Stopping, Not Accelerating the Wall Street Conveyor Belt
Let us hope that Andrew Ross Sorkin never decides to leave DealB%k for government service, because his views have become too tainted by his proximity to Wall Street. In his column, entitled “Encouraging Public Service, Through the ‘Revolving Door’ ” Mr. Sorkin lauds the Wall Street practice of paying executives their deferred compensation and unvested stock options when they accept jobs in the public sector. He cites the example of Antonio Weiss, who would receive $20 million from Lazard if he were confirmed as undersecretary of the Treasury for domestic affairs. Mr. Sorkin has previously criticized Senator Elizabeth Warren for opposing Mr. Weiss’s nomination.
Mr. Sorkin believes Wall Street firms, as well as other industries, should be encouraged to pay out all deferred compensation when executives pursue public service. He argues, and he’s probably right, that more Wall Street professionals would pursue government service if they could accelerate their deferred benefits. Nonetheless, this is an incredibly poor idea.
For starters, I’m not sure federal and state government need more Wall Street influence or culture. In both Democratic and Republican administrations, investment bankers and traders have done enormous damage to the public interest. The failure to properly regulate derivatives and mortgages, the failure to properly regulate banks and brokerages, and the failure to enact equitable tax policies has come via a steady stream of bankers. Mr. Sorkin argues that we need more talented people in public service. I agree. However, Wall Street represents a pervasively corrupt and amoral culture that turns talented people into folks who cannot serve the public interest.
Moreover, accelerating deferred compensation and benefits in exchange for public service will simply become one more corporate game. To play this new game, an executive merely has to find a 12 to18-month government gig so he can accelerate five to ten years of benefits and then reload with signing bonuses and stock options when he rejoins the Street. While I don’t think Antonio Weiss is purposefully playing that game, he will get his $20 million and then only serve about 18-months until the Obama Administration comes to an end. After that, Wall Street will be eager to have him back.
I also think Mr. Serkin completely confuses talent with extraordinary compensation. Most Wall Streeters and senior executives in other in other industries aren’t paid based on their value or talent. Rather, they are paid tens of millions of dollars because the compensation system has been rigged to unduly reward a tiny proportion of our population. Mr. Weiss and his Wall Street colleagues are simply smart guys who happened to get a “golden ticket.” If they want to work in government, they need to leave their huge piles of deferred cash and unvested equity behind.
There are plenty of mid-level executives in the private sector who could greatly aid the public sector. They don’t have huge deferred compensation packages, but they would be making an even bigger financial sacrifice if they left their private sector careers to lend a hand in the federal government or a state capital. There’s nothing in Mr. Sorkin’s proposal to help those folks devote a portion of their careers to public service.
Over the past few decades the federal government’s policymakers and lawmakers, both Republicans and Democrats, have been manufactured on a conveyor belt that begins at Harvard and other elite schools and passes them along to Wall Street, where they are unjustifiably enriched. As a result, they are able to feed our political process with mountains of campaign cash and then occupy key positions in the White House and federal agencies before the conveyor belt returns them to Wall Street. The results for our government and the public interest have been nothing short of disastrous. Instead of accelerating the conveyor belt as Mr. Sorkin proposes, we need to shut it down.