In 2014, the leading economic mind from Barack Obama’s administration left office to become president and partner of the private equity firm Warburg Pincus. The revolving door between Wall Street and Washington was a familiar problem at the time, but the details of Timothy Geithner’s cashout proved unusually gruesome.
Warburg Pincus owns Mariner Finance, a predatory lender devoted to ― in the words of a devastating Washington Post exposé ― “monetizing poor people.”
And there was an unfortunate harmony between Geithner’s public and private careers. The banks had been in serious trouble in 2009, but as Obama’s first and most powerful Treasury secretary, Geithner too often prioritized the short-term interests of the financial sector over the needs of struggling families. His most catastrophic decision was on housing, where he transformed a foreclosure relief program into a slush fund for Wall Street, effectively redistributing money from middle class families to the very rich.
Geithner was not the only policymaker to get big questions wrong, of course. The personnel choices Obama made before he even set foot in the White House did much to sabotage his presidency. Although much about the Great Recession and its lackluster recovery can be laid at the feet of Republican obstruction, it is also true that top Obama administration officials frequently pursued bad economic ideas with gusto, leading to disappointing policy outcomes and political dysfunction.
Even before Obama’s historic 2008 win was sealed, a then-obscure Citi executive named Michael Froman was compiling a list of top hiring targets for the incoming administration, placing Geither’s name alongside figures who included Rahm Emanuel, Eric Holder and Peter Orzsag, all of whom hailed from a Wall Street-friendly milieu and would advance ideas in office that held back the recovery and damaged the administration’s public credibility on economic policy.
Judged against that debacle, the news trickling in from President-elect Joe Biden’s transition team is in some respects promising. The public list of policy advisers is not stacked with big bank insiders or private equity magnates. There is, in fact, an excellent panel of thinkers on financial reform featuring some of the best minds available, including Gary Gensler, Mehrsa Baradaran, Amanda Fischer, Andy Green, Simon Johnson and others.
But Biden also appears to be trading one set of villains for another. On advisory panel after advisory panel, veterans of big, bad Silicon Valley predators keep popping up ― Facebook, Uber, Amazon, AirBnB, Lyft and even Mark Zuckerberg’s creepy philanthropy all appear. Biden even found a spot for Amazon’s international tax avoidance guru Tom Sullivan to advise on State Department policy.
The Big Tech crisis of the Trump era has not been as abrupt as the 2008 meltdown, but it has been going on now for years. If Biden allows Silicon Valley to shape the economy of the future, he will damage his presidency just as surely as Obama did by naming Wall Street insiders to a team trying to weather a Wall Street-generated recession.
There was no organized progressive movement pressuring Obama on personnel back in 2008, and for many Democrats it seemed natural that he would be pulling from Bill Clinton administration alumni who had spent their time striking it rich during President George W. Bush’s years. Emanuel joined the administration as Obama’s first chief of staff after making millions in private equity. Today he is most famous for covering up the police murder of 17-year-old Laquan McDonald while serving as Mayor of Chicago. But in 2009, he helped overrule administration economists calling for a larger economic stimulus package, perhaps the biggest blown-call of the Obama’s presidency.
Orzsag, as Office of Management and Budget director, was an even more aggressive deficit hawk, pressing the administration to create a commission to fix the ”unsustainable″ national debt burden ― but without ending the Bush tax cuts. He took a job at Citigroup in 2010.
Holder, when named attorney general by Obama, was making millions of dollars a year representing corporate clients including Swiss banking giant UBS and OxyContin manufacturer Purdue Pharma. As attorney general, he refused to prosecute high-level financial fraud, which helped cement the impression that Obama was letting the rich rig his economic program.
Froman, the man with the magic list, ended up with a post as the U. S. trade representative, where he was responsible for the Trans-Pacific Partnership, an 11-nation pact that liberal interest groups and labor unions almost universally derided, and which ultimately failed ― embarrassing Obama after dividing the Democratic Party.
“Like any other people, politicians trust their old friends. But when your old friends choose to go rake it in at Facebook, a company that poisons democracy all over the world, or Apple, which very publicly bet its future on a cozy relationship with the Chinese government ― those friends no longer belong in the White House.”
There were no backroom conspiracies or bags of cash under the table among these players. But they brought a Wall Street-centric view of the world to the administration, where they relied on Wall Street thinking that just happened to be harmful public policy. They believed the deficit was a big deal when it wasn’t. They didn’t want to raise taxes on corporations or the rich. And they didn’t mind flushing homeowners in the name of saving the banks, which, after all, needed to be saved.
The result was a rhetorically liberal presidency in which inequality escalated, the racial wealth gap expanded and American life expectancy declined for the first time since World War I.
Biden has generally avoided Wall Street whiz kids, and outside his financial reform group, there is a trade policy team stacked with capable, reform-minded experts who understand exactly what went wrong on trade under both Obama and Trump. If this list of advisers is any indication, Biden will not be running a big bank White House.
But the Silicon Valley names are frightening. Many of them are Obama White House alums or long-time Biden aides who joined Big Tech and cashed in back when these firms had reputations that were fishy, but not fully toxic. Longtime Biden confidant and turned bigwig Facebook lawyer Jessica Hertz will be running, of all things, ethics policy for the transition. Cynthia Hogan is returning to Biden’s team after a stint as a lobbyist for Apple.
Like any other people, politicians trust their old friends. But when your old friends choose to go rake it in at Facebook, a company that poisons democracy all over the world, or Apple, which very publicly bet its future on a cozy relationship with the Chinese government ― those friends no longer belong in the White House.
Other Big Tech advisers are Obama White House people who were trusted for their expertise and who Biden no doubt continues to respect. But this is precisely the attitude that got Obama into trouble in 2009 with Clinton administration alumni.
Nor is Biden restricting his Silicon Valley search to Obama alums. According to a Financial Times report, Biden is seriously considering a position for former Google CEO Eric Schmidt. He found a labor policy advisory slot for Seth Harris, the intellectual architect of California’s infamous Prop. 22 which rewrites California law to allow Uber, Lyft and other gig economy firms to deny rights, pay and benefits to their workers.
It is hard to overstate just how out of touch Biden’s Silicon Valley romance is with today’s intellectual consensus on Big Tech’s role in society. Google is the subject of a landmark antitrust case from the Department of Justice. Uber is something between a laughingstock and a nightmare, so bad that journalists make lists ranking its worst scandals. There are multiple, highly respected think tanks that exist for the sole purpose of reining in Facebook, Apple, Amazon and Google. Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) called to break up Big Tech in their primary campaigns, and even Hillary Clinton thinks Zuckerberg is an “authoritarian.”
Thus far, the Biden transition suggests that the Biden White House will be premised on a world a decade out of date ― one where Democrats knew that Wall Street was a modern Big Tobacco, but hadn’t yet realized that tech companies were, too.
It’s hard to fix the economy when you don’t know what’s wrong with it.
Zach Carter is the author of the New York Times bestseller “The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes,” named by Publishers Weekly as one of the Ten Best Books of the Year. It is available from Random House wherever books are sold.