Wednesday, April 07, 2010
During the recent congressional debates on the reform of health care and the student loan program, Jane Hamsher of firedoglake exposed the revolving door that high level Democratic advisors go through as they travel back and forth between the government and the private sector. She emphasized two case studies: Rahm Emanuel and Jamie Gorelick. Gorelick was a Deputy Attorney General during the Clinton administration. Emanuel, as we all know, is the current White House Chief of Staff.
Gorelick left the Clinton White House in 1997 for an appointment to Fannie Mae, a government sponsored enterprise that serves as the leading market maker in the secondary mortgage market, serving under Franklin Raines as Vice Chair. She received over 26 million dollars in bonuses despite serious accounting irregularities during this period. Upon leaving in 2003, she became a lobbyist. According to Hamsher:
Not surprisingly, Gorelick recently profited from her Democratic Party pedigree by lobbying against a student loan program reform that shifts billions of dollars from banking fees to the provision of more loans for students. Another former Clinton administration figure, John Podesta, did so as well. Amazingly, this one actually got through Congress as part of the reconciliation process used to pass the health care reform bill, one of the rare instances in which the Obama administration carried out a progressive policy against the wishes of transnational financial institutions.
Gorelick has benefitted tremendously as lobbying money has flowed to the Democratic side of the aisle. In addition to SLM Corp (Sallie Mae), she also represents the scandal-plagued investment bank Lazard Freres. She’s also lobbied for JP Morgan, BP America, Lucent, the Medicines Company and Google in the past.
Rahm Emanuel worked in the Clinton White House as well, serving as a senior advisor until 1998. He then took a position as an investment banker, earning 16.2 million dollars in bonuses between 1998 and 2002. In 2000 and 2001, he served on the board on Freddie Mac, another government sponsored enterprise that serves a market maker for mortgages, earning $320,000 in bonuses. Financial and accounting irregularities at Freddie Mac, and Gorelick's old employer, Fannie Mae, subsequently played a prominent role in the meltdown in global financial markets in 2007 and 2008, necessitating an enormous bailout, a bailout that is ongoing and without limitation.
As noted by Hamsher, the Chicago Tribune reported that Freddie Mac inflated bonuses to board members like Emanuel by using dubious accounting practices to misrepresent earnings:
Hamsher responded by submitting, along with Grover Norquist, a demand that Attorney General Eric Holder investigate Emanuel's activities as a Freddie Mac board member. Pro-Obama liberals were, quite predictably, more outraged at Hamsher for submitting the complaint along with Norquist than they were about the possibility that Emanuel may have personally benefitted from fraud at Freddie Mac. Jane, G-d bless her, she still believes in the system, and probably Santa and the Easter Bunny, too.
Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.
But, for those of us on the left, the experiences of Gorelick, Podesta and Emanuel raise more troubling questions about the plausibility of implementing progressive policies that prioritize people over capital. In my first Vote or Die post, I emphasized the failings of US electoral politics, the extent to which it disenfranchises millions of people, the difficulty of discerning what the candidates really mean and the fact that it is used to legitimize governance by claiming that we all have a voice in the process when, in fact, we don't. Other entries have addressed the power of large corporations and international capital in dictating outcomes and the unwillingness of elected officials to even respond to our inquiries. Most recently, I observed that the recent Supreme Court campaign finance decision intensifies these problems, and even empowers large, undemocratic unions to speak for us, despite the fact that they don't do it very well.
Hamsher's disclosures about Gorelick, Podesta and Emanuel reveal yet another problem: the fact that, even if you elect the President you want, despite all the impediments, the President and his staff are personally motivated to implement policies dictated by capital. Upon leaving office, Obama, like Reagan, Clinton and the Bushes, will receive millions of dollars for speaking appearances. Obama, as the first African American president, will, in all likelihood, demand fees substantially greater than any President who preceded him. But there's a catch. He's not going to get those fees, and the adulation that comes with them, if he seeks to become the next FDR, or even the next TR. The US political system no longer has a place for the progressivism of past presidents.
For aides, the inducments, as shown by Emanuel and Gorelick, are seductive. Does anyone really believe that Emanuel knew anything about investment banking in 1998? Yet, there he was, making 16.2 million dollars in bonuses over 5 years, after participating in an administration that entered into NAFTA, implemented a telecommunications reform that allowed the emergence of a large media oligopoly and took down the wall between commercial banks and investment ones. In January 2009, he returned to the White House with the perspective of the bankers that he worked with so profitably. Meanwhile, Gorelick made even more in bonuses, over 26 million, and parlayed her personal relationships and access for well paying financial clients, asserting their interest over the public interest. And they are just two examples among many. The career path is obvious. As long as you facilitate policies for the benefit of capital, you can get unimaginably rich yourself.
Or, to put it differently, by serving the lords of capital, you can become one, too. Emanuel, it should be noted, started out in politics as part of a consumer rights organization, Illinois Public Action. For us on the left, though, the troubling question is, how can we expect a movement towards Social Democracy in the US, given the obstacles and perverse incentives of the existing political system? And, the answer is, of course, we can't. Certainly, not a very comforting one, but one that is difficult to refute. As long as economic power resides in the hands of a few, political power will as well, regardless of the outward appearance of a participatory system.