Politico Op-Ed: The Citigroup Clique
Why is Obama appointing so many former employees of one Wall St. bank?
Apr 29, 2014
Senator Elizabeth Warren
Today, I cast my vote on the Senate Banking Committee for Stanley Fischer to serve in the No. 2 position at the U.S. Federal Reserve. I asked Fischer tough questions - in person, at his nomination hearing, and in writing - and I have been impressed with the depth of his knowledge and experience.
But I cast my vote reluctantly because of my growing frustration over the concentration of people with ties to the megabank Citigroup in senior government positions.
In recent years, Wall Street institutions have exerted extraordinary influence in Washington's corridors of power, but Citi has risen above the others in exercising a tight grip over the Democratic Party's economic policymaking apparatus. Fischer, after all, is just the latest Citi alumnus to be tapped for a high-level government position. Starting with Robert Rubin - a former Citi CEO - three of the last four Treasury secretaries under Democratic presidents have had Citigroup affiliations before or after their Treasury service. (The fourth was offered, but declined, Citigroup's CEO position.) Directors of the National Economic Council and Office of Management and Budget, as well as our current U.S. trade representative, also have had strong ties to Citigroup.
No one doubts that there are smart, hard-working people at Citigroup and elsewhere in the financial industry. When I worked to set up the new Consumer Financial Protection Bureau, I interviewed, hired and worked alongside many people with private-sector experience. Private-sector experience can be valuable and should not disqualify someone from serving in the upper levels of government.
But there is danger anytime the key economic positions in our government fall under the control of a single tight-knit group. Old ideas can stay around long after they're useful, and new ideas don't get a fair hearing. We learned about the harms of groupthink in economic policymaking the hard way - first with the deregulation of the banking industry in the 1980s and 1990s, followed by the no-strings-attached bank bailouts in the aftermath of the 2008 financial crisis, and most recently with the anemic efforts to help homeowners who were systematically cheated by financial giants.
The power of a tight group of insiders can also echo through the government in subtle ways. No one likes to ignore telephone calls from former colleagues, and no one likes to advance policies that could hurt future employers. Relationships matter, and anyone who doubts that Wall Street's outsized influence in Washington has watered down our government's approach toward still-too big-to-fail banks has their eyes deliberately closed.
Small, tight-knit groups consolidate their power through hiring. Too many people get jobs based on who they know - not what they know. And in too many cases, the group in power is confident that not just insiders, but their insiders, are best for the key jobs. The Citigroup clique has produced some effective public servants, but it has crowded out too many others who might have brought a different perspective to their service. It is bad for the country when so many top officials and advisers just happen to be part of their small club and so many others happen to be unqualified or the "wrong fit."
There are experienced and innovative people throughout the private and public sectors who are more than qualified for top economic positions in government. It defies probability that so many of the very best people all happened to have had high paying jobs on Wall Street, let alone at Citigroup in particular. When former Citigroup officials land top positions in government and former senior government officials land top positions at Citigroup time and again, Americans have good reason to question whether the interests of the people - or the big banks - is paramount.
Conflict-of-interest rules can help, but the administration needs to get serious about appointing top officials with a broader mix of career backgrounds, relationships and worldviews. That means resisting pressure to pick people with big bank ties for so many top economic positions when plenty of other companies and industries play critical roles in the economy as well.
For too long, the titans of Wall Street succeeded in pushing government policies that made the megabanks rich beyond imagination, while leaving working families to struggle from payday to payday. Many Republicans openly acknowledge their ties to Wall Street, but Democrats have campaigned on an alternative approach focusing on expanding opportunities and leveling the playing field for the middle class. Democrats' slogans have won some elections, but once in power, Democratic administrations have too often stacked top positions in government with people close to Wall Street. Stanley Fischer is a good man and has earned my respect, but this is a real and growing problem. If the big banks can seize both parties, then the Democrats-and the country-lose the central economic argument that government should work for the people, not just for the rich and powerful.
Read the op-ed on the Politico website here.