How Wall Street keeps its finger in the D.C. pie
In the litany of oxymorons, no more ironic one exists than Wall Street integrity’
Last issue I expressed concerns over the revolving door between Wall Street and Washington. Little did I know the problem was worse than I thought. Thanks to a recent New York Times article, I've come to realize that the hubris among society's power brokers is greater than one could imagine.
The article outlined how Wall Street's big firms compensate employees who choose to pursue public service. JPMorgan Chase, Goldman Sachs and Morgan Stanley all provide "accelerated payments" to senior executives if they leave for government employment.
The existence of these accelerated payments was a topic of discussion during the confirmation hearing of Treasury Secretary Jack Lew. Citigroup — his previous employer — wanted to make sure that he went to Washington in a positive frame of mind. To facilitate that outcome, it accelerated the vesting of $500,000 worth of stock that Mr. Lewis would have otherwise forfeited.
A cynic might view such preferential treatment as a pseudo-bribe. One might suppose that the purpose is to ensure that the soon-to-be public servant retains fond memories of his former employer. Such memories might serve the former employer when the former employee is faced with crafting policy or performing his oversight function.
But I wouldn't think of viewing this generous gesture in such a negative light. I think it's patriotic. Wall Street firms understand the great sacrifice that is being made to serve the country. Offering a small stipend helps ensure that these selfless individuals are not distracted by any financial worries as they embark on their quest to make our country a better place.
It's common knowledge that the people who run Wall Street are of the highest integrity. And for these budding public servants, having honed their skills in the complex world of high finance only enhances their ability to further the public good.
Just a moment … I'm laughing too hard to continue.
In the litany of oxymorons, no more ironic one exists than "Wall Street integrity."
You don't have to be Oliver Stone to detect the less-than-stellar pattern of conduct that emanates from the financial community. At least once a decade they manage to financially fleece society. Let's recap: we have the subprime mess, the Internet bubble, Enron, Long Term Capital and the savings and loan scandal. For good measure, throw in cameos by the likes of Bernie Madoff, Michael Milken and Ivan Boesky.
Defenders of Wall Street will emphatically state that the majority of people who work there are honest Americans, no different than in any other industry. Among the rank-and-file that’s true, except that I can't think of a single industry other than Wall Street that could accurately be described as a serial offender. Let's see: fashion, high tech, agriculture, automotive, furniture makers … Nope. Can't seem to think of one.
The roots of these generous transition deals can be found in a 2004 tax law designed to ban companies from offering accelerated payments, but with a few exceptions. You guessed it, like the do-not-call exemption for political campaigns — surprise! — government service was made an exception for accelerated payments.
Of course, the carve-out was made for ethical reasons. A "payment may be accelerated" to an executive who joins the government if an ethics official finds that "divestiture of the financial interest or termination of the financial arrangement is reasonably necessary" to comply with federal ethics rules.
What? Simply sacrificing the compensation doesn't solve any ethical problem?
If I were a cynic, I'd suspect alumni of Wall Street had some input in this legislation.
Tony Paradiso of Wilton is an author, professor, entrepreneur, radio and TV commentator. His website is tonyparadiso.com.