Today, a leading candidate to be Timothy Geithner's deputy at the Department of the Treasury withdrew his name from consideration. Another leading candidate, that is. We don't even know the identities of potential candidates for 18 of 20 major open Treasury positions. What's going on? The official word from the administration is that these potential nominees had "vetting problems." That obscures, I believe, what's really happening. A vetting problem implies some deep secret or shame, like having a second family in Nebraska. But the reality is that, in a lot of cases, the potential nominee decides that the requirements foisted upon them by the vetting process are just too much to bear. Remember, a lot of these nominees are upper middle class folks, and they've seen their retirement accounts dwindle. They have families, send their kids to private schools, and have some equity in their homes. They, like everyone else, have reason to worry about having a solid financial nest-egg. Anything that would rock the boat...anything that could hurt their families....would be something they'd think twice before agreeing to go through. The standards, especially for Treasury officials, are incredibly high -- maybe too high.
For example: nominees are required to give their vetters a receipt for every charitable deduction they've claimed in recent years.... This is tripping up people who've claimed lots of deductions. Nominees have been asked, in some cases, to divest themselves of large parts of their financial portfolios. Spouses have been asked to leave jobs and unwind partnerships.
Speaking of conflicts, for general purposes, it's hard to think of a stock or bond or fund that wouldn't present a conflict for a Treasury official; that's why Treasury is experiencing this problem acutely.
Another factor to consider: there are several different vetting teams... the administration's, the confirming Senate committee's, and the departments' own ethics teams. They have different (stricter than before) standards... and sometimes the standards conflict.
In short, it's the process -- which is much stricter -- that's tripping up a lot of these folks. They just don't want to give up control over their financial decisions, especially during an economic crisis.