In Obama’s Wall Street-Friendly Cabinet, a Clean Sweep for Finance

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This post originally appeared in the Columbia Journalism Review.

The New York Times, covering the hiring of former Treasury Secretary Tim Geithner by private equity giant Warburg Pincus, writes: “Mr. Geithner initially seemed unlikely to join Wall Street.”

Seemed unlikely to whom? Oh, yes, I recall this from January as Geithner announced he’d be leaving the Obama administration:

A regulator of Wall Street but not a creature of it, he will probably be the least likely former Treasury secretary to land there.

That mystifying sentence came from the Times as well, which also let Geithner spin his dismal record on housing. How naive can you get?

That story was part of a dispiriting series of parting kisses from the press to five of the principle figures in the Obama administration’s Wall Street-friendly response to the financial crisis: SEC enforcement chief Robert Khuzami, Justice Department criminal division head Lanny Breuer, SEC chief Mary Schapiro, National Economic Council chair Larry Summers and Geithner.

Here’s where they’ve ended up:

— Khuzami took a $5 million a year job at corporate law firm Kirkland & Ellis after a six-month wait. Kirkland & Ellis represents such Wall Street firms as Morgan Stanley, UBS, American Express and Bank of America, the latter of which got a wrist slap from Khuzami and the SEC for lying to investors — one so light that a federal judge raised a stink over it.

— Breuer, two months after leaving the Department of Justice, went through the revolving door to his old firm Covington & Burling and makes $4 million a year as the firm’s vice chair. Covington represents a who’s who of the Wall Street firms Breuer failed to prosecute. Do me a favor and watch this satirical video from Frontline:

— Schapiro joined the board of General Electric, a company she wrist-slapped for accounting fraud in 2009, failing to prosecute any individuals despite finding that “GE, acting primarily through senior corporate accountants, engaged in knowing or reckless fraudulent activities resulting in numerous materially false and misleading statements or omissions.” Worse, Schapiro also joined Promontory Financial Group, a sort of shadow regulator that lets former SEC types cash in to help Wall Street “navigate” regulatory structures. Her pay is undisclosed but surely well into the seven digits.

— Larry Summers is back at DE Shaw, though no word if he’s still making $5 million a year for working one day a week. He’s also advising Citigroup, Nasdaq, Lending Club and Silicon Valley biggie Andreesen Horowitz for untold pay.

— And now Geithner becomes president of private-equity firm Warburg Pincus for an undisclosed pay package that will be in the many, many millions of dollars a year. Hey, at least, it’s not Goldman.

Even that was predictable, though. Here’s something I wrote in February on Geithner and the rash of resignations from the Obama administration:

As the exit profiles stop, the real fun begins: Watching where these guys end up next. Presumably, the days of waltzing right into Citigroup, say, from high public office, for $15 million-a-year gigs with no responsibility, are over for now. More likely: a six-month break to disinterest the press followed by a sinecure at Cadwalader or a return to Covington or some such.

I’ll end with former FDIC chief Sheila Bair, talking to American Banker editor Neil Weinberg earlier this year:

“The capture, a lot of people say, is bipartisan. And when I say capture, I’m talking about cognitive capture. It’s not so much about corruption. It’s just listening too much to large financial institutions and the people who represent them and not enough to the people out on Main Street who want this fixed.”

Ryan Chittum covers the business press as deputy editor of Columbia Journalism Review’s The Audit. A former Wall Street Journal reporter, Chittum co-edits the annual Best Business Writing books. He lives in Aalborg, Denmark with his wife and twin daughters. Follow him on Twitter @RyanChittum.
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