It used to be called “selling out,” “cashing in,” or “influence peddling.” Now it’s referred to politely as the “revolving door.” But, whatever it’s called, nothing is more corrosive to the American people’s trust in government than when former senior public officials turn their so-called public service into multi-million dollar riches unimaginable to almost all Americans.
Former senior government officials are paid millions of dollars when they leave their public positions regulating the financial industry for one reason: the richest corporations and wealthiest individuals on Wall Street are willing to pay enormous amounts of money for the knowledge, experience and connections those former public officials gained during their service in government. That is what is being bought and sold. That is why the American people look at Washington, DC and see an insider’s game that is rigged against them and put in service of the rich, powerful and well-connected.
These activities are most often done in the dark, quiet corners of Washington without public knowledge or scrutiny. But, the American people just witnessed the largest financial collapse since the Great Crash of 1929 and are still suffering from the worst economy since the Great Depression of the 1930s. They also witnessed the government ladle out trillions of dollars in bailouts to Wall Street with no strings while sticking Main Street with the bill. They saw government approve Wall Street paying themselves hundreds of billions of dollars in bonuses after causing historic economic wreckage across the country. They saw government ignore the high crime on Wall Street with no prosecutions and then heard the Attorney General of what is supposed to be the Department of Justice admit that there is a double standard in America: Wall Street gets a pass while Main Street gets the book thrown at it.
The American people also see Wall Street’s army of lawyers, lobbyists, consultants and other purchased supporters — many former government officials — besieging and influencing the regulatory, legislative, executive and judicial branches of government. The result Wall Street wants and has paid for is visible to all: financial reform is still unfinished and bogged down almost five years after the failure of Lehman Brothers, after trillions in bailouts, and trillions in costs to the American people.
While the latest examples of former SEC Chairman Mary Schapiro and former Department of Justice Criminal Division head Lanny Breuer follow the well-worn path of former Treasury Secretary Robert Rubin and legions of others, obviously not all former officials do this. Former FDIC Chairman Shelia Bair and former Treasury official Michael Barr are prime recent examples of former government officials putting their talents and experience to other worthy uses.
As important, not everything that happens, good or bad, is due to former public officials putting themselves out for service to the highest bidder. It is also certainly the case that not everything former government officials do is bad or against the public interest. Indeed, no doubt some of what they do is in the public interest, especially if they guide or facilitate compliance with the law. But, until there is full disclosure of all of their incredibly lucrative work, the suggestion that is all they do based on highly selective, incomplete publicly disclosed laudatory examples of such work has to be viewed skeptically.
It is also irrelevant for someone working for Promontory Financial Group to say they aren’t going to lobby because, as the founder and CEO says, they don’t lobby anyway. Also, for a former senior government official to agree to never appear before any federal regulatory agency on behalf of clients is largely meaningless. That’s not the only way the influence industry works and not how former senior government officials work once in the private sector. Providing information, perspective, context, names, views previously expressed, background, judgments, contacts and direct phone numbers, among many other things, to clients, directly or indirectly through colleagues and third parties, is actually much more valuable.
While none of that may be illegal or unethical and much of it may be benign or even coincide with the public interest at times, former senior public officials should be more mindful of both actual conflicts of interest as well as the appearance of a conflict of interest. Appearances count, and right now it appears to the American people that too many government officials are selling them out, which seems to explains how Wall Street and so many other powerful interests continue to get their way in Washington.
Read our related Blog Post on Lanny Breuer’s recent trip through the revolving door here