Peter Orszag: The Shoe That Didn't Drop

I made a mistake several days ago when lamenting Peter Orszag's decision to take a senior job with Citibank, reportedly for several million dollars per year, so soon after leaving a senior Obama Administration post. Over the past two-plus years, Obama (and GW Bush) policies played a crucial role in saving Citi -- and in not holding its executives (or other senior financial-world figures) accountable for polices that brought on the world financial crisis or reining in top-end pay as profitability has returned. Now a senior member of the Obama team -- Orszag was budget director -- was going straight to one of those top-end jobs, even as his former colleagues in the administration have their hands full fighting the social, economic, and political effects of the crisis on "ordinary" Americans who can't find jobs or are losing their homes.

My mistake was not in pointing out this problem, nor in identifying it as the kind of thing that is notable precisely because no one even stops to remark on it any more. It was in the sentence that said, "Objectively this is both damaging and shocking." That's the difference between one-draft web postings and many-times-edited print articles. What I meant was, "Politically this is damaging and should be shocking." Because the real point is that official Washington should notice this instance of structural corruption -- but won't.

If you're wondering just how taken for granted such arrangements are in today's Washington/ Versailles, here's a data point. The Washington Post, still aspiring to be official journal of politics, has not published a single story about Orszag's new job. Here is what its search function shows just now:

"Please try another search" indeed. How about "things that are depressing"? To their credit, the Post's Ezra Klein and Ed O'Keefe each had one-line links on their sites, pointing to (respectively) the NYT "Dealbook" and Reuters stories on Orszag. (And those links come up if you search the Post's site for "Orszag Citigroup." Otherwise there appears to have been no "news" coverage by the Post. Klein also had this follow-up link to an item called "Our Peter Orszag Problem" on the Economist's site.) The gap between the things the Post considers "scandals," and a development like this, so taken for granted as not to merit mention, says too much about our politics.

Or, consider a Google News chart of coverage of the story. There's a little flurry when the deal was announced (a "real" story would generate vastly more coverage), then... it goes away. Pathetically, the "C" on that chart is my own original item on the story -- with nothing in the mainstream press since then. The chart doesn't show mainstream press results after Dec 11, because there don't seem to be any.


Here's a reader reaction:

>>I think the situation is even worse than you suggest. Many of us who supported the idea of a bailout for the reason you suggest -- the likely negative consequences of not bailing them out were terrifying -- urged that the bailout be conditioned on major changes in the size and operations of the financial sector behemoths who'd become too big to fail. The Volcker rule was one example. Serious changes in compensation practices. Breaking up of these banks was possible and desirable. Strict regulation of derivatives. And so on.

The final outcome, however, has been pathetically inadequate, if the goal was to prevent another crisis like 2008. And Orszag signing up with Citi for several million $ per year puts that policy failure in even worse light. What chance is there that the government will get tough on the big banks when key economic policy makers move back and forth between government and those banks?

Two more reader reactions after the jump. Eventually I'll publish a few defenses of Orszag that have come in. Really, I don't have anything against him personally, though I think this was a big misjudgment. What I can't get away from is the two twinned aspects of taking this move for granted. From the "elite" level -- the editors who decide not to put it in the paper -- taking it for granted means: Sure, that's reasonable, what else would you expect? And from everyone else's level, taking it for granted means: Sure, that's how the world works. Them that has, gets. What else would you expect?

Another reader writes:

>>I agree with you totally about the structural corruption inherent in Orzag's move.  But it is a localized corruption:  the corruption of Wall Street and its corruption of politics.  Say Orzag had taken a several million dollar a year job for "strategic advising" with Kraft or Google.  We might smirk a bit but mostly shrug our shoulders and wonder what those companies would think they're getting.  And that's the key:  those companies would be highly unlikely to hire someone like Orzag, with no corporate or manufacturing experience, at that level.  Only Wall Street.  And therein lies the true corruption.<<

And another:

>>Mr. Orszag is one of the brighter lights in public service, but this move just reinforces all of the cynicism that many Americans feel. While the Obama administration certainly talks about the disenfranchised, Orszag's move to Citi looks like the same old same old. Republican or Democrat, liberal or conservative, the important thing is to become one of the members of the club, and trade on influence and access. It's a revolting revolving door. I'm sure Orszag was committed to public policy, but this move makes it look like the really important thing is making big bucks to be able to live the Hamptons life. Sarah Palin, another money grabber, gets some vindication when people like Orszag make these choices. Her rhetoric about the "elites" (see Administration to New York Times to Citi), while silly and clumsy, starts to have some resonance. I can't get my head around it, but as a basically moderate Republican small businessman, I'm starting to really think Wall Street and D.C. are playing us for suckers.<<

OK, rather than saving it, here's the most impassioned defense of Orszag, from a current law student. For the record, I don't agree with this, but I'll leave it to readers to judge for themselves.

>>My comment is probably something you are aware of, so I don't mean to sound condescending, but any acknowledgment of it was absent your recent post regarding Peter Orszag.

It is neither structural nor personal corruption that leads government officials to leave the government and fall into lucrative private sector jobs. This is just how it works, and there is no corruption involved at all: Orszag is a brilliant man, and his skills are in high demand, as is his reputation. It is not corruption for a man to be compensated according to the prestige and cachet his pedigree deserves.

As a law student, I tend to think of this more in terms of the legal world and talented lawyers and the like but just consider:

1: the obvious. Michael Luttig left his prestigious, coveted, highly sought-after post as a federal judge to become the general counsel for Boeing. In so doing, he went from earning around $200,000 per year to well over a million dollars a year. One is hard pressed to say that this is corrupt. If someone can make five times more money, especially in our uncertain economic climate, how can you fault them?

2: Chief Justice Roberts went from various relatively low-earning positions in the Reagan and Bush executive branch to a partnership at Hogan and Hartson, earning about a million dollars a year. Is this corruption? His skills were in high demand, and a world-class firm wanted him. Was he to ignore such offers because it somehow seems corrupt?

I could go on but I think the point is made: it is a false and unfair 'populist' argument to assert that anyone who leaves a government post for a lucrative private job is somehow corrupt. I mean, that is the basic premise of your article but I'm sure if you thought about it you would realize how simplistic and wrongly idealistic it turns out to be. If your point was timing, it is simply a ridiculous and immature point to make: if its wrong now, it's always wrong. If not, then it is never wrong. Otherwise you merely patronize peoples' sense of outrage and its correlation to timing.

If your point was that it is wrong for government officials in general to benefit from their government affiliation in the private sector after leaving, you must necessarily expand your scope to such an extent that your argument becomes ridiculous: no more can retired military officers serve on boards; no more can former DoJ lawyers serve as law firm partners; no more can former government economists serve as bank executives; and even former federal judicial clerks can no longer accept signing bonuses from law firms. I apologize for the legal orientation of these objections, but just think about it. Government for better or worse is the true seat of American power, and the fact that is does not compensate as such necessarily means that that compensation must come from elsewhere. There is no evidence that the private riches a former government official can earn are directly related to any influence or otherwise corrupt sway a former federal employee may have over the government.

The more sensible interpretation is that former federal officials have an impressive and rare credential on their resumes, and therefore must be compensated accordingly. Why else do former presidents make more off of speaking engagements than do the average person? It is a simple answer to a banal question, and I think your article really deserved more thought before it was published.<<