--This guest post was written by Michael Collins, a POGO Blog reader from Scotland.--
It was in a New Hampshire speech in June 2007 that presidential candidate Barack Obama outlined his commitment to an ethical White House:
“When I am President, I will make it absolutely clear that working in an Obama Administration is not about serving your former employer, your future employer, or your bank account - it's about serving your country, and that's what comes first. When you walk into my administration, you will not be able to work on regulations or contracts directly related to your former employer for two years. And when you leave, you will not be able to lobby the Administration throughout the remainder of my term in office.”
Many opposition leaders saw this as a typically opportunistic and unrealistic promise, yet, upon taking office, one of President Obama's first moves was to sign an Executive Order on January 21, 2009, entitled 'Ethics Commitment by Executive Branch Personnel,' which required staff members to make a pledge that included:
“Revolving Door Ban All Appointees Entering Government. I will not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.”
Nevertheless, many members of Obama's team have relations with businesses before the government, potentially undermining Obama's Executive Order--particularly those people involved in the oft-criticized area of economic policy. Given the current circumstances, in which the government is battling to overcome the financial crisis, such glaring ethical inconsistencies within the corridors of power will raise eyebrows for those who do not fully trust the government's handling of the economy.
Much has been made of the role of Timothy Geithner, Secretary of the Treasury, and Larry Summers, Director of the National Economic Council and Assistant to the President for Economic Policy. But by focusing on these well-known figures, one may be overlooking the larger picture regarding the inextricable link between President Obama's economic team and Wall Street. One example of this link is the man confirmed as Deputy Treasury Secretary on May 18, Neal S. Wolin. On the face of it, Mr. Wolin looks like a logical appointment, having previously occupied the post of General Counsel at the Treasury from 1999-2001. However, the intervening years prove more intriguing. Before joining the Obama team as Deputy Counsel to the President for Economic Policy in February, Wolin was President and Chief Operating Officer for Property and Casualty Operations of the Hartford Financial Services Group. It is interesting to note that just two weeks after his White House nomination, Treasury announced that it would extend TARP to cover life insurance companies. One of the first insurers to apply for TARP funds was none other than the Hartford Financial Services Group, which in January had its application to become a savings and loan holding companies approved by bank regulators, and in June received $3.4 billion in funds. Wolin's appointment was confirmed by the Senate in May, but his new role raises concerns about his compliance with the aforementioned two-year order made by President Obama, given that in his post, Mr. Wolin is likely to play a key role with Secretary Geithner regarding the distribution of TARP funds.
Mr. Wolin is not the only member of the Obama economic team whose work history raises questions. On March 28, the president announced his intent to nominate George Madison as General Counsel at the Treasury Department. While Madison's appointment, pending Senate confirmation, was applauded by many, one look at his employment record suggests that Madison may not be the right person for the job after all if he's limited in his work. Mr. Madison is a former Executive Vice President and General Counsel at financial services firm and retirement fund TIAA-CREF. The two-year recusal may again have been disregarded by the president when making this selection, given that at the beginning of April, it became apparent that TIAA-CREF would have a direct financial relationship with the Treasury Department due to the company's announcement that it would participate in the TALF program (the Term Asset-Backed Securities Loan Facility), a program to provide low interest rate loans to investors to finance the purchase of asset-backed securities.
Here are some more Treasury appointments which will dismay champions of government ethics:
- Kim N. Wallace, Assistant Secretary of Treasury, Legislative Affairs. Mr. Wallace was a managing director and chief political strategist at the now-defunct Lehman Brothers until 2008, before moving on to become a managing director at Barclays Capital.
- Herbert M. Allison, Assistant Secretary for Financial Stability. President and Chief Executive Officer of Fannie Mae from September 2008 until his appointment. Previously worked as Chairman, President and Chief Executive Officer of TIAA-CREF from 2002 until his retirement in 2008.
- Michael Froman, Deputy Assistant to the President and Deputy National Security Advisor for International Economic Affairs. Financial disclosure forms show he received more than $7.4 million dollars from Citigroup, where he had worked, from January 2008 until he joined the Administration.
While it is understandable that the White House should want the cream of the financial crop to work to solve this generation's biggest financial crisis, the administration's cozy ties to Wall Street are likely to restrict its activities and anger voters whose confidence in the government's economic policy has waned in the light of auto industry bailouts and bonus scandals. The sheer number of Treasury staff who until recently received a paycheck from the same financial institutions they are now expected to monitor and distribute bailout money to reduces the public's faith in the Obama Executive Order, which pledged that the government wouldn't be directed by personal or corporate interests. All of this is very worrying for a Treasury which, during the AIG bonus scandal, was accused of dishonesty. Moreover, the appointments leave President Obama open to the charge that he has left the wolf to guard the hen house.
In a recent article for The Atlantic, former IMF Chief Economist Simon Johnson spoke of the need for the White House to take on Wall Street to salvage America's economic future. Looking at the current make-up of Obama's economic team, it would seem that Wall Street has already won that bout--leaving the taxpayer to pick up the pieces. After all the campaign promises, it appears that “Plus ça change…” is a more apt slogan for this White House.
-- Michael Collins