Why Senate Dems Led by Liz Warren Are In Revolt Against Obama's Wall Street Nominee
The behavior of the Obama admin when it comes to financial reform has been one of his biggest weak points. The latest unfortunate act is his nomination of Antonio Weiss, a former mergers and acquisition banker for Lazard Bank, for undersecretary of domestic finance at the Treasury. Weiss immediately drew fire from progressives pointing to his role in crafting tax inversions that helped corporations save money by parking funds overseas.
There was a time when Weiss's nomination would be uncontroversial – bankers have dominated Treasury and economic posts in the government for a generation. But with the arrival of Sen. Elizabeth Warren (D-MA), a chief critic of Wall Street's domination of the government, there is a revolt brewing against Weiss that threatens to derail his path to the Treasury.
Weiss' History As Wall Street Democrat
Warren has made a name for herself as a sharp and trenchant critic of Wall Street, and she put out the first salvo against Weiss by pointing to him overseeing mergers such as Burger King's acquisition of Tim Horton's, which involved the company moving its headquarters to Canada to save up to $117 million in American taxes.
The Burger King-Horton deal was one of many deals that Weiss negotiated while he was at Lazard, which bills itself as “the world's leading independent financial advisory and asset management firm.”
The firm promoted Weiss in 2009, as it was shuffling various positions – that same year it Ken Jacobs as its chairman following the death of former CEO Bruce Wasserstein. Weiss was first made global head of mergers and acquisitions (M&A) and then the following fall to the global head of investment banking.
While at these new positions, Weiss made a name for himself as one of the industry's biggest dealmakers. By December, EfinancialNews wrote that Weiss was “this years most prolific M&A banker according to data provider mergermarket, working on more deals than anyone else globally in what has been a difficult 12 months for dealmakers.”
Over the next five years, Weiss had his hands on some of the biggest mergers between multi-national firms. He became a talking head on CNBC, talking about some of his biggest deals, such as the 2013 Berkshire-Heinz deal, where billionaire Warren Buffet took control of the famed ketchup maker.
If anything, Weiss's resume looks a lot more like Mitt Romney's – or David Perdue, the newly-elected Georgia GOP Senator who also made his fortune off of buyouts, mergers, acquisitions – than it does Barack Obama's. Weiss has never served in government before.
But as Warren's charge against Weiss has heated up, his defenders have escalated their own rhetoric. DealBook's Andrew Ross Sorkin – who has himself been very close to Wall Street – countered that Weiss was a bundler for President Obama and other Democrats, and edited the Paris Review (a French literary journal with deep American ties).The White House itself touts a Center for American Progress (CAP) report that Weiss co-authored that called for increased revenues and closing some tax loopholes.
Weiss As The Democrats' Mitt Romney
The problem with these defenses is that they do little to nothing to counter the view that Weiss is too close to Wall Street. Bundling for Democrats is hardly a sign of left-wing views – especially when Weiss donated almost exclusively to Democrats close to the banking industry or who oversee the regulatory environment. Federal Elections Committee data shows that he donated to Sens. Cory Booker (D-NJ), Maria Cantwell (D-WA), Kirsten Gillibrand (D-NY), and Mark Warner (D-WA). These come alongside a $32,400 donation to the Democratic Senatorial Campaign Committee. Additionally, he donated to Third Way Georgia Senate Democratic nominee Michelle Nunn as well as to the newly-elected Rep. Seth Moulton (D-MA). Interestingly, he gave $1,000 to Reshma Saujani in 2010, who was dubbed the “hedge fund candidate” by the press as she unsuccessfully tried to unseat a sitting Democratic congresswoman in New York for being insufficiently accomodating to Wall Street's needs.
As for The Paris Review, editing a literary journal is hardly evidence of any sort of political beliefs. The CAP report is closer to an actual blueprint for Weiss's views, but it's worth mentioning that the report itself had not just Weiss as an author – he shared the byline with ten other co-authors. Among those co-authors were Robert Rubin, Larry Summers, and William Daley – three known to be close to the Wall Street wing of the Democratic Party. The report itself is hardly radical, focusing on deficit reduction rather than job creation. It does include some tax hikes on the wealthy, such as a more progressive estate tax and slight hikes in personal income taxes. But it also calls for lowering the corporate tax rate, and some regressive tax increases, such as increased sales consumption taxes in some areas. Most importantly, the report itself includes a disclaimer asking the reader not to hold it as representative of the views of the individual co-authors:
Note from the authors: As in any collaborative process, there has been much give and take among the participants in developing this final product. We all subscribe to analysis and principles articulated here, to the need for revenue levels at the level proposed, and to the need for spending reductions. We also generally agree with the provisions of the plan. There may be specific matters, however, on which some of us have different views.
