Saturday, November 17, 2012

Book Review --The Payoff: Why Wall Street Always Wins, by Jeff Connaughton

Jeff Connaughton's book, The Pay Off: Why Wall Street Always Win is an important addition to our understanding of the interplay between politics and finance.  Most readers are probably aware of the long and tortured process involved in the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Mr. Connaughton brings context to this legislation, as well as the battle over regulating high frequency trading (HFT) and the investigation of Wall Street executives by the Department of Justice and the SEC in the wake of the credit crisis.  He doesn't just discuss the shortcomings of Dodd-Frank, the delays in the SEC's response to HFT, or the failings of the US Department of Justice. Rather, he places these events within the context of his career, which brings the book alive.

The background about his work for then Senator Biden, his stint in the Clinton White House and years of lobbying at Arnold and Porter and Quinn Gillespie & Associates help to explain why it was so difficult for Senator Kaufmann and Mr. Connaughton as the Senator's chief of staff to make a lot of substantive progress bringing about rigorous reform of Wall Street in 2009-2010.  Over the past several decades, thousands of Jeff Connaughtons have been drawn to Washington D.C. with the idea of performing public service.  Mr. Connaughton's book shows how that idealism is slowly transformed into the business of bending legislation and regulation to benefit the interests of the powerful, most especially Wall Street.  There's a sad irony throughout the book because Senator Kaufmann and Mr. Connaughton wind up battling the very system they helped to create.

At times Mr. Connaughton paints a pretty ugly picture of the inner workings of Washington, but his story rings true.  K Street and Wall Street are two very seductive places.  The author is honest enough to tell us that the power and the money seduced him.  There aren't too many people in Washington or Wall Street willing to make those kinds of admissions.

I suppose critics will charge that Mr. Connaughton should have recognized the corrupting influence of money and politics much earlier, and headed for Savannah, Georgia, his current home, ten or fifteen years ago.  They may also be put off because Mr. Connaughton only wrote his story after attaining a level of financial security.  Without the author's lengthy stint in Washington, we would not have this story.  Mr. Connaughton would have just been one more analyst or associate working behind the scenes in government or a lobbying firm without direct access to the policymakers and politicians.  And, we wouldn't be privy to the details that give meaning to the uphill battle for financial reform.

Anyone who wants to understand how their government operates and how their bank or brokerage firm maintains it position of privilege should put this book on their reading list.

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