For Services Rendered? Wall Street’s Big Paydays For Trade Negotiators
If you take the king’s shilling, says the old saying, then you do the king’s bidding. So what happens when you take 100 million of them?
Here’s one possible answer: You negotiate trade deals like NAFTA and the Trans-Pacific Partnership (TPP), the new pact that the administration is currently trying to ram through Congress. A recent report confirms that some of the officials crafting this latest agreement were paid handsomely by the Wall Street institutions that stand to benefit from it.
As the United States trade representative, Michael Froman has primary responsibility for the TPP. A new investigation from Republic Report reveals that Froman received more than $4 million in payouts from his then-employer Citigroup as he was leaving to join the Obama administration.
Citigroup, as an ever-decreasing number of Americans seems to recall, is the mega-institution created through the largesse of the Clinton administration, working with Republicans on the Hill. It later required a massive bailout, after its corrupt mismanagement inflicted widespread damage on the economy.
Is it any surprise to learn that Citigroup, like many other Wall Street institutions, pays large bonuses to encourage its executives to take high-level government positions? Without friends in high places, after all, Citigroup would have never come into being – and would never have continued to exist after the 2008 crisis.
Many observers agree that Citigroup should have been broken up after 2008, which only goes to show: it’s not what you know, it’s who you know.
The New York Times reports that Froman also had a half-million dollars in a Cayman Island account managed by Citigroup, which used the infamous Ugland House tax dodge. This modest building houses more than 18,000 legal entities. Republican Sen. Charles Grassley (R-Iowa) called Ugland House “the biggest tax scam in the world.”
Froman also reportedly invested in funds that took advantage of the “carried interest” loophole. It’s a political embarrassment for an administration appointee to profit from tax deals that the White House opposes. Perhaps that’s why Citigroup also paid him a multimillion-dollar bonus to cash out of these funds.
Consider the sequence of events. First, the taxpayers created Citigroup, then it shafted the taxpayers. And meanwhile, its CEO has been trying to convince Americans that their government can’t afford to pay Social Security benefits or pay for other important programs, through his membership in the Wall Street front group known as “Fix the Debt.”
We’re going to need a new word for “chutzpah.”
How did the United States Senate feel about nominating a former Citigroup executive to negotiate trade deals that could benefit the financial industry, and that have in the past? Froman was confirmed by a vote of 93 to 4.
Who says Republicans and Democrats can’t agree on anything?
Republic Report also notes that “Stefan Selig, a Bank of America investment banker nominated to become the Under Secretary for International Trade at the Department of Commerce, received more than $9 million in bonus pay as he was nominated to join the administration in November.”
Bank of America was arguably the worst offender – a title for which there was extremely stiff competition – in the foreclosure fraud scandal. America’s megabanks robbed Americans to the tune of hundreds of billions of dollars or more.
What does it mean when a banker accepts a multimillion-dollar payout just before he takes a government job – or, as they used to say in a more innocent time, “enters public service”? One pictures a police detective sitting face-to-face with a local crime boss in some small-town restaurant. An envelope is slipped across the table. And when it’s picked up, an understanding is reached.
There are those who will argue that this is an unfair analogy. After all, criminal and the detective are engaged in an illegal exchange. A bonus for “government service” is perfectly legal. But don’t we know what the money’s for? These treaties can forcefully promote Wall Street’s interests by ensuring that private finance flows easily across international borders.
What’s more, the parties in question are frequently the people who decide what’s legal and what isn’t. That’s certainly true of the Trans Pacific Partnership, which would create an “investor-state dispute resolution system” allowing corporations to bring sovereign governments before business-friendly “courts” when they feel they’ve been wronged by that government’s actions.
Under these circumstances it’s hard to see these payouts as anything other than a transaction between two equally cynical parties, under the indifferent eye of elected officials from both parties.
But who are these people? How do they justify their own actions? Theirs is an insular world, known only to a privileged few. In their world, none of this is particularly immoral or unethical. It’s just the way things are done. (We’ve sometimes described it as the “147 people” problem.)
A kind of bonding phenomenon may also take place when there is a sharing of secrets. The public may or may not ever know about the payments, but the parties in question do. The “envelope” binds them in a silent covenant.
Sociologist Erving Goffman helped develop the concept of “total institutions,” places like prisons or sanitariums where individuals are grouped together for every aspect of their lives. Their work, their leisure, and their activities of daily living are all guided by a central authority from whom they have no secrets.
Wall Street may be the most privileged “total institution” on the planet. But it is nevertheless, in Goffman’s words, “a forcing house for changing persons … a natural experiment on what can be done to the self.” Success on the Street depends on conformity to strict and unusually aggressive social rules – about how to treat competitors, colleagues, and your own clients. (“I ripped his face off!” Morgan Stanley’s traders reportedly used to boast after selling their clients inferior but lucrative financial products.)
That’s the mentality that these individuals bring to public service. That – and some very big payouts.
There’s a lot of money in being a former trade representative, too. Mickey Kantor, who had the job during the Clinton administration, is now a partner at the Mayer Brown law firm and a senior advisor to Morgan Stanley Dean Witter Discover & Co. His list of board positions and clients reads like a Who’s Who of firms (pharmaceutical and otherwise) that have benefited from these international trade deals.
Each of these people probably considers himself an ethical human being. But the perception of ethics becomes warped when one is absorbed into the “total institution” of the banking-government complex, that world of marble vaults and revolving doors. What is spoken, what is left silent, and what is the reflection of something Disraeli called a “conspiracy of shared values”? We may never know for sure. Here’s what we do know: Stefan Selig’s nomination has yet to be acted upon.
The Wall Street Journal fretted that Selig’s $165,000 government salary, should he be confirmed, is “hardly a princely sum by Wall Street standards.” It should know better. If history is any guide, Selig will be handsomely rewarded on both ends of his government service.
The Senate could send a strong message to Wall Street, Washington and the nation by rejecting his nomination – and telling the world that U.S. trade policy is no longer for sale.
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