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Does Jack Lew's Citibank contract violate ethics laws?

The emerging details of prospective Treasury Secretary Jack Lew’s contract with Citibank raise fresh concerns about the persistent issue of the Obama administration’s revolving door with too big to fail banks.

During Lew’s confirmation hearing earlier this month, Sen. Orrin Hatch, R-Utah, questioned the president’s pick to run the Treasury Department about a provision in his employment contract with Citibank – where Lew landed after his previous tenure as a high-ranking official in the Clinton administration.

According to his Citibank contract, he would lose a hefty bonus worth nearly $1 million and other compensation if he left before he received it, except under two very specific circumstances – either he died or obtained a high-level job in the federal government.

If he became a lobbyist, he would lose the bonus. If he became a farmer or the governor of New York, no bonus. Only by getting one of the administration's top jobs could he swim in that vast ocean of cash.

The unusual terms of the contract create a huge potential conflict of interest for Lew, who stood to gain enormous wealth if he landed a government job. Citibank is ensuring that Lew can comfortably move back into the public sector without financial sacrifice. What do the bankers expect for their money? On many tough issues which will require Lew to represent consumers, borrowers and taxpayers when big banks lobby authorities for weaker regulation, can we count on Lew to strongly represent us, even though we have no millions to dangle in front of him?

During his confirmation hearing, Sen. Hatch noted “your employment agreement included a clause stating that ‘your guaranteed incentive and retention award’ would not be paid upon exit from Citigroup but there was an exception that you would receive that compensation ‘as a result of your acceptance of a full time high level position with the United States Government or a regulatory body.’ Now is this exception consistent with President Obama’s efforts to ‘close the revolving door’ that carries special interest influence in and out of the government?”

Lew’s answer doesn’t pass the smell test. “I’m not familiar with records that were kept, so I don’t have access to things that I don’t know about,” Lew testified.

Is Lew, with a reputation as a serious numbers cruncher, policy wonk and savvy political negotiator, suggesting that when it came to the terms of his own bonus, he didn’t read the relevant documents?

Either his statement is false or he just disqualified himself from any government job, especially one overseeing the nation’s complicated finances.

Lew’s response begs for further inquiry. Hatch didn’t pursue it during the hearing. Neither did any of the major media in their coverage. The only initial coverage came from Pam Martens in her “Wall Street on Parade” blog. She referred to the “bombshell” Hatch dropped during the hearing. A week later, Bloomberg columnist Jonathan Weil covered the issue, writing that it appeared that Citibank paid Lew a “sort of bounty” to get a high-powered job in the administration. Lew has certainly earned that Citibank bonus with a series of powerful positions, first in the State Department, then as director of President Obama’s Office of Management and Budget and then as his chief of staff.

Lew and the Obama administration may have other problems aside from whether Lew’s Citibank bonus disqualifies him from a job overseeing it and other megabanks. Government watchdog Bart Naylor, an analyst with Public Citizen in D.C., said, after reviewing excepts of Lew’s contract, that the Justice Department should investigate for a possible criminal violation of USC 18 Section 209, which reads:

“Whoever receives any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government, of any independent agency of the United States, or of the District of Columbia, from any source other than the Government of the United States, except as may be contributed out of the treasury of any State, county, or municipality; or

Whoever, whether an individual, partnership, association, corporation, or other organization pays, makes any contribution to, or in any way supplements, the salary of any such officer or employee under circumstances which would make its receipt a violation of this subsection—?”

Naylor, said: “ The Department of Justice should answer whether the contract between Citi and Mr. Lew is in accord with federal ethics law. This law prevents a private company from making `any contribution’ to an employee `for his services’ to the executive branch of the government. Citi’s contract states that Mr. Lew would sacrifice any bonus he earned unless he landed a high level federal job. Authorities must answer whether the $1 million bonus Mr. Lew qualified for by taking a high level government job constituted a `contribution’ from Citi.”

Even if Lew’s Citibank bonus doesn’t constitute a criminal violation, it certainly violates the spirit of the law and gravely undermines the public’s confidence in him and in the administration’s ability to protect the public from the onslaught of Citibank lobbying and political contributions. If the Obama administration wishes to retain any shred of credibility in its ability to regulate too big to fail banks, it should immediately launch an investigation into the circumstances surrounding Lew’s contract – and the contracts of the many other former Citibank officials who have served in the administration.

