WASHINGTON -- Democratic presidential candidate Hillary Clinton announced her support Monday for legislation that would ban "golden parachutes" for private sector employees, like Wall Street bankers, who take jobs with the federal government.
The Financial Services Conflict of Interest Act, which is sponsored in the Senate by Tammy Baldwin (D-Wis.) and in the House by Elijah Cummings (D-Md.), would ban golden parachutes and crack down on other conflicts of interest in government. Progressive groups, who believe that the revolving door between the private sector and the government fosters corruption, had written a letter to Clinton last week asking her to clarify whether she supported the legislation. Sen. Elizabeth Warren (D-Mass.) has called it "a bill any presidential candidate should be able to cheer for."
Clinton voiced her support for the bill in an op-ed for The Huffington Post co-written with Baldwin. Their blog post argues that government workers with private sector experience are usually an "asset, and not a liability," but "in some cases it can affect the public trust -- for example, if a public servant's past and future are tied to the financial industry. That's when people start worrying that the foxes are guarding the hen house."
This is exactly the situation that former Deputy Secretary Tom Nides took advantage of, as a longtime Morgan Stanley executive who served under Clinton at State before returning to the bank. When Nides left Morgan Stanley, he disclosed to the government that the bank was allowing him to cash out his shares at an accelerated rate. The situation was similar for Robert Hormats, an under secretary of state during Clinton's tenure, who wrote to the government upon taking the job that Goldman Sachs would be accelerating and paying out his restricted shares.
Another member of President Barack Obama's administration, Treasury Secretary Jacob Lew, was able to take home bonus compensation because he left for a “high-level position with the United States government or regulatory body." The policy from his former employer, Citigroup, would not have applied had he left for a private sector competitor. While banks that have policies that allow for special financial treatment for employees that take government jobs argue that the policies are meant to encourage public service, rather than curry favor with the government, reform groups argue such policies foment regulatory capture.
"The American people need to be able to trust that every single person in Washington -- from the President of the United States all the way down to agency employees -- is putting the interests of the people first," Clinton and Baldwin's op-ed reads. "We want to make sure that happens."
"If you're working for the government you're working for the people -- not for an oil company, drug company or Wall Street bank or money manager," it adds.
Baldwin and Cummings' bill would also bump to two years the period in which government employees who do oversight are required to recuse themselves from any cases involving their former employers. (The current period is just one year.) The legislation would also mandate that people leaving government service would be prevented from taking a position at a company they oversaw until at least two years have passed. Finally, it would close loopholes that allow former government officials to lobby by being called "outside advisors" or "strategic counselors" to avoid the legal requirements that ex-government employees have to meet to lobby after they've left.
"At the end of the day, a lot of this is about leadership," the op-ed explains. "There’s an old saying in government: 'Personnel is policy.' Who we hire goes a long way toward determining what we do and how well we do it. We need to make sure those who do the people’s work in Washington are actually doing it -- not worrying about former or future bosses at the public’s expense."
The coalition of progressive groups who had written to Clinton asking her to come out in favor of Baldwin's bill said the op-ed was encouraging.
“Secretary Clinton’s support of Sen. Baldwin’s bill is great news for anyone who wants to see Wall Street play by the same set of rules as the rest of the country,” said Kurt Walters, campaign manager at Rootstrikers. “We’re pleased that Sec. Clinton has come to the conclusion that golden parachutes are so contrary to the public interest that they should be criminally illegal. It’s time to shut down the corrupt Wall Street-to-Washington revolving door, and Sec. Clinton should be applauded for starting to lay out clear steps she’d take to fight it.”