I have been writing about the revolving door between Wall Street and the government. Yesterday’s Wall Street Journal has an article that sheds an interesting light on this process and how favorably it is viewed by Wall Street. It concerns primarily Jack Lew, president Obama’s current Chief of Staff and nominee to be Treasury Secretary.
As for the Citi paycheck, the story is how Wall Street has become a get-rich-turnstile for Democratic political operatives. The terms of Mr. Lew’s original employment contract with Citi included a bonus guarantee if he left the bank for a “high level position with the United States government or regulatory body.” [My italics-MS]
Most companies include incentives for top employees not to leave, but in this case the contract was written to reward Mr. Lew for treating the bank like a revolving door. Citi says it likes to accommodate employees who do public service or work at nonprofits. But the Lew contract was specific about a senior job in the federal government. There would be no special payout if he left to run the Red Cross or the New York state budget office.
Citi has been an especially nice landing spot for big-shot Democrats. Former White House budget director Peter Orszag is now a Citigroup vice chairman and somehow finds time to write a column for Bloomberg News. And there was former Treasury Secretary Robert Rubin, who was paid more than $115 million while encouraging the risk-taking that would have destroyed Citi if not for a taxpayer rescue.
Mr. Rubin was Mr. Lew’s patron at the bank. Mr. Lew’s contract suggests that Citi knew from the start that Mr. Lew was headed back to a powerful job in Washington, and that it wanted him to remember the bank fondly when he left. We have nothing against people making a living, but when they show up a few years later to do more “public service,” taxpayers have a right to know what their private employers were paying them to do.
So Citigroup actually pays its people to take up high-level positions in the federal government. I am pretty sure that they expect something in return.
Interestingly New York University, Lew’s employer after he left the Clinton White House and prior to joining Citigroup, also gave him a generous severance when he left to join Citigroup. As the article says, “We wrote recently about the oddity of New York University paying severance to Mr. Lew in 2006 when he left there voluntarily to work at Citigroup. NYU hasn’t explained why it would pay someone for quitting to take a job on Wall Street.” Severance pay is usually given to people who are fired or to pressure them to leave, but Lew left NYU voluntarily, after arranging a sweetheart deal for Citigroup with NYU. Lew is also is an investor in the Cayman Islands tax haven and received bonus and corporate jet rides underwritten by taxpayers at a bailed-out bank.
We can confidently expect Lew to continue the practice of using the government as a subsidiary of Wall Street and of the Treasury Secretary being its faithful servant.