Here’s a partial list:

•Former Citigroup chief economist Lewis Alexander, who joined Treasury in 2009 as a top adviser to former Treasury Secretary Tim Geithner. Alexander is probably best known for having incorrectly predicted, while still at Citi in 2007, that the U.S. would avoid a recession from the crash of the housing bubble. He left the Treasury Department in 2011.

•Former vice-chairman of Citigroup’s global markets Lewis Susman was named to the plum assignment of U.S. ambassador to Great Britain in 2009. He earned his job the old-fashioned way, as one of President Obama’s top contributors and bundlers during the 2008 campaign.

• Michael Froman, a veteran of the revolving door who served in the Clinton Treasury Department before his work as a chief financial officer at Citibank, is credited with introducing President Obama to Robert Rubin, the former Clinton Treasury secretary who oversaw the dismantling of the Glass-Steagall Act before becoming Citibank CEO during the financial crisis. Froman is a special assistant to the president and deputy national security adviser for international economic affairs. The New York Times reported that Froman received more than $7.4 million in compensation from Citibank between January 2008 and joining the White House in February, 2009 – including a $2.25 million bonus, which the White House claimed Froman donated to charity.

•David Lipton, another Clinton Treasury veteran who was paid huge Citibank bonuses ($1.275 million in 2008 and $762,000 in 2009) while serving as the bank’s head of country global risk management. President Obama appointed him special assistant to the National Economic Council and the National Security Council.

The administration should get a clue, withdraw Lew’s nomination, and find somebody to lead the Treasury who puts the interests of the public and taxpayers ahead of those of the big bankers.

In austerity fight, deceptions have just begun

Only time will tell how much of a boost Republican challenger Mitt Romney will get from his debate win over President Obama.

The president seemed flatfooted and unprepared to respond to Romney’s shift toward the center, even though Romney’s campaign had suggested that’s exactly what they would do - use the Etch-a-Sketch to pivot away from the extreme right toward a more moderate stance during the general election campaign.

The debate felt like a replay of the scenario that has played out so often over the past four years: aggressive Republicans concealing their real motives and putting passive Democrats on the defensive.

Romney was acting every bit the CEO in charge, telling the customers what he thought they wanted to hear to make the sale; in this case, that his deficit reduction scheme wouldn’t favor the wealthy and damage the middle-class.

The contrast between CEO Romney talking to voters (customers) and CEO Romney talking to his big contributors (his board of directors) at a private fundraiser in Boca Raton, Fla. in May couldn’t have been starker. In what he thought were private remarks that have now blown up, Romney, you recall, dismissed the 47 percent of the country that supports Obama as self-pitying moochers who need to be taken care by the government.

We know that all politicians say one thing in public and another in private. That’s not a shock. But what’s striking is just how much contempt CEO Romney expressed for nearly half the voters when he was talking to the people who will hold real power in his administration: his board of directors.

Most CEOs wouldn’t let such feelings slip, even in private. But just as Romney told the Denver audience what he thought it wanted to hear at the debate, so too he was telling his contributors what he thought would please them.

Because make no mistake, plenty of the big money is preparing to work with whoever gets elected in November to launch a major offensive against Social Security and Medicare as well as to end tax breaks that favor the middle class, such as the mortgage interest tax break, under the guise of backing a new grand bargain to balance the budget.

For example, billionaire hedge fund executive Pete Peterson, who has also spent $458 million of his own money to push an austerity agenda, is now backing a bipartisan group known as Campaign to Fix the Debt. Ryan Grim at Huffington Post reports that the initiative has raised $30 million so far, including $5 million from a single unnamed donor.

The operation has hired 25 to 30 staffers, with plans to double, Grim reports. Along with a paid-media campaign, aims to influence press coverage in 40 states with locally focused teams.

This “bipartisan” initiative is just the latest attempt by Wall Street and its allies to pass the costs of the government deficits created by the financial crisis on to the middle class and those who can least afford it. Though President Obama has said he won’t let these programs be cut in a way that hurts the most vulnerable, to keep that promise he’ll have to grow backbone that was missing Monday night – and through much of his first term.

