Delamaide: Wall Street nominee splits Democrats
WASHINGTON — Gridlock in Congress has already gotten worse in the wake of the midterm elections — not between Democrats and Republicans, but within the Democratic Party.
The unlikely catalyst for a new internecine war in the party is the nomination of a Wall Street banker to be the undersecretary of the Treasury for domestic finance.
The duties of this official include implementing regulatory reform and for anti-banker Sen. Elizabeth Warren, D-Mass., that was one too many foxes in the henhouse.
"Enough is enough," she thundered in a blog on Huffington Post, castigating the president for consistently appointing Wall Street executives to key administration posts.
"The over-representation of Wall Street banks in senior government positions sends a bad message," she wrote. "It tells people that whatever goes wrong in this economy, the Wall Street banks will be protected first."
The nomination pits the populist, anti-Wall Street wing of the Democratic Party led by Warren against the centrist faction represented by Hillary Clinton, who reportedly collects as much as $300,000 a speech for Wall Street denizens and their ilk.
The nomination also exposed the bias in mainstream media as editorialists at The New York Times and Washington Post rushed to defend the nominee, Lazard executive Antonio Weiss, and demonize Warren as a misinformed and misguided populist.
It is a battle, in short, that puts Wall Street regulation at the center of the war in Washington and is the first sally in what may become a genuine challenge to Hillary Clinton's "inevitability" in winning the Democratic presidential nomination in 2016.
Warren objected to the nomination specifically because Weiss has spent the bulk of his career in global mergers and acquisitions — including a long stint based in Paris — that ill prepares him to deal with the domestic concerns of this post. Equally important, many of these mergers, notably Burger King with Tim Hortons of Canada earlier this year, were driven as tax "inversions" — transferring corporate headquarters abroad to reduce taxes.
Heaven knows why Weiss, who has amassed a fortune somewhere between $50 million and $200 million at Lazard, is even interested in the job. He has been a big donor and bundler for President Obama, and appointing Wall Streeters to top Treasury jobs is a hallmark of the Clinton tradition that Obama has adopted as his own.
You don't have to be a high-powered investment banker to do this job in Treasury. The most recent occupant of the post, the low-profile Mary Miller, worked for a quarter-century at fund manager T. Rowe Price in Baltimore, heading the fixed-income division before joining Treasury in 2010.
Senate Democrats, perhaps embarrassed by the tone-deafness of the nomination, are in no hurry to deal with it in their waning days in the majority. They seem to be quite happy to leave this Obama pick to the tender mercies of the Republican majority in the new Congress, which convenes Jan. 6.
Iowa Republican Sen. Charles Grassley, a member of the Finance Committee which will consider the nomination, gave a preview of what this Obama donor can expect.
"This nomination shows the continued hypocrisy of the Obama administration in this area," he said when Weiss was named in mid-November. "The president has put forward nominees with offshore accounts, which he lambasted on the campaign trail, and now someone who's been involved in inversion transactions, something he's referred to as unpatriotic."
It doesn't help that Lazard itself — a hallowed firm founded more than a century and a half ago with big operations in Paris, London and New York — moved offshore in 2005, reincorporating in Bermuda primarily for tax reasons.
New York Times business columnist and editor Andrew Ross Sorkin found Warren's "wrath" to be "misdirected" and her opposition to Weiss' nomination "misinformed." Moreover, her understanding of the Burger King deal was "mistaken."
Sorkin allows that the deal was "technically an inversion," but insists it was not "cynically constructed" — that is, it was not driven primarily by tax concerns.
Weiss, the Times writer argues, is not a "prototypical banker" because he was protégé of literary gadabout George Plimpton and is now publisher of The Paris Review, Plimpton's idiosyncratic quarterly.
Sorkin argues that the debt-financing role of the Treasury post — not the regulatory reform Warren is worried about — is the paramount consideration, though he should know that rolling over Treasury debt is a fairly mechanical business often handled at a junior level in Treasury. There is little scope for innovation or financial wizardry in Treasury auctions.
In case Times readers missed the point, Washington correspondent Jonathan Weisman weighed in a few days later with another panegyric for Weiss, saying he is being unfairly tarnished for his Wall Street resume when he is "more Daddy Warbucks than Gordon Gekko."
Not to be outdone in their defense of the Lazard banker, the editorialists at the Washington Post branded Warren's opposition a "populist witch hunt." So what if his tens of thousands in campaign contributions mean he is "wealthy and politically connected."
Weiss, the Post notes in his defense, was one of 11 authors who signed off on a "progressive" tax reform proposal from the Center of American Progress, a Clintonite group fixated on reducing the deficit.
Warren's focus is elsewhere, however, and Weiss doesn't fit in there.
"Neither his background nor his professional experience makes him qualified to oversee consumer protection and domestic regulatory functions at the Treasury," Warren wrote in her blog.
After her own career focused on domestic economic issue, she said, "I know how important these issues are and how much the people in Treasury can shape policies. I also know that there are a lot of people who have spent their careers focused on these issues, and Weiss isn't one of them."
Stagnant wages, student loans, fraudulent and inappropriate financial products — not a federal deficit that is already safely in decline — are the problems besetting Americans now, she feels, and a multimillionaire investment banker with a fondness for Paris is not the person to understand or address these issues, she feels.
The fight over this nomination is, in short, a struggle for the soul of the Democratic Party. Even if Weiss eventually squeaks through — a doubtful proposition at this point — it draws the battle line for the 2016 primaries.
Business columnist Darrell Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones news service, Barron's, Institutional Investor and Bloomberg News service, among others.