The White House and Wall Street

Really interesting – if fairly long – article in New York Magazine about the relationship between the White House (no matter which party controls it) and Wall Street.  They use Peter Orszag’s journey from the White House to Capitol Hill, back to the White House, and now to Wall Street as the stepping off point for the discussion.

Among many other things, Orszag talks about why he left the White House when he did:

Looking back, Orszag now says he didn’t even want the job. “I didn’t want to do it,” he told me. “Having worked in a White House before, I knew how the infighting can become all-­consuming, and I didn’t want to fall into that trap again. Many of my mentors warned me that despite the ‘no drama’ Obama campaign, once in office this White House would inevitably be like others—and possibly worse. And unfortunately that’s exactly what happened.”

Orszag took the OMB job after both Emanuel and Obama personally lobbied him to accept. (When a president asks you to serve, you do it, Orszag told me.)

He also talked about why he chose Wall Street over an academic life (money probably had something to do with it, too; you’ll have to read the article to see what the estimates are of his new salary):

Orszag made clear he understood that by joining Citi, he was stepping into a white-hot center of populist animus. “Look, I faced a fundamental choice,” he said. “I could have been totally comfortable doing something easy, going back to academe or a think tank, giving speeches, having a cushy consulting thing—ironically, which would have played off my White House experience much more than what I chose to do. Or I could have done something new, which would be harder.”

But, perhaps the most interesting discussion in the article is not about Orszag but about the complexity of the system which gives the relationship between the White House and Wall Street a feeling of inevitability.

In fact, to the layperson, the most surprising thing might be the degree to which people like Peter Orszag see the government and Wall Street as, essentially, parts of the same industry. Aside from some bad publicity, going from one to the other is not a leap at all, not any kind of sellout, but a natural progression for a member in good standing of the super­meritocracy like Peter Orszag. In this sense, the last two years have been confusing for these people, because you need public servants who understand capital markets, and who understands markets better than Wall Street? “If you think that someone’s past work on Wall Street disqualifies them from playing a role in something as complex as government, you’ll essentially have people who have no understanding how financial markets operate,” a former senior Goldman Sachs partner who spent time in Washington told me. “That’s a dangerous and scary thing.”

But another way of looking at this is that Wall Street has Washington over a barrel—and the values of one can’t help but be the values of the other. Even in Democratic administrations like the current one, once and future Wall Streeters are in position to pull the teeth out of regulations—for what they see as perfectly sensible, perfectly ordinary reasons. There’s no need to cue the scary music; it’s not a conspiracy. It’s just that having lived in the same worlds, read the same textbooks, imbibed the same maxims, been tutored by the same mentors, attended the same confabs in Aspen and Davos—and, of course, been paid with checks from the same bank accounts—they naturally think the same thoughts. To these people, the way things are done is, more or less, the way they have to be done. To change the system, you have to change the people; but the people are the only ones who know how the system works.


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