It's no wonder why Amtrak can charge so much for its express train tickets between Washington and New York: demand for the trip must be growing as the route from Wall Street to government continues to gain popularity. As President Obama struggles to fill two big vacancies in his staff, he's said to be leaning towards candidates who have worked for big Wall Street banks. Gene Sperling, a former Goldman Sachs part-timer, is reported to be at the top of the list to replace Larry Summers as National Economic Council director. William M. Daley, JP Morgan's Midwest chairman, is said to be a major contender to replace Rahm Emanuel as Obama's chief of staff.
This might seem surprising, as the President portrays himself as someone who wants to buck the old political order, and the Washington-Wall Street connection is hardly a novel trend. Unfortunately, he might be finding that ignoring strong candidates with Wall Street ties is extremely difficult. Why is a good non-Wall Streeter so hard to find?
Lots of Very Smart, Talented People End Up on Wall Street
First, there's the obvious: many people on Wall Street are actually very smart, talented individuals. That's why they manage to nab jobs that provide seven- and eight-figure paychecks. They have degrees from the best schools in subjects like economics and math, but also in subjects like philosophy and political science. Many have graduate degrees in law or business.
Often, their skills extend far beyond just math. In order to succeed on Wall Street, you not only need above average quantitative skills, but you also must have an insane work ethic, a lighting-fast mind, problem-solving prowess, and phenomenal interpersonal skills. In fact, a knack for forming strong relationships with clients is arguably far more important than knowing math once a banker reaches a certain level.
A lot of these same characteristics are very attractive in Washington. Indeed, that's why so many from Washington, like former White House budget director Peter Orszag, also make the easy transition to Wall Street. To avoid anyone with Wall Street experience would be to push aside some of the best and brightest minds in the world.
Real World Experience Actually Matters
But that's only part of it. Certainly there are other very smart, talented people out there who could fill government positions. There are career regulators and bureaucrats. There are academics. Why not choose from those pools? They lack real world business experience, which is often very desirable from political and practical perspectives. There's a difference between having an adviser responding, "Based on my knowledge of economics, I think that business will. . ." and "Based on my 20 years experience in the private sector, I know that business will. . . "
Still, why Wall Street? Surely there are other titans of industry to choose from. Why not a tech CEO? How about someone who runs a pharmaceutical firm? What about a manufacturing company head?
It's a little harder to explain why other industries don't have as substantial a showing in Washington. But here's a theory, based on three kinds of Wall Street types. Let's go through those first:
The Retired Career Banker Seeking Power or an Opportunity to Give Back
Think former Treasury Secretaries Henry Paulson and Robert Rubin, and former New Jersey Senator and Governor Jon Corzine. All three of these individuals made more money on Wall Street than they could reasonably spend in their lifetime. As a result, they didn't need to keep making more money, so they sought something else. That new desired end depends on the person. Once some people are done with money, they seek greater power or influence, so they move to politics. Others genuinely feel that the world has been good to them, so they want to give back and enter public service.
Next, there's the type that goes back and forth every few years from Washington to Wall Street. Perhaps William Daley is of this sort, even though most of his finance experience was in Chicago, instead of New York. He worked in banking and law for a while. Then he went to Washington to serve as Bill Clinton's Commerce Secretary. Before long, he ended up back at a bank. Now he may be back to Washington, working as Obama's chief of staff. This type has political aspirations, but is practical enough to know that money matters. So years in banking are sprinkled in with public service to pay the bills and build connections.
The True Finance-phile
Finally, there's the Wall Streeter who truly loves finance and little else. They have no desire to ever go into politics; in fact, they might even find it annoying or inane. They enjoy the day-to-day of trading stocks or doing deals, and that's all they need for a fulfilling life -- that and money, of course.
This third type tends to characterize most people who excel in some other industry. There are exceptions to every rule, but these business leaders are often more passionate about their industries than politics. They are also generally unlike the other two types of bankers. They can't exercise an underlying passion for politics like the Acela-Taker even if they possess one, because it isn't as easy to flip back and forth from Washington to some industry where a consistent, cumulative path of experience really matters. Most have probably accumulated more modest fortunes, so they may keep working until a ripe retirement age. Those who have made gobs of money early may not have a hunger for power and influence that some Wall Streeters exhibit. Others choose to give back in less dramatic ways, like through charity or local politics.
As mentioned, there are exceptions to every rule, but it certainly makes sense that there's such a well-trodden path between Washington and Wall Street. It isn't simply explained by conspiracy. The same sorts of personalities are attracted to and thrive in both roles. And it often isn't reasonable for a President to ignore past or present bankers if seeking the best person for a job. That isn't to say we should be happy about or comfortable with the revolving door -- just that it's easy to understand how it came to be, and why it will probably never slow.
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