Earlier this week, we wrote about how the New York Times’ Dealbook, the creature of Wall Street sycophant Andrew Ross Sorkin, had launched a fierce campaign against Elizabeth Warren’s latest move, her opposition to the Obama administration’s nomination of Lazard’s Antonio Weiss, a mergers and acquisitions banker. Warren’s grounds for objecting to Weiss were straightforward: his experience was no fit for the requirements of his proposed Treasury role. On top of that, he had been involved in and therefore profited from acquisitions called inversions that Treasury opposes because they reduce the taxes paid by the acquirer, which uses the acquired company to move its headquarters to a lower-tax jurisdiction.
Dealbook published three Warren-bashing columns in as many weeks; the Washington Post and Wall Street Journal ran editorials making similar arguments, suggesting that all were picking up on the same talking points out of Treasury. One tell: the Times had to issue a correction on one of its pieces because it relied on a Treasury document that exaggerated Weiss’ accomplishments.
Warren upped the ante in a speech on Tuesday, making Weiss, who is now head of investment banking at Lazard, a symbol of what is wrong with the relationship between the government and Big Finance: that of far too much coziness between the large, influential players and financial regulators. And in sharpening and further documenting her critique, she has put the Robert Rubin wing of the Democratic party in her crosshairs.
It is hard to exaggerate Rubin’s role in shaping Democratic party economic and financial regulatory policy. Rubin was a former Goldman co-chairman before becoming Treasury secretary and was later a board member and vice-chariman of Citigroup. All Democratic party Treasury secretaries after his time in office were proteges of his. A boatload of former Goldman and Citigroup employees that have rotated through major government posts are also members of what a regulatory expert calls the Rubino gang. Rubin’s support was also critical to Obama’s rise. Rubin has exercised intellectual influence over the Democratic party through the Hamilton Project, which has sponsored a raft of good for banks, bad for the middle class policies such as unfettered free trade, a strong dollar, financial services deregulation, and balanced budgets.
Make no mistake about how forceful Warren’s critique was and how it took aim at Rubin operatives. We’ve embedded it at the end of the post and encourage you to read it in full.*
As Dave Dayen wrote in The New Republic:
Warren made clear that her fight is about much more than one nominee at the Treasury Department. She crafted a direct challenge to three decades of bipartisan collusion between government and Wall Street, in a highly unusual manner for any politician, let alone one recently drafted into the Senate Democratic leadership. The Weiss affair has become secondary to this bigger competition for what principles will shape the Democratic Party, and what role Warren will play in it.
Dayen does not tease the bigger impllications out, but Warren is playing high-stakes poker. Whether she is seriously interested in running for President or not, she’s being groomed as the Hillary fallback. The dissent-grounding-out organization known as MoveOn plans to spend $1 million on Warren as a 2016 contender. Warren has nothing to lose by playing along (provided she does not get captured) since it enhances her prestige and influence. The thinly-disguised attack on the Clinton/Obama personal ties to major financiers reinforces her differentiation from Hillary and sets the stage for a Main Street versus Wall Street campaign.
Warren catalogues how much sway major financial firms have over bank-related regulations, including the scale of the revolving door, with nearly 1500 former Federal employees now working as lobbyists. And mind you, that’s before you get to all the stuff that isn’t formal lobbying that is carried on through think tanks and public relations efforts. DC insiders estimate that for every dollar classified as lobbying, another $2 is spent on other forms of influence. Look, for instance, at Larry Summers’ post Treasury career. He regularly gives finance-friendly speeches, op-eds, and small-group meetings, yet none of of his influence-peddaling is classified as lobbying.
The most striking statistic from Warren is how outgunned ordinary citizens are in the effort to sway regulators:
The Sunlight Foundation, a non-partisan, non-profit organization, took a look at all of the meeting logs from 2010 to 2012 of the Treasury Department, the CFTC, and the Fed. It found that those agencies reported meeting with one of 20 big banks or banking associations a combined 12.5 times per week- about five times as often as all reform-oriented groups combined… Goldman and JP Morgan each met with those agencies at least 175 times- or nearly twice per week, every week, on average.
Do the math. Goldman and JP Morgan alone got nearly as many meetings as all the finance critics combined.
Warren spends most of the speech with a more detailed shellacking of the Antonio Weiss nomination than she provided in her Huffington Post article that first made her case. She spent the most time on the big bone of contention, that being a senior financier meant Weiss was qualified to perform any banking-related role. That idea would be laughed out of the room by any Wall Street recruiter, given how narrow and specialized the various profit centers are, and Warren patiently walks through why international mergers and acquisitions experience is utterly irrelevant to the Undersecretary of Domestic Finance position.
She also rebuts a bizarre argument mounted by Weiss’ backers, that the public should be grateful and happy that Lazard will accelerate the payout of Weiss’ unvested income, which will give him an estimated $21 million payday. This is for a man with a net worth estimated ate between $54 and $203 million. As Warren tartly notes:
So what is this all really about? Why call out the cavalry for a guy whose experience doesn’t match the job he’s been nominated for? Why circle the wagons around a guy who is picking up $20 million to take a public service job?
It’s all about the revolving door- that well-oiled mechanism that sends Wall Street executives to make policies in the government and that sends government policymakers straight to Wall Street. Weiss defenders are all in, loudly defending the revolving door and telling America how lucky we are that Wall Street is willing to run the economy and the government. In fact, Weiss supporters even defend golden parachutes like the $20 million payment Weiss will receive from Lazard to take this government job. Why? They say it is an important tool for making sure Wall Street executives will continue to be willing to run government policy making.
If that sounds ridiculous to you, you’re not alone. Sheila Bair, a Republican and the former head of the FDIC, responded that “only in the Wonderland of Wall Street logic could one argue that this looks like anything other than a bribe.” End Quote. She went on: “We want people entering public service because they want to serve the public. Frankly, if they need a $20 million incentive, I’d rather they stay away.”
Warren may not win this fight in a narrow sense. She may not even be able to prevail in blocking the Antonio Weiss nomination, although the AFL-CIO is uncharacteristically opposing the Administration and siding with Warren. But anyone with an operating brain cell can see that the Democratic party strategy of siding with Big Business and Big Finance to the point of abandoning the middle class has failed. Appealing to identity politics and hot-button special interests aren’t sufficient to rally the base, particularly after the blatant Obama 2008 bait and switch. There are acceptable degrees of political lying, and Obama has repeatedly gone well beyond their boundaries. The even-worse-than-expected midterm losses were a wake-up call.
The conundrum is that for party leaders as individuals, selling out to monied interests is often still a wining strategy, no matter what it costs the party, so Warren’s rearguard action may well fail. But the flip side is she is demonstrating that opposing the anti-middle class members of the 1% is a viable political position, not just from the standpoint of public profile, but fundraising. The fact that Warren has gotten as far as she has is due to her standing as a donation magnet. So even if she appears to lose these fights, she wins longer-term by demonstrating she can make her opponents’ victories costly, de-legitimizing the power of Big Finance, and paving the way for other Main Street candidates.
* A nice touch: Dave Dayen and this blog were cited in the footnotes.