Lobbying / Martin Column / Mitt Romney / President Barack Obama / Social Security - 10/05/2012

Is born-again bank buster for real?

Who is Sandy Weill and why should we care that he now says he thinks big banks should be broken up?

Weill built Citibank into the financial colossus whose spectacular collapse in 2008 helped tank our economy. He said he had a vision of creating giant financial supermarkets that conjured up convenience, friendly service, well-lit aisles and lots of choices. But what he was actually building were massive financial tankers fueled on fraud and risky, toxic assets no one understood, kept afloat with dirty back-room deals, hijacked regulators, lobbying and campaign contributions.

To make that vision a reality, Weill also did more than anyone else to drive the final spike through the heart of the Depression-era Glass-Steagall law, which for seventy years had kept risky investment banking separate from federally-guaranteed traditional banking, reducing the risk of bank failures. President Clinton signed the bill repealing Glass-Steagall in 1999.

For his efforts, Weill, 79, made gazillions before he retired in 2006, ahead of the financial collapse.

He also earned a spot among a very select group - Time Magazine’s “25 people to blame for the financial crisis.” Weill, Time said, helped create the country’s “swollen banks,” which remain one of the economy most serious unsolved problems.

His Citibank is one the worst, and remains on life support only through $45 million [million?] worth of the taxpayers’ generosity.

It didn’t help Weill’s reputation that a few weeks after Citibank accepted its bailout, he used the Citibank jet to fly to his vacation in Cabo, a flight immortalized by the poets on the New York Post copy desk with the headline: “Pigs Fly.”

It was only six months ago that Weill announced he was “downsizing” and simplifying his life, selling his Central Park West apartment in Manhattan for $88 million – more than double what he’d paid for it, as well as attempting to unload his yacht for nearly $60 million. Weill moved to another apartment downstairs.

But downsizing doesn’t mean the same for an uber-banker that it does for the rest of us. He spent $31 million on the largest real estate-deal in Sonoma County’s history, buying a Tuscan-inspired villa that includes 8 acres of vineyards, seven miles of private hiking trails, and an 11,605-square-foot mansion made with 800-year-old Italian roof tiles and 200-year-old wood beams, and a fire truck that comes with seven firefighters. A real estate agent cautioned against viewing Weill’s purchase as a sign that the real estate market in the county north of San Francisco was recovering. As one Coldwell Banker agent said: “[The sale] is not an indicator of an emerging real estate recovery, but rather the ability of the world’s wealthiest individuals to buy what they desire.”

There’s been all kinds of speculation about why has now come out in favor breaking up big banks. But the best way to judge whether he’s serious, or just trying to get a little good PR, is to examine how much cash he’s willing to spend to make it happen.

When bankers, led by Weill, wanted to repeal Glass-Steagall, they fought for 20 years and spent millions in lobbying and campaign contributions before they won. The big banks would certainly put up a similar fight against its reinstatement. No one knows better than Weill that when it comes to changing banking regulations, it’s not what people say that matters; money talks.

How much is Weill willing to spend in support of his newfound conviction? Without massive amounts of money behind them, his words are no more than an old mogul’s sad, empty cry for attention.

Glass-Steagel / Lobbying / Martin Column - 07/30/2012

Bipartisans, bankers and baloney

Along with protecting their profits, big banks also care deeply about getting revenge against those politicians who cross them.

That’s the message from the primary defeat of Sen. Richard Lugar, the veteran Indiana Republican who has been highly touted as one of the last of a vanishing breed of respectable bipartisan statesman-politicians.

Lugar, 80, was defeated by a tough-talking Tea Partier, Indiana state treasurer Richard Mourdock, who said his idea of compromise was bashing Democrats until they gave in.

While much of the media has blamed Lugar’s defeat on his willingness to work with Democrats, if you follow the money against Lugar, you’ll find other, familiar forces at work.

This was hardly a grassroots victory against the Washington status quo, unless by grassroots you mean the Financial Roundtable and the American Bankers Association.

As Politico and the Republic Report detailed, the attack on Lugar was funded by the Financial Services Roundtable and the American Bankers Association, along with Wall Street-backed anti-tax, anti-regulatory groups including Dick Armey’s FreedomWorks and the Club for Growth.

