmed “counselors.”
“Counselor” is the new czar:
Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms.
The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund…
…Speaking to financial executives last month, Obama said: “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.”
At the same time, the president has promised to change Washington by keeping lobbyists for special interests at a distance and by making decisions in the open.
Sperling and Sachs are each paid $162,900 at the Treasury. Along with four others, they hold the title of counselor to Geithner. Sachs, 46, withdrew earlier this year from consideration to be the Treasury’s top domestic finance official, a job that would have required Senate confirmation.
As usual, circumvention is the Obama way:
The title of counselor had been generally reserved for those awaiting confirmation. Some of Geithner’s aides now work in that capacity, including Lael Brainard, who has been nominated to be undersecretary for international affairs, and Jeffrey Goldstein, the nominee to be undersecretary for domestic finance.
“The use of counselors provides an opportunity to bring valuable expertise into the department to serve in a close capacity with the secretary,” said Rob Nichols, a former Treasury official under Secretaries Paul O’Neill and John Snow, neither of whom relied extensively on unconfirmed aides. “It’s important that they complement, but don’t supplant, the Senate confirmed appointments.”
The use of unconfirmed counselors can cut both ways. It allows Geithner to bring in staff quickly by avoiding the arduous confirmation process. On the other hand, the aides don’t get as tough a vetting by the White House or Congress and remain less accountable than Senate-confirmed officials.
“Too often,” Obama lectured Wall Street in March 2008, “we’ve excused and even embraced an ethic of greed, corner cutting and inside dealing that has always threatened the long-term stability of our economic system. Too often, we’ve lost that common stake in each other’s prosperity.”
In June 2008, Obama railed against credit card companies: “This has to stop. We cannot let the rules of the game continue to be rigged against ordinary Americans. We need a President who will look out for the interests of hardworking families, not just their big campaign donors and corporate allies.” Immediately after the speech, he headed to a campaign fundraiser at the Manhattan headquarters of Credit Suisse, one of the major investment companies caught up in the subprime lending debacle.
In March 2009, Obama assailed the corporate bonuses handed out by bailout recipient AIG—which had been approved by his own handpicked Treasury Secretary and AIG bailout architect Tim Geithner. But let’s not get distracted.
Obama blamed “the system and culture that made them possible—a culture where people made enormous sums of money, taking irresponsible risks that have now put the entire economy at risk.” The irresponsible risk-takers at AIG donated $104,332 to Barack Obama in the 2008 federal election cycle. Since 2004, AIG has donated 60 percent of its $2.6 million in political donations to Democrats. Obama kept the corrupted cash. But I digress.
“We don’t need these house of cards, these Ponzi schemes, even when they’re legal, where a relatively few do spectacularly well while the middle class loses ground,” Obama inveighed. “I want to describe to you the kind of economy that we want to build: an economy that rewards hard work and responsibility, not high-flying finance schemes.” He vowed to “make sure we don’t find ourselves in this situation again, where taxpayers are on the hook for losses in bad times, and all the wealth generated in good times goes to those who are at the very top of the income ladder. That’s the kind of ethic we’ve had for too long. That’s the kind of approach that led us into this mess.”
However, a close look at the high-flying financiers whom Barack the Commoner has surrounded himself with in Washington shows how deeply embedded the “ethic of greed” is in Obama World. The Wall Street gamblers that Obama and his wife carped about on the campaign trail were shoveling money to his campaign hand over fist. According to the Center for Responsive Politics, hedge funds and private equity firms donated $2,992,456 to the Obama campaign in the 2008 cycle. Obama, erstwhile critic of the campaign finance practice known as “bundling,” happily accepted more than $200,000 in bundled contributions from billionaire hedge-fund manager James Torrey, more than $100,000 in bundled contributions from billionaire hedge-fund manager Paul Tudor Jones and more than $50,000 in bundled contributions from billionaire hedge-fund manager Kenneth C. Griffin, chief executive officer of Citadel Investment Group in Chicago.
No fewer than 100 Obama bundlers are investment CEOs and brokers: nearly two dozen work for financial giants such as Lehman Brothers, Goldman Sachs, or Citigroup.
By comparison, multi-house dweller and Evil Republican Rich Guy John McCain received $1,699,525 from the industry—that’s more than forty percent less than Obama took.
Now, the hedge fund managers, statist bankers, corporate lobbyists, and lax regulators Obama incessantly cursed are the same ones whom he has appointed to “fix” the “system and culture” they created—and from which they all profited greatly.
“We can’t afford eight more years or four more years or one more year of the failed economic policies that George Bush has put in place,” Obama proclaimed on the campaign trail. But just like George Bush, Barack Obama is relying on Goldman Sachs/Wall Street power brokers to engineer massive government interventions to “rescue” failing businesses with the tax dollars of ordinary Americans. Obama had assailed John McCain for being “in cahoots” with CEOs and hedge fund managers. How are the myriad “public-private partnerships” Obama has embraced between government and corporate interests any different?
