Bloomberg has an article this morning that reads like a hard-hitting investigative journalism piece. It turns out they've uncovered that some of Treasury Secretary Timothy Geithner's aides earned millions of dollars working for Wall Street banks. Bloomberg might also be shocked to learn that former Treasury Secretary Hank Paulson actually was the CEO of Wall Street behemoth Goldman Sachs, and consequently surrounded himself with his Wall Street kin as well. The fact that Geithner has drawn some talent from Wall Street is not surprising, newsworthy or even bad.
Here's Bloomberg's shocking news:
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.
As part of Geithner's kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations. Yet they haven't faced the public scrutiny given to Senate-confirmed appointees, nor are they compelled to testify in Congress to defend or explain the Treasury's policies.
I have a few comments about this. First, what exactly is it that Bloomberg is proposing? Should every employee of the Treasury be confirmed by the Senate and testify in Congress? Clearly, that's madness. You have to draw the line somewhere, and the number of appointees already required to fulfill those obligations seems adequate.
It sounds to me like Bloomberg is joining the growing chorus of people who object to Wall Street's influence in Washington. If lawmakers are really that worried about the Wall Street connection, then they could always require that no one working for the government was ever compensated directly or indirectly by Wall Street. That would solve the problem.
It would also decimate much of the Federal government, particularly the Treasury. There's a sort of natural progression that's always existed where business and finance professionals find themselves interested in trying out a different role, after tiring of the private sector. That's what's led so many to travel to Washington to be a part of the government. I don't think that's a bad thing. They have very useful experience in the private sector that can be utilized in their new government jobs.
In fact, I'd argue that someone with Wall Street experience is likely a better choice than the alternative. Who would you rather have making important decisions that affect the economy: a former Wall Streeter who actually worked in the market every day or a career bureaucrat who has read a lot of books about the market? Theoretical knowledge is useful, but I would argue that real world experience will go much further in understanding how rules and policies will actually affect business.
So what about the problem that Wall Street might have too much influence in Washington? I understand the concern. I just think the experience those individuals bring might outweigh their allegiance to big finance. The hope, then, must be that Geithner is able to supervise his minions successfully, and keep their actions to support Wall Street in check. Or at least within reason.
Here here!
I love how one of the proposals to fix the clusterf*ck at the SEC is to actually hire people who know what they're doing, i.e. those who've worked in Finance before, yet when its actually put into practice at Treasury, its somehow cronyism? Hogwash!
100% agreed, we should be LUCKY that there's people who know their stuff @ Treasury; of course, perhaps throwing in a professor or a variety of Wall Street types to balance it out would be more ideal, but lets not push our luck too much.
[Earlier comment attempt vaporized?]
"So what about the problem...?" The first step is to admit there IS a problem.
Larry Summers bags $130,000 for a single speaking engagement with Goldman Sachs before the election. The fraction of the telephone records currently available for both Treasury Secretaries -- Geithner and Paulson -- show that they spoke most frequently with GS, especially during the crisis, even directly after calls with the President, while blowing off Members of Congress.
More important is this: It was Goldman Sachs who talked dirty about AIG's books and pressed for a ratings downgrade, which sent them into a tailspin wherein they could not raise the impossible amounts of collateral that required. Then Blankfein participated in the discussions about AIG's bailout, and so, as a counterparty with $20bn in SPECULATIVE AIG CDSes, won 100 cents on the Dollar in the bailout. The EU correctly acknowledged the CDSes were garbage and gave their counterparties a fraction of the contracts' face value. Not only this, but GS got paid TWICE during the bailout, by hedging with CDSes bought through other firms that bet AIG would crash.
I'm growing very tired of bloggers blithely dismissing this as though $170 bn was taxpayer money well wasted, and as though GS did not engineer the terms of this $170 bn bailout for their own spectacular gain.