Gene Sperling and the institutionalization of the revolving door

By Felix Salmon
January 6, 2011
David Corn has a long piece in Mother Jones defending the choice. (He's not the only person to have this idea: Jacob Weisberg has a similar column.)

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It now seems all but certain that Gene Sperling is going to get Larry Summers’s (and his own) old job at the NEC. And David Corn has a long piece in Mother Jones defending the choice. (He’s not the only person to have this idea: Jacob Weisberg has a similar column.) I’ve said my piece about Sperling; there’s no point relitigating this. But it’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:

After the Clinton administration ended in 2001, Sperling, according to a former Clinton administration aide, spoke to several “wise men” about what he should do next. As a former NEC director, he was in great spot to cash in. And he received the same career advice from all of these counselors: go to Wall Street for the next eight years, make millions, and then return to public service (when there might be a Democratic president). He didn’t follow this guidance. Instead, Sperling devoted most of his time to addressing the challenge of global poverty…

A friend of Sperling adds, “After having been head of the NEC for Clinton, he could have immediately gone to Wall Street and made a lot of money. That’s what most people in his situation do. But he didn’t. A lot of us who know him scratched our heads about that.” …

At some point, according to a source familiar with the episode, Goldman Sachs approached Sperling for advice on globalization… On the advice of friends, he requested that he be paid what the investment firm might pay a top lawyer or dealmaker: $70,000 a month.

Corn never identifies the “friends” and “wise men” who sagely intoned, when asked for their opinion, that Sperling should go off and make millions of dollars. But it’s easy to guess that Rubin and Summers were among them — not least because they, too, did exactly the same thing upon leaving the Clinton administration.

If the revolving door is really as institutionalized as Corn says that it is, that’s a very serious problem — and all the more so for the fact that people like Weisberg try to paint it as a positively good thing:

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.

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.

As the testimony at the FCIC from the Goldman executives involved in the Abacus transaction shows, bankers tend to live in a highly distorted reality where the outrageous is accepted as a normal and ethical way of conducting business: insofar as working on Wall Street does give people a feel for how business is conducted, it can give people a very distorted impression indeed. Like, for instance, the impression that an annual income of $2.2 million is head-scratchingly low, rather than mind-blowingly high.

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Comments
6 comments so far

Rahm left public service for i-banking and in a few short years made 11+ million dollars in compensation. This then fueled his entry to Congress. Where he genuflected towards all things Wall St. even more so when running the White House for two years.

The real question is why there isn’t a single non-Wall St. beholden advisor within Obama’s inner circle. Doesn’t this man value debate and alternative points of view?

Posted by Sad_Oligarch | Report as abusive

Felix, you are really too kind to this type of technocrat. They’ve never made anything, had to meet a payroll, or make strategic decisions that the health of their business depended upon. Wall Street has nothing to do with business and real life.

As a gentle aside, your own point of view is remarkably limited by living and working in Manhattan, which also does not represent real life for the vast majority. You should get out more, and I don’t mean vacationing to the wilds of Wyoming or Alaska. Try doing some of the things that average Americans do, like taking a road trip, going to a minor league baseball game, or spending a day at the beach (no, not Sag Harbor). You are open-minded; it will do wonders for your perspective.

Posted by Curmudgeon | Report as abusive

Curmudgeon,
I love your suggestion and the ever-so polite way in which it is proffered.

However, I think it is important for smart insider-outsiders like Felix to perch themselves very near to the groups they write about. You have to swim in their pond to understand them, but not become part of their school or you lose your independence.

It’s safe to say that the DC and Wall Street schools have long since merged and won’t have much to do with the rest of the pond. Thanks to Obama, the Chicago fish have made the jump too, which we in the Second City are over the moon about, of course.

Felix, you are hereby invited to come to Chicago and observe our ecosystem. Not sure it’ll fulfill Curmudgeon’s requirement of the real America. But at least you could get a decent hot dog.

Posted by LadyGodiva | Report as abusive

Hey, learn something from the French … it is called “pantouflage” and they have been doing it for decades ;). But indeed interesting …

I am reading “All the Devils are Here” at the moment and Summers and Rubin are getting their share of the flak … makes sense that they turned to the Street after their public the tenure. It appears that they were the Street’s main meal ticket during the Clinton years.

Claus

Posted by clausvistesen | Report as abusive

clausvistesen, given the newspaper articles they wrote that book is one of the best ones on the crisis. McClean’s book on Enron was good too. Shame about their newspaper journalism….

Posted by Danny_Black | Report as abusive

Seriously, Felix, do not let go of this bone. It is simply astonishing to me that not only do these Wall Street creatures have no idea of what is true public service and what is a conflict of interest, but when the editor of a national magazine cannot let go that same sense of entitlement and impunity, it is truly distressing.

For them, the rest of the world simply doesn’t exist. Thanks for at least mentioning the “quaint” idea of standards and reasonable compensation for actual work.

Posted by Dollared | Report as abusive
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