…In cahoots with Citicorp
By late November 2008, taxpayers came to expect midnight bailouts from feckless feds “in cahoots”—to borrow our president’s words—with Big Business. At 1 a.m. Eastern on November 24, 2008, Citicorp got its share of the bailout pie: $306 billion in government backing and $20 billion from the TARP banking bailout rammed through Congress a month earlier. The Citi “rescue” was the result of intense collaboration between Citigroup board member and former Clinton Treasury Secretary Robert Rubin; then Bush Treasury Secretary Henry M. Paulson Jr.; and then president of the Federal Reserve Bank of New York/Paulson-Rubin protégé/soon-to-be Obama Treasury Secretary Tim Geithner.
“[I]s it too much to ask Washington to develop a policy that isn’t crafted in a scramble of private phone calls?” an exasperated Wall Street Journal editorial board wondered the next day.
In January 2009, the Obama administration flexed its faux populist muscle in demanding that Citigroup drop its plans to spend $50 million for a luxury French jet. The same month Rubin resigned from the company—walking away from the wreckage with $150 million after 10 years at the company. Behind the scenes, more Citi men were sitting in the catbird’s seat. They included Jacob Lew, former chief financial officer of Citigroup Alternative Investments, who was appointed Obama’s No. 2 at the Department of State and will oversee interagency economic policy matters, and Michael Froman, another former CFO in the same division, who is now deputy assistant to the president and deputy national security adviser for international economic affairs. Obama and the bonus-bashers refrained from demagoguing Lew’s $1.1 million-plus salary and bonus and Froman’s $7.4 million-plus salary and 2008 year-end bonus of $2.25 million.
Both Lew and Froman now work closely with Wall Street crony and former Robert Rubin co-worker Larry Summers at the National Economic Council. National Journal connected more Rubin/Citi dots: “Director of the Office of Management and Budget Peter Orszag, and Summers’ deputy, Jason Furman, both served as directors of the Hamilton Project, a Brookings Institution initiative the produces research and policy positions on economic issues, where Rubin was a founding member of the advisory council. If that isn’t enough, Froman served as Rubin’s chief of staff during Rubin’s stint as Secretary of Treasury.” Three months after the Bush-Obama team engineered the first Citi bailout in November 2008, the Obama administration announced it was raising its stake in the failing company from 8 percent to 38 percent.
“We need a President who will look out for the interests of hardworking families, not just their big campaign donors and corporate allies,” candidate Barack Obama insisted in the halcyon days of his campaign. Still waiting. He promised Hope, but his Wall Street friends and backers got the Change—billions and billions of dollars worth of change.
The Subprime Gang
Former Fannie Mae corruptocrats Jim Johnson and Franklin Raines may not have official positions with the administration, but other subprime crisis-connected beneficiaries do.
…Obama’s close hometown crony, campaign finance chief, and senior adviser Penny Pritzker was head of Superior Bank of Chicago, a subprime specialist that went bust in 2001, leaving more than 1,400 people stripped of their savings after bank officials falsified profit reports.
Pritzer’s lawyer at O’Melveny & Myers, Tom Donilon, is now deputy national security adviser. He earned just shy of $4 million representing her and other high-profile meltdown clients including, yep, Citigroup and Goldman Sachs.
In April 2009, the White House tapped former Fannie Mae executive Donald Remy to be the Army’s top lawyer. He submitted a bio that stated that he had “worked as a senior vice president for a ‘major U.S. company’ for an unspecified number of years.” The employer was Fannie Mae. He worked there from 2000 to 2006, during the height of the government-sponsored mortgage giant’s accounting scandals. Remy wasn’t just any low man on the totem pole. Among his job titles at Fannie, according to Congressional Quarterly: Vice president and deputy general counsel for litigation; senior vice president and deputy general counsel; senior vice president and chief compliance officer; and senior vice president, housing and community development.
When questioned by Republicans in the Senate about these rather glaring omissions on his bio, Remy protested: “My time at Fannie Mae was a time period where I am personally proud of all the work that I did.” Omissions speak louder than words.
Austin Goolsbee, named head of Obama’s Economic Advisory Board, was a champion of extending credit to the uncreditworthy. In a 2007 op-ed for the New York Times, he derided those who called subprime mortgages “irresponsible.” He preferred to describe them as “innovations in the mortgage market” to expand the pool of homebuyers. Now this wrong-headed academic who espoused government policies that fed the housing feeding frenzy is in charge of fixing the loose-credit mess he advocated.
Goolsbee, by the way, is the 15th-wealthiest member of the Obama administration, with assets valued at between $1,146,000 to $2,715,000. He also pulled in a University of Chicago salary of $465,000 and additional wages and honoraria worth $93,000, according to the Washingtonian. If you’ve got the right corrections, being wrong pays.
Rahm-bo the Rich
White House Chief of Staff Rahm Emanuel’s most famous dictum is this: “Rule one: Never allow a crisis to go to waste…They are opportunities to do big things.” Emanuel certainly didn’t let the housing crisis go to waste. During the Clinton years, he was appointed to the Freddie Mac board of directors at a time when its oversight manager called the quasi-governmental agency “so pliant” that it enabled rampant book-cooking. Freddie Mac’s stock skyrocketed; its CEOs helped themselves to massive bonuses. Emanuel’s hometown paper, the Chicago Tribune, exposed how Emanuel’s “profitable stint” during this corruption-plagued period entailed almost no work:
The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board’s working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.
