James Saft

The revolving door between government and Wall Street is wrong, antithetical to both democracy and capitalism and ought to be stopped.

For the second time in two weeks a high-ranking recent U.S. public servant has traded a position of influence in the corridors of power for a massive paycheck working for an institution that owes its very existence to government largess.

This time it is Theo Lubke, who has transitioned smoothly from heading the New York Federal Reserve Bank’s derivative regulation effort to working for Goldman Sachs, where he can be expected to, well, help it do well out of regulation, current and future.

Last week it was Peter Orszag, who until July was the Obama administration’s Director of the Office of Management and Budget, joining Citigroup’s investment banking unit as a vice chairman. Several days before that Citi hired George W. Bush’s Commerce Secretary, Carlos Gutierrez, as vice chairman for its institutional clients group.

To be clear, none of the parties is doing anything illegal and there is no suggestion that any of them wittingly acted against the public interest while in government service.

Sometimes it’s what doesn’t happen that is most illuminating.

When Pay Czar Kenneth Feinberg first slashed executive compensation at U.S. firms that benefited most from a government bailout the cry was that this would hurt these weakened firms when they could least afford it, as the best and brightest would leave for better money elsewhere, where the free market still ruled.

Well, the door didn’t hit them on their way out, but mostly because they stayed rooted to their desk chairs.
Feinberg evaluated the compensation of 104 top executives at affected companies in 2009, reducing pay for most to levels far below financial industry norms and their own former earnings.

Yet here we are in 2010 and about 85 percent are still working for the same firms, still toiling for the kinds of wages that may well make them wish they’d gone into the law rather than finance. Remember all those articles in glossy magazines about how impossible it is to make it in New York City on $500,000 a year?