by Phil Cannella
Our friend Michael Smallberg with the Project on Government Oversight (POGO) is back again with another damning report of the Revolving Door between Washington regulators and Wall Street Financial Firms. It seems that not only is the Revolving Door still spinning, but that private firms are also offering their executives big bonuses for taking high-ranking government jobs, bonuses that would not be available to them if they took jobs at competing private sector firms.
You may remember Mr. Smallberg from his appearance on the Crash Proof Retirement Show® in January 2012, a groundbreaking interview during which he and I discussed the Revolving Door and its impact on government regulations. In his work with POGO, Mr. Smallberg has spent a great deal of time studying the revolving door.
In case you don’t know, the Revolving Door refers to the practice of Wall Street executives leaving their jobs at financial firms and taking jobs within the U.S. government (or vice-versa). This happens more often than you would think; some notable recent examples include Mary Schapiro, who went from being Chairman of the Securities and Exchange Commission (SEC) to the Board of Directors at General Electric, and Jacob “Jack” Lew, who has bounced between government jobs and his position as COO of Citigroup, and who currently serves as Secretary of the Treasury.
Well POGO’s report released last week revealed some disturbing facts about the Revolving Door and showed that private companies actually encourage their executives to leave for high-ranking government jobs in the form of compensation agreements. You see, most of the time if an executive were to take a job at another company, they would forfeit lucrative bonuses, stock options, and other forms of compensation designed to keep them in their current jobs. But the compensation agreements of firms like Citigroup, Goldman Sachs, JPMorgan, and others allow an exception for executives who take jobs within the government.
These types of agreements are actually fairly common, and are created with the mindset that the U.S. government is not a competitor to any company. In practice, these agreements actually seem to give executives an incentive to move to government jobs. The reason behind it could be that having an “inside man” within a government regulator, for example, could provide a firm with a contact to push certain beneficial legislation, or to help navigate around regulations. Of course, we’d all like to believe that these firms have the best of intentions, but recent history shows that may not be the case.
So you can read the POGO report on Revolving Door Bonuses by clicking here. Michael Smallberg and POGO have done a great job providing information about firms that provide these Revolving Door Bonuses, and with each report like this, we get a little bit closer to ending the corruption that spans from financial firms in the private sector all the way to regulators working for the U.S. government.
Phil Cannella is founder and CEO of Retirement Media, Inc.