On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.
The accounting scandal wasn’t the only one that brewed during Emanuel’s tenure.
During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.
The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by Armando Falcon Jr., head of a federal oversight agency for Freddie Mac. The scandal forced Freddie Mac to restate $5 billion in earnings and pay $585 million in fines and legal settlements.
Freddie lost tens of billions of dollars and cost billions more after both major parties in Washington engineered a gargantuan Fannie/Freddie bailout. The former ballet dancer-turned-Chicago pol, meanwhile, pirouetted off the Freddie stage—and then cashed-in again. The Tribune reported that he sold more of his Freddie Mac stock for an easy $100,001 and $250,000. Displaying their continued disregard for their own transparency pledges, White House officials refused to fulfill the newspaper’s request for public documents related Emanuel’s tenure as a Freddie Mac director.
The revolving money machine brought Emanuel a combined $51,000-plus in campaign contributions from Fannie Mae and Freddie Mac when he ran for the House. Chicago Sun-Times columnist Lynn Sweet pointed out that as a member of the same House subcommittee that has oversight of Fannie/Freddie, Emanuel (with outstanding options for 2,500 shares of Freddie) had a major conflict of interest. When Emanuel responded that he put the shares in a trust and would recuse himself from voting on any issues related to Freddie Mac, Sweet shot back: “Emanuel’s trust is supposed to be blind, not stupid.”
Emanuel’s savvy ability to flit in and out of the government-corporate revolving door paid huge dividends. Washingtonian magazine lists him as the fifth wealthiest member of the Obama administration, with assets between $5,023,000 and $13,170,000 in 2007.
“According to congressional disclosures, Emanuel made $16.2 million in his 2½ years as an investment banker at Wasserstein Perella, in between advising Bill Clinton and taking Rod Blagojevich’s vacant seat in the 5th District of Illinois—or roughly $740 an hour 24 hours a day, 365 days a year.”
While Barack and Michelle Obama assailed greedy bankers and hedge fund managers and advised hopeful young followers to stay away from Wall Street, Emanuel happily absorbed hedge fund cash. OpenSecrets.org reported that Emanuel “was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry” with $1.5 million filling his campaign coffers. They only call them “ill-gotten gains” when the cash is going in somebody else’s pocket…
Mark the Corporate Lobbyist
There’s always room for another Goldman Sachs water-carrier in the House of Barack. Even if it means breaking Obama’s own no-lobbyist rules. In January 2009, Treasury Secretary Tim Geithner chose former Goldman Sachs lobbyist Mark Patterson to serve as his top deputy and overseer of the $700 billion TARP banking bailout—$10 billion of which went to Goldman Sachs. In the understatement of the year, left-leaning government watchdog Melanie Sloan of the Citizens for Responsibility and Ethics in Washington responded: “It makes it appear that they are saying one thing and doing another.” Give her the Sherlock Holmes Award!
Paul Blumenthal of the Sunlight Foundation noted that, while at Goldman Sachs, Patterson lobbied against executive pay limits that Obama had crusaded for as Senator (before, that is, his administration carved out exemptions for AIG). While Patterson agreed to recuse himself on any Goldman Sachs-related issues or related policy concerns, Blumenthal wrote, it “still creates a serious conflict for Geithner, as Treasury is being partly managed by a former Goldman lobbyist. Geithner is also placed in a tough position considering that his chief of staff is limited in the areas in which he can work (supposedly).”
As if that weren’t enough baggage, Washington Examiner columnist Timothy P. Carney reported that Patterson was also a former Tom Daschle acolyte and adviser who carved out a niche in alternative energy mandates and subsidies. He championed an ethanol firm in Canada, Iogen Corporation, which received $30 million from Goldman Sachs in a bid to boost its green image. The logs started rolling. Iogen soon received an $80 million Bush Energy Department grant and millions more in energy bill set-asides. “So now you see how it works,” Carney demonstrated. “A well-connected company invests in a technology that is currently unprofitable. That company then uses its high-dollar lobbyists and friends inside government to subsidize or mandate that product into profitability. Goldman similarly invested in—and lobbied for—greenhouse gas credits, which are literally worthless without climate change legislation that caps emissions. A good lobbyist is like an alchemist, turning lead into gold.
Mark Patterson and Goldman Sachs may not have figured out how to turn switchgrass into energy, but they did figure out how to turn it into profit. Patterson is a rainmaker, leveraging his government connections into private profit. He’s emblematic of both the ‘green revolution’ Obama touts, and the ‘revolving door’ Obama assails.”
Yes, so much for Obama’s “close the revolving door between K Street and Capitol Hill.” So much for ridding Washington and Wall Street of “excess greed, excess compensation, excess risk taking.” So much for giving the American people “more than window-dressing when it comes to ethics reform.”
It’s not that bona fide capitalism is evil or that lawyers, lobbyists, hedge fund managers, or corporate executives should have no role in government. It’s the cognitive dissonance…blog comments powered by Disqus
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Categories: Tim Geithner