Even though Lugar opposed financial reform, Wall Street is still mad at him because he took the side of giant retailers like Target and Wal-Mart in another epic battle, over debit swipe fees.

The banks suffered a rare defeat in the Senate last year when it rejected a delay in implementing a rule that limited the amount banks could charge you to swipe your debit card, costing the banks about $16 billion. Lugar was one of the few Republicans who sided with the retailers to stand for election this year.

His defeat will no doubt serve as a useful example for legislators considering opposing Wall Street.

On key votes on bread and butter issues, Lugar the bipartisan voted against economic stimulus, and he favored extending unemployment benefits only if the Bush era tax cuts were extended.

I wouldn’t waste any tears for Lugar.

It’s only a matter of time until he lines up a lobbying deal, if he wants one. He can join his former Senate colleague from Indiana, Evan Bayh, a Democrat who was also celebrated as a great bipartisan. After leaving the Senate gnashing his teeth over the increased partisan rancor, Bayh landed a sweet gig lobbying his former colleagues on behalf of the Chamber of Commerce.

If by bipartisan one means always ready to fight for corporate interests, big banks or the titans of retail, then both Lugar and Bayh fit the definition. But Lugar’s defeat is just the latest example of how the media and the Washington insiders persist in wringing their hands over the phony loss of bipartisanship while ignoring the much more compelling reality of corporations that wield way too much power in Washington at our expense.

Bipartisanship / Lobbying / Martin Column - 05/21/2012

No Lobbyist Left Behind

If we forced CNN commentators to wear the names of their clients on their sleeves like NASCAR drivers we might have a deeper, more honest debate over what’s going on in Washington.

Unless you live under a rock without any form of media, it’s hard to miss the nonstop frenzy over dumb comments made by CNN commentator Hilary Rosen about Ann Romney.

Rosen said Romney never worked a day in her life, which made her unqualified to comment on the economy. Republicans then attacked Rosen as another in a long line of Democratic elitists who have no respect for women who work in the home.

When she comments on CNN, the network labels Rosen a “Democratic strategist,” though they don’t disclose any particular strategy that she’s come up with.

CNN doesn’t mention her work representing many high-profile clients in Washington, D.C. with interests across a wide range of issues. Her firm, SKDKnickerbocker is filled with former government employees cashing in on their contacts on behalf of their corporate clients. The firm, which includes President Obama’s former communications director Anita Dunn as managing director, isn’t required to disclose clients because it doesn’t acknowledge that what it does is lobbying. In Washington-speak the firm is “political consulting and public relations firm.”

Last year, Bloomberg Business week reported that the firm coordinated an army of lobbyists unleashed by a coalition led by Google, Apple and Cisco pushing for a tax holiday.

The Republic Report compiled a partial list of clients, including big railroads, agricultural interests, PepsiCo and General Mills and for-profit education companies.

In addition, the Washington Free Beacon reported that Dunn pitched SKDKnickerbocker’s services as part of a team that offered to restore hedge funds’ sullied reputations, though apparently nobody swung.

Rosen’s poke at Ann Romney may have stirred up media frenzy, offering just the excuse for a jive revival of jive working mom v. stay-at-home brawl that sheds no light and offers no insight to anybody.

It’s also not the kind of controversy that’s likely to upset Rosen’s clients, who will recognize it for the sideshow it is compared to their free-flowing access to the White House. It’s more likely that it will provide Rosen with an opportunity for some good-natured self-deprecating humor to grease her way as she makes the rounds through the corridors of power.

The Obama administration has made a big deal about how it holds itself to a higher standard by not taking money from lobbyists. But that doesn’t mean lobbyists don’t have a strong presence in the White House, as the New York Times reported Saturday. “Many of the president’s biggest donors, while not lobbyists, took lobbyists with them to the White House, while others performed essentially the same function on their visits,” the Times reported.

Several years ago, GOOD magazine came up with the idea of making politicians wear suits with the names of their biggest contributors, like NASCAR drivers advertise their sponsors. Politicians have been reluctant to embrace the idea. They’re perfectly happy to keep us focused on the sideshow provided by Rosen and those like her, who babble phony nonsense on TV but profit from their access to the real game off-screen.

Lobbying / Martin Column / Mitt Romney / President Barack Obama - 04/17/2012