Saturday, February 7, 2015

How Wall Street Funds the Revolving Door to Place Its Top Execs at Key Positions in Government

David Dayen writes:
Citigroup is one of three Wall Street banks attempting to keep hidden their practice of paying executives multimillion-dollar awards for entering government service. In letters delivered to the Securities and Exchange Commission (SEC) over the last month, Citi, Goldman Sachs and Morgan Stanley seek exemption from a shareholder proposal, filed by the AFL-CIO labor coalition, which would force them to identify all executives eligible for these financial rewards, and the specific dollar amounts at stake. Critics argue these “golden parachutes” ensure more financial insiders in policy positions and favorable treatment toward Wall Street...

The handouts recently received attention when Antonio Weiss, the former investment banker at Lazard now serving as counselor to Treasury Secretary Jack Lew, acknowledged in financial disclosures that he would be paid $21 million in unvested income and deferred compensation upon exiting the company for a job in government. Weiss withdrew from consideration to become the undersecretary for domestic finance under pressure from financial reformers, but the counselor position—which does not require congressional confirmation—probably still entitles him to the $21 million. The terms of the award are part of a Lazard employee agreement that nobody has seen. 

These payments are routine at major banks, several of which have explicit policies, found in filings with the SEC, outlining automatic awards for executives who rotate into government. Goldman Sachs offers “a lump sum cash payment” for government service, for example. 

Other banks’ policies are subtler. Banks often defer certain types of compensation in order to retain talent. When an executive terminates employment, unvested stock options and other forms of deferred compensation are usually forfeited. But several companies let executives’ equity options continue to vest if they leave for a government position, or allow them to keep retention bonuses that would otherwise be returned to the firm. A 2004 tax law banned accelerated payments but made an exemption for employees who leave for government service. Critics wonder whether the gifts are intended to fill the government with friendly faces who will act in their former employer’s interests. 

“It fuels the revolving door between banks and the government,” said Michael Smallberg, an investigator for the Project On Government Oversight (POGO), whose 2013 report detailed these types of compensation agreements. The average executive branch salary is substantially less than these millions in awards, so the bonuses effectively supplement the lower pay, raising questions about who the government officials actually work for.

1 comment:

  1. The great illusion of free press

    I regularly enjoy coffee with two mainstream media editor friends.

    Neither will carry my articles because of my ‘pro-Russian leanings.’ I won’t play a part in mainstream media’s orchestrated anti-Russian rhetoric. Be proud of me; my candid nature suggests that, in the Euro Weekly News at least, you enjoy a free press.

    A fiction usually directed at Russia is that it doesn’t have a free Press; rhetoric without substance. Let us instead take a look at the so-called free Press in the West.

    William Colby, ex-director of the Central Intelligence Agency, is a man who should know Western media: “The CIA (Central Intelligence Agency) owns everyone of any significance in the major media.” Not long after becoming a whistle-blower Colby died in a freak canoeing accident.

    There is no disguising the sinister and insidious nature of CIA tentacles: “In the US 90 per cent of all TV, newspapers, radio, magazines are owned and controlled by six mega corporations. You can’t get a word in there that connects to the real world.”

    https://www.euroweeklynews.com/columnists/mike-walsh/item/125739-the-great-illusion-of-free-press

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