Seven years ago, as our economy was collapsing in on itself after decades of deregulation and limited governmental oversight on Wall Street, Barack Obama ran his presidential campaign on change from the cronyism that had plagued our government for so long. In a campaign ad, he pledged to “End the anything goes culture on Wall Street with real regulation that protects your investments and pensions” and to “Crack down on lobbyists once and for all.”
But after six years in office, it is clear that the Obama administration has brought limited change to Wall Street, a point that certain liberals, like Elizabeth Warren, have been quick to criticize him for. The reality is that Obama is stuck within the institutionalized nature of our corporate capitalist system. He has hired many of the same names who helped bring our economy to its knees to run the treasury and advise him on economic policies. He also wanted to nominate Lawrence Summers as Chairman of the Fed, one of the main suspects of financial deregulation. Luckily, he received too much backlash to possibly go through with it.
Most recently, Obama has nominated Antonio Weiss, who has spent the last twenty years working at the financial advisory company Lazard, to serve as Under Secretary for Domestic Finance at the Treasury Department. In reaction to this nomination, Elizabeth Warren has criticized him for working on certain deals, like the recent corporate inversion for Burger King. Corporate inversions (aka Tax Inversions), allow companies to claim foreign citizenship while maintaining operations in America for certain benefits, usually to cut their taxes. However certain folks have defended Weiss over this deal, saying it is less about cutting taxes than it is about international growth.
While it is certainly worth while looking into Weiss’ history in this controversial area, the main criticism of Weiss should be the fact that he will be getting paid handsomely by Lazard if he does end up getting the Under Secretary position. This is because the firm makes sure that employees receive accelerated financial rewards if they manage to get a position of influence in the government. Weiss will receive millions of dollars worth of restricted stock upon his resignation, which he would normally only receive if he remained with Lazard through 2017.
Lazard, however, is hardly the only company that provides financial incentives to employees departing for public service. Most financial institutions on Wall Street have similar revolving door policies. For example, Morgan Stanley executives are eligible for a bonus that they would normally forfeit for leaving the company early if they are leaving for a “governmental department or agency, self-regulatory agency or other public service employer.”
Another instance is shown in a cryptically written company document posted on the SEC site titled “Long Term Incentive Plan”, in which JP Morgan describes financial awards given to employees. In bureaucratic syntax, it explains “The purpose of this award is to motivate your future performance for services to be provided during the vesting period and to align your interests with those of the Firm and its shareholders.” It then goes on to describe how an employee will still be awarded after leaving, if “you voluntarily terminate your employment with the Firm to accept a Government Office or become a candidate for an elective Government Office.” Basically, if you have the opportunity to work for the regulators, they want to make sure your interests are aligned properly with those of the firm.
This is a common practice on Wall Street, and even the Treasury Secretary, Jack Lew, was criticized for receiving financial rewards after leaving Citigroup for his current post. It truly blows the mind that this is tolerated, and is yet another example of the Obama administration and its cozy relationship with Wall Street.
If Obama wants to make good on his promises of real change and regulation, he should start by pushing for laws banning these sort of revolving door policies that financial institutions put into their contracts. Anyone can say they do not have a conflict of interest, but when millions of dollars are at stake, it seems inevitable to have a certain bias towards the paying firms interests, even if its unconscious. If someone who works on Wall Street wants to resign and work in the public realm, that is fine, but they should not receive monetary awards from private industry for doing so.