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Corporatism Run Riot

From today’s Wall Street Journal editorial on Treasury Secretary nominee Jack Lew’s Wall Street background:

… 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.”

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.

… All of this matters in particular in a Dodd-Frank world when the biggest banks are public utilities. They have little choice but to do what a Treasury Secretary tells them to do. A too-big-to-fail bank must be pleased to know that in a little more than two years it made the sacrifice of government so much easier for America’s most powerful banking regulator.

It’s nothing short of the contractual codification of regulatory capture. Make the federal government essential to the operation of the big banks and you make it essential for the big banks to infiltrate the federal government at every turn. Lew and Citi — operating on the basis of rational, if perverse, incentives — deserve a lot less of the blame here than a government that makes this calculation reasonable. It’s an exercise in plutocracy — from an administration that likes to posture about “fat cat bankers.”

  1. Crow

    A credibly populist Republican insurgent ought to be able to build a coherent and big tent strategy against this kind of corruption in DC generally: campaign against the “new gilded age” of corporatism in the nation’s capital.

    It would have to be someone young enough not to have been in Congress during the TARP vote, and who could criticize the excesses of the Bush administration as well as Obama.

    To be credible, it would have to be someone who could speak out against the use of ‘mercenary’ firms in the Defense industry like Blackwater, or “contract nation” firms like Halliburton, as well as the revolving door between lobbying groups in Energy/Ag and big Wall Street banks who define “regulatory capture”.

    It would also have to be someone who could be ruthlessly critical of the social Democratic ruling class and, for example, Dodd-Frank’s provisions which only perpetuate the bailout mentality, or anti-union but populist enough to connect with disaffected union members.

    It would also have to be someone who could paint a picture in broad strokes of an opportunity society amenable to the concerns of the 50% of Americans who carry the national tax burden today.

  2. Doug Kimball

    How this is not a “bribe” is beyond me.  If you leave us to pursue a high level federal position, we will pay you…  Of course, the Democrats will cite Dick Cheney’s deal with Haliburton as much the same thing, however, Cheney’s golden handshake was predicated upon his retirement, not his entry into public service.  He gave them his expertise and they compensated him for it.  It would  not have mattered had he joind the Bush administration or retired to Florida.  Not so for Lew whose deal was specific and tied to his future as a top regulator/advocate.  The only thig missing is a clause that says, and if you aren’t nice to us post employment, we get our money back.  Of course, I’m sure a door was offered him should his federal gig end.  This is such obvious profiteering and it sickens me.  Worse yet, Republicans are painted as the party of the rich and greedy while Democrats game the system for their own fortunes.  Don’t start me on Al Gore…

  3. Derek Simmons
    It’s nothing short of the contractual codification of regulatory capture. 

    And you are nothing short of ‘spot on.’ Does it get any better than this?

  4. WI Con

    It would be kinda refreshing not to attain ‘new lows’ to be outraged or disgusted about.

     

     

  5. Aloha Johnny

    Imagine if  the head of Exxon Mobil’s environmental compliance division had clause rewarding him or her if they got a job with the Federal Government and then they became head of the EPA after a stint at the White House.  Or Northrup Grumman and Defense?  Or Blue Cross and the HHS?  or Monsanto and Agriculture? Ford and Transportation? Weyerhaeuser and the Forest Service?    The horror, the horror.  Somehow Citigroup and the Treasury is OK.