In other words, as Weiss was working for Lazard and helping negotiate deals to lower corporate tax rates, we were supposed to not look too much into him co-authoring reports that may include some tax hikes. But while he looks to move into the White House, that report is suddenly representative of his worldview.
CAP's president Neera Tanden has been quoted defending Weiss, saying, “Antonio not only brings significant knowledge and expertise in financial markets, he brings an understanding and a deep commitment to the goals of this administration, including implementing smart policies that spur economic growth and support the middle class.”
But this defense can't be looked at outside of its political context. CAP is very close to the administration, and rarely disagrees with its moves. It is also itself financed by Wall Street. (Full disclosure: I worked for CAP for two and a half years).
If Weiss is a supporter of the middle class, he had a strange way of showing it while at Lazard. While much attention has been focused on his role in inversions, he also was instrumental in furthering the sort of mergers and layoffs that have hollowed out the American economy for the past few decades.
Take the Berkshire-Heinz deal referenced earlier. After Buffet acquired Heinz with Weiss's help, he set about gutting the company's workforce. Heinz eliminated 600 jobs, and a third of its operation in its own hometown. The layoffs were “intended to enable faster decision-making, increased accountability and accelerated growth,” said a spokesman for the company; if this was the case, nobody told the decision-makers who handled outgoing CEO William Johnson, who “received a golden parachute of $56 million, in addition to $156.7 million in vested stock and deferred compensation he accrued over his career,” after the Lazard-brokered sale.
In response to layoffs after Weiss brokered the Kraft-Cadbury deal, Belgian workers called a 48-hour strike. The layoffs at Kraft after the merger reportedly saved the company millions, but also made some of its employees even wealthier as a direct result. Kraft president Irene Rosenfeld received $21.9 million dollars in compensation in 2011, partly as a result of “quality implementation of programs to reduce costs” – in this case, layoffs.
Weiss could claim that all of this isn't a result of his personal ideology but simply the cost of doing business. But he has not made even this defense. It has been reported that Weiss has been offered around $21 million in unvested income and deferred compensation should he be confirmed to his Treasury post – and he has not declined the offer.
Breaking With a Key Obama Administration Policy
The Obama administration has repeatedly slammed companies for parking money overseas to avoid taxes. The president himself essentially called the tax inversions tactic unpatriotic. During a 2011 CNBC appearance, Weiss took a different tack, justifying parking money overseas as a facet of our tax environment (5:20):
HOST: On our show we do talk a lot about cash on the balance sheet....more than half of that or roughly half of that two trillion let's call it is on foreign balance sheets of U.S. Corporations –
WEISS: Absolutely, absolutely.
HOST: How does that resolve itself. More deals in-market?
WEISS: What it means is the $1.9 trillion of corporate cash which the Fed reports non-farm non-financial cash, fully half of that is off-shore. And what it generates is off-shore investment, off-shore M&A, and cross-border M&A by definition. And so the discussions in Washington about whether to consider tax holiday or tax reform are fundamentally linked to where this cash is ultimately going to be invested.
HOST: What is your expectation then? Let's assume we don't get anything out of Washington that would encourage bringing that cash back. Will it ultimately be deployed in-market in the form of deals?
WEISS: Well, companies are retaining cash. I mean, companies had well over a trillion dollars of cash on their books even in the depths of the crisis.
HOST: They had a lot of debt on their books as well.
WEISS: They had debt against that absolutely. But what it means is, you know the incentive to invest abroad is simply too great for their to be substantial repatriation and I think the statistics bear that out.
In other words, Weiss thinks that companies are simply acting in their best interest, and unless taxpayers give them an even sweeter deal with a tax holiday or cutting tax rates, they'll continue to keep their money abroad.
A Righteous Jihad
One of the most outspoken defenders of Weiss was the Washington Post's David Ignatius, who claimed Warren was waging a “jihad” against his nomination. Given the foreign reporting he has done, Ignatius might recall that the Arabic phrase jihad above all other things refers to an “inner struggle.” Perhaps what Warren is doing is waging a struggle for the soul of the Democratic Party – putting down a marker saying that Democrats shouldn't line up behind a man who has stood against what they have always told the public they believe in.
That struggle is growing, as a whole host of Democrats – Sens. Joe Manchin (WV), Al Franken (MN), Jeanne Shaheen (NH), Dick Durbin (IL), and Independent Bernie Sanders (VT) – have all come out against the Weiss nomination, representing a broad array of constituents and ideologies that are all now standing against Wall Street.