Understanding the Wall St-Washington Relationship

New director of the National Economic Council Gene Sperling becomes a case study for those reopening the "revolving door" debate

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President Obama has tapped Gene Sperling to replace Larry Summers as director of the National Economic Council, The New York Times' Michael D. Shear reports, and it's a pick that most find unsurprising but some find unsettling. Sperling is certainly qualified for the job, having held the job under President Clinton and currently serving as a counselor to the Treasury Department. But there are a few other items on his resume with which some take issue: working for Goldman Sachs, pulling in $70,000 a month.

Sperling's work for Goldman involved organizing a charity to give business training for 10,000 women in developing nations--not exactly the devious subprime plotting the firm's name conjures nowadays. And he was paid a lot less than most former White House officials who head to New York. So many are defending Sperling's Wall Street experience as unavoidable, even helpful for understanding the economy. But does Sperling's career epitomize the unholy revolving door between Washington and Wall Street? Some say yes.

  • Goldman Wanted Something in Return, The Washington Post's Ezra Klein writes. Sperling's work for Goldman was mostly charitable, "but in some ways, that makes the transaction more peculiar: You tend not to get paid that much for offering guidance to charitable endeavors. It is very hard to believe that Goldman Sachs wasn't attempting to buy influence with a politically savvy economist who had good relations--and would later go to work for--the incoming Democratic administration."
  • He's the Best Progressives Can Hope for, Mother Jones's David Corn writes. Under Clinton, Sperling worked on many liberal causes, including maintaining child labor laws abroad, the earned income tax credit, Head Start, debt relief, and strengthening Social Security. "Sperling is hardly a Wall Street insider. ... After the Clinton administration ended in 2001, Sperling... spoke to several 'wise men' about what he should do next." They all told him to cash in while he waited out the Bush administration. "Instead, Sperling devoted most of his time to addressing the challenge of global poverty, particularly promoting the need for basic education in developing nations," though, "Sperling didn't don a sack cloth and follow the example of Mother Teresa." When Goldman asked for help on the charity, Sperling just "requested that he be paid what the investment firm might pay a top lawyer or dealmaker." "Fairly or not, he's become associated with Wall Street but he never went Wall Street. He's been more interested in making policy than in making mega-money." Sure, there are more liberal candidates, but "with Summers as the benchmark, a Sperling appointment, for progressives, would be a step in a better direction."
  • Enough with the 'Main Street Puritanism' Slate's Jacob Weisberg argues. That way of thinking "epitomizes the ethical confusion that has grown up around public service in the wake of the financial crisis." Selling influence to lobbyists is wrong, and letting future employment prospects shade your government service is wrong. But Sperling didn't do those things. "Now when your big cause is an issue like women's economic empowerment, and Goldman Sachs comes calling with $100 million to spend on it, with a nice salary for you into the bargain, you can say: A) No way will I help you spend your money, you dirty capitalist bastards; B) I will help you, but only if you don't overpay me like one of your own; or C) sounds good to me, Lloyd. There are crazed purists who might choose option A, saints who might choose B, but please cast your stones after you tell me that your answer would not have been, like Sperling's, C."
  • We Need to Keep Perspective, Weisberg continues. "I suppose that in a perfect world, officials would be members of a flagellant order, coming to Washington from their monastic cells and reaffirming their vows of poverty afterward. But that wouldn't work, either, because economic policymakers would have no feel for markets, business, or life in the real world. We should demand ethical behavior, not public servants untainted by money or any effort to make it."
  • No You Need Perspective, Feliz Salmon writes at Reuters to those defending hte Sperling pick. [I]t's fascinating to see how Corn reports on the institutionalization of the revolving door between Wall Street and Washington, to the point where taking $887,727 from Goldman Sachs is positively self-abnegatory." Salmon writes. The revolving door, contra Weisberg, is not a good thing.
It's worth pushing back against this notion that earning a seven-figure sum on Wall Street automatically gives you a feel for markets and business--or even that in order to have a feel for markets and business, you have to earn a seven-figure sum on Wall Street. Neither is true. Advising Goldman Sachs on setting up a charitable foundation might teach people a lot about how to navigate the internal politics of Goldman Sachs, but that’s about it. And while there are certainly many highly-remunerated bankers who do know a lot about markets and business, there are equally many who don’t. Wall Street jobs tend to be hyper-specialized: a detailed knowledge of, say, the custody trail in reverse repo transactions is highly unlikely to give you any insight into the state of the US economy.
  • But He's Known as a Man of the People! The New Republic's Noam Scheiber writes.
If you've spent much time talking to Treasury officials over the past two years, you've probably heard them joke that Gene Sperling, a counselor to Secretary Tim Geithner, is the department's in-house populist. What makes this funny (insofar as wonk humor can be funny) is that Sperling isn’t exactly your classic pitch-fork wielder. He was director of Bill Clinton's National Economic Council (NEC) in the late '90s, a period when the White House got pretty good marks for its understanding of business and the broader economy. But as Sperling often speaks up for the little guy in internal deliberations--he was one of the administration wonks most concerned about executive pay, and he argued passionately for saving Chrysler--there's certainly enough truth to the label to make it stick.
  • Who Else Could Obama Pick? Mother Jones's Kevin Drum asks. "I doubt we're likely to get anyone to replace Summers with less connection to Wall Street than Sperling. The worlds of Wall Street and the West Wing are so intertwined these days that pretty much everyone with any serious experience at all with economic policymaking is hopelessly marinated in high finance. Given the immense pools of money at stake, the finance industry is simply the highest bidder by far for their services. Like it or not, I don't think the revolving door will ever come close to shutting down until Wall Street becomes a lot less profitable than it is now."
  • This Limits Information at Policymakers' Fingertips  "The problem with this trend isn't that lawmakers are being bribed under the table, but rather that connections and contacts create closed communities of thought," Paul Blumenthal writes at Sunlight Foundation. "Lawmakers talk to lobbyists because lobbyists have information. That information is invariably skewed to fit their client's interest, even if it isn't factually inaccurate. This creates a situation where lawmakers are influenced by this professionalized community, disregarding other streams of information."
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