The Rewards and Burdens of Public Service
Renee Wilkins and Timothy Geithner have two things in common. Both of them have performed public service, and both of them appeared in the news of over this past weekend. However, their fortunes have taken decidedly different paths. Ms. Wilkins was featured in the News & Observer in a story about the four jobs she has in order to support her children. Ms. Wilkins is a Court Clerk in Wake County, who has various part-time jobs in order to make ends meet. The county pays her $33,000, and her part-time work adds another $10,000 or so.
Mr. Geithner made $191,300 per year as US Treasury Secretary and had earned over $400,000 annually as President of the New York Federal Reserve. With two children going through college and a home in Larchmont, New York, I am sure that the Geithners didn’t save a great deal of money. Whatever you think of the former Treasury Secretary, he earned every penny of that salary in his 24-7 job. However, Mr. Geithner’s story veered off into an infinitely more profitable direction after he departed government service. The former secretary began his quest for riches in a standard Washington fashion. He hit the speaking circuit at something like $100,000-$150,000 per speech, and then signed a book deal with an advance of around $500,000. In other words, Mr. Geithner slowly started in cashing in on his government service.
Warburg Pincus, a major private equity firm, has just announced that Mr. Geithner will join the firm as its President and a managing director next year. If Mr. Geithner was not yet rich, he will be soon. While I’m not sure what he knows about running a PE firm, Warburg Pincus should earn a big return on their investment in the former Secretary. He will be highly valuable in attracting clients, especially public pensions, and working with banks to finance the firm’s deals.
Ms. Wilkins and thousands of civil servants and school teachers don’t have Mr. Geithner’s options. While Ms. Wilkins has garnered brief fame in the N&O, no one will pay her to speak or write a book about her daily trials. If she leaves public service, the private sector isn’t going to help her make up for lost ground.
While I was never worth the big bucks coming to Mr. Geithner, I passed through the portal from government into finance. I understand the financial lure. In 1983, Mario Cuomo became Governor of New York and immediately began to purge the office of folks hired by his predecessor, Hugh Carey. Competence wasn’t the litmus test. Rather, the newly elected governor went after those folks who supported Ed Koch in the democratic primary. While I’d stayed out democratic politics and was pretty low in the pecking order, I was living paycheck to paycheck. Crossing the street, or in my case walking down the hill, to enter the investment business was a huge temptation, even if I didn’t get a Geithner-like deal.
The tales of Ms. Wilkins and Mr. Geithner tell us about the broken nature of our government and economy. In North Carolina, our public servants are demeaned and poorly paid. However, the cabinet secretaries, whether they work in Washington or Raleigh, are going to be taken care of when they leave government. It also doesn’t matter at all, whether they work for President Bush, President Obama, Governor Purdue, or Governor McCrory. The rank and file are treated poorly, and the political appointees cash in. That’s not a proper system for running government or an economy.