The quid pro quo culture
Clinton’s response to the question about being paid 625,000 dollars for giving three speeches to Goldman Sachs stirred up some interest, and a lot of vitriol from Sanders supporters. While I understand the vitriol, I think it is important to broaden the response. Clinton didn’t invent this culture. She simply floats in it.
It is a matter not so much of being bought, but of being cognitively captured – which by easy degrees effects the career arc. Instead of using Clinton as an example, lets use Bernanke.
In 2009, the Fed, along with Treasury, engineered a controversial bailout of AIG. AIG was the party to financial instruments – bets – made, on a tremendous scale, by numerous counterparties. Among those counterparties was Citadel, a Chicago based hedge fund.
Now, Citadel was hit by the meltdown in 2008. According to Bloomberg Business:
“Investors in Citadel Investment Group’s two main hedge funds can take solace in the fact that 2008 has finally come to an end. Of course, that won’t ease the pain of seeing those two porfolios lose about 53% of their value going into the final week of the year.”
Thus, there is every reason to believe that Citadel was on its last legs in 2009. But it survived. One of the bright spots in that year was that AIG, far from dealing with Citadel as a bankrupt insurance firm and thus paying out a penny on the dollar, dealt with Citadel as a company with the infinite resources of the U.S. Government behind it and paid out a dollar on a dollar – 200 million of them.
Thus, Citadel owes its continued existence, in no small part, to the decisions of Ben Bernanke.
And now Ben Bernanke is making a considerable sum – probably in the millions – working for Citadel.
Do I think that Ken Griffen, Citadel’s Daddy Bucks, sat down with Ben B. and said, you get us that 200 million and you have a job with us, wink wink? No, of course not. Rather, in the course of time, as Bernanke was feeling his way to the exit at the Fed, an offer to a highly respected figure in the financial community was perhaps made by some intermediary that led to Bernanke taking his job with Citadel. That’s how the revolving door works.
This is the problem that Sanders is hammering on. Clinton was not bribed to do anything in particular for Goldman Sachs. But it is very likely that Goldman Sachs will get a very respectful hearing when she is president. I expect she will be president, in fact. I am hoping that Sanders shrill denunciations make the relationship between the Clinton administration and the banks much less comfortable.