From Washington to Wall Street to Washington to Wall Street…
From New York Magazine:
When Peter Orszag left his post as White House budget director last summer, it made perfect sense, on several levels, that he ended up in an office next to Bob Rubin. Rubin, the Clinton-era Treasury secretary, had the year before resigned his position as senior counselor to Citigroup, a job for which he was paid $115 million, plus options, over nine years. Rubin’s tenure ended shortly after the bank’s near implosion and subsequent $45 billion government bailout. Rubin was temporarily bivouacked at the Council on Foreign Relations on the Upper East Side, which is something like a gentlemen’s club for the Davos crowd, one of the places, much like the West Wing of the White House, where finance and civic engagement meet and mix. Orszag was in preliminary talks with NYU about joining the faculty, but Rubin talked with Orszag about joining the Council on Foreign Relations instead. It was an influential perch from which the 42-year-old economist could write op-eds, give speeches, and travel the conference circuit. But the Council, for someone like Peter Orszag, was not a place to linger. It was a place to pass through on his way to somewhere else—and that somewhere else was Wall Street. For one of the most talented economists of his generation, the revolving door was about to spin.
The close alliance among Wall Street and the economics departments of the major universities and the West Wing of the White House is the military-industrial complex of our time. That it has an effect on our governance is beyond question. How pernicious and distorting these effects are, how cynical many of its participants might be, and what might be done to change the system are being fiercely debated in Washington.
In fact, to the layperson, the most surprising thing might be the degree to which people like Peter Orszag see the government and Wall Street as, essentially, parts of the same industry. Aside from some bad publicity, going from one to the other is not a leap at all, not any kind of sellout, but a natural progression for a member in good standing of the supermeritocracy like Peter Orszag. In this sense, the last two years have been confusing for these people, because you need public servants who understand capital markets, and who understands markets better than Wall Street? “If you think that someone’s past work on Wall Street disqualifies them from playing a role in something as complex as government, you’ll essentially have people who have no understanding how financial markets operate,” a former senior Goldman Sachs partner who spent time in Washington told me. “That’s a dangerous and scary thing.”
But another way of looking at this is that Wall Street has Washington over a barrel—and the values of one can’t help but be the values of the other. Even in Democratic administrations like the current one, once and future Wall Streeters are in position to pull the teeth out of regulations—for what they see as perfectly sensible, perfectly ordinary reasons. There’s no need to cue the scary music; it’s not a conspiracy. It’s just that having lived in the same worlds, read the same textbooks, imbibed the same maxims, been tutored by the same mentors, attended the same confabs in Aspen and Davos—and, of course, been paid with checks from the same bank accounts—they naturally think the same thoughts. To these people, the way things are done is, more or less, the way they have to be done. To change the system, you have to change the people; but the people are the only ones who know how the system works.