Economy

What the Former Obama Lawyer's Defection for Goldman Sachs Says About 'Transparency' in Washington

Why is the top White House lawyer taking a job at Goldman Sachs?

Barack Obama's Washington was supposed to be a place where transparency reigned and influence-peddling dwindled into irrelevance. But the latest high-profile hire at Goldman Sachs makes clear that, even in Obama's Washington, money and power still hold sway.

The investment bank, under fire from the Securities and Exchange Commission for allegedly defrauding its investors, has hired former White House counsel Greg Craig to aide its cause. Craig's new gig confirms what many government ethics observers predicted: despite the president's initial efforts to reform Washington, ex-administration officials will find ways to market themselves to rich clients. If presidential appointees on their way out of office find new and creative ways to serve powerful interests, Obama's efforts to clean up Washington culture could ultimately leave the place even murkier and more secretive. 


As his first presidential act, Obama issued an executive order detailing how Washington would behave during his time in office. Lobbyists would not work for the administration, and administration officials would not leave the government to become lobbyists. It was an open attack on the revolving door between the top levels of industry and government, an effort to insulate taxpayers from corporate abuses.

But it takes more than a flourish of a pen at the beginning of an administration to thwart the exchange of money and influence, a practice deeply ingrained in the American political system. The problem is not unique to the federal government. Governors who recently swept into office promising a new era of sunshine and accountability include Louisiana's Bobby Jindal and Florida's Charlie Crist. None of those states have been transformed into paragons of ethical behavior. Neither has Washington.


Craig provides an important test case for the path Obama appointees could take after leaving office. An early Obama supporter, Craig was mentioned as a candidate for Secretary of State before he landed in the counsel's office. During the first year of Obama's presidency, Craig worked to close the prison at GuantanamoBay, one of the Bush administration's most shadowy endeavors. In November 2009, however, after shutting down Guantanamo proved problematic, Craig became one of the first high-profile Obama appointees to announce his resignation. In 2010 he rejoined the private sector as a lawyer for Skadden Arps, a high-powered law firm with ties to Wall Street.


Now, instead of advising the president, Craig will advise a company that helped create another one of the dark clouds hanging over the country. Technically, Craig is not violating President Obama's ethics order. He is barred for two years from appearing before or lobbying the White House and its executive offices. In Craig’s case, Obama's order doesn't cover work with the SEC, which as an independent agency was not part of the former counsel’s official responsibilities. So far the White House has not had much to say about Craig’s new client; the press office did not respond to requests for comment from AlterNet.

When it comes to exercising influence, Goldman knows what it's doing. The Center for Responsive Politics, which monitors money in politics, last week called the company "one of the largest wielders of political clout." In the last election cycle, the firm's financial footprint totaled about $6 million, according to CRP, which analyzed contributions from "people and political action committees associated with Goldman Sachs." CRP also found that Goldman’s employees contributed more to Barack Obama’s war chest than did any other group in the private sector.


So Goldman probably isn't terribly worried about the fact that Craig can't parlay with the White House for a while: the company has plenty of other lobbyists listing it as a client—49 at last count—including former majority leader Dick Gephardt and Kenneth Duberstein, who served as chief of staff to Ronald Reagan.


Several Goldman alums also have infiltrated the Treasury Department. Treasury Secretary Timothy Geithner's chief of staff, Mark Patterson, worked for a few months as chief of Goldman's lobby shop. Another top aide, Gene Sperling, is a former Goldman consultant. And the bank has doled out hundreds of thousands of dollars to officials like Larry Summers for speeches and other advice. Patterson had to sign an extensive ethics agreement with the White House before joining the department, but the work Sperling did for Goldman was not covered by the president's ethics order.


"I am a lawyer, not a lobbyist," Craig told The New York Times yesterday. But just as it's no coincidence that the SEC went after Goldman Sachs in its first big case targeting the financial meltdown, it's unlikely that Goldman just happened to recruit Craig for its legal team. 


Craig's career path resembles that of another Obama ally who did not find a place in the administration: Tom Daschle.Like Craig, as a former public official, Daschle faced some limitations on the lobbying he could do during his first year in the private sector. So although he spent his time assisting moneyed clients further their agenda in Washington, Daschle could say that he was not a lobbyist, but a "policy adviser." And technically, it's true. A person like Daschle can spend up to 20 percent of his time on activities that could qualify as lobbying before having to formally register as a lobbyist.


Whether or not Daschle or Craig must register as a lobbyist, both of them owe their current positions at least in some part to the stature and influence they attained through their public offices, and both can use those assets to benefit their clients. But as lawyers or policy advisers, they can keep those clients secret. The Huffington Post has labeled this practice "influence laundering," and it could become more common as officials start trickling out of the administration.

Many lobbyists have deregistered in hopes of clearing their records and skirting around Obama's ethics order, and former administration officials will likely be able to circumvent the ethics restrictions as well. Even if they're not allowed to lobby, their experience in executive branch will still be valuable, and plenty of law and lobbying firms will be interested in offering up "clean" jobs that bank on their knowledge and connections without requiring them to dirty their hands with lobbying.


Like Goldman, Washington as a whole hardly needs more lobbyists. As financial reform has stumbled through Congress, lobbyists for banks have swarmed the Hill, seeking to extract concessions, punch loopholes in the bill or simply kill the legislation. The U.S. Chamber of Commerce alone is spending $1.4 million per day lobbying Congress against Wall Street reform and there are four bank lobbyists in Washington for every member of Congress. And, like Goldman, other financial companies have sent their alumni to public sector jobs in the Treasury Department. Deputy Secretary Neal Wolin, for instance, oversaw the lobbying office for his previous employers, the Hartford Insurance Company, although he was never registered as a lobbyist himself.


It's starting to look like, rather than bringing sunlight to Washington, Obama could be presiding over a backslide of politics sinking deeper into the shadows. Although the administration has been more forthcoming with some information—research documents from the EPA are now easily searchable online, for instance—other documents, like personal financial disclosures for administration officials, have not become any more accessible. If more former officials like Craig start serving powerful clients without disclosing their relationships, transparency in Washington might end up worse off than when Obama took office.

 

Sarah Laskow is a writer living in New York. A former staff writer for the Center for Public Integrity, her work has appeared in the American Prospect, Politico, and other publications.