Democratic presidential candidate Hillary Clinton announced her support today for legislation that would ban so-called “golden parachutes”– bonuses paid to private sector employees, especially Wall Street bankers and financiers, who leave their banking jobs to enter “public service”. A variety of progressive groups had written a letter to Clinton last week asking her to clarify her support for the bill – the Financial Services Conflict of Interest Act – which Sen. Elizabeth Warren has called “a bill any presidential candidate should be able to cheer for.”
Although Wall Street firms are doing their best to keep it from public knowledge, dozens of their former employees are now working in government positions – many regulating the same firms they previously worked for – and are being paid by their former employers to do so. Thus the bill seeks to curtail conflicts of interest among former financial and banking industry employees who are given handsome bonuses and deferred payments – in some cases tens of millions of dollars – upon leaving the private sector for a government job. Wall Street firms claim that the bonuses are meant to encourage public service, but in reality the exit bonuses create a clear conflict of interest where government employees owe more allegiance to the big banks and firms they are meant to be regulating than to the government or the interest of the people. This has led to several instances of Wall Street cronies now employed by the government writing their own regulation bills, which, of course, have turned out to be quite spineless.
With a continuous revolving door between regulatory, lobbying, and financial positions, the fox really is guarding the hen house when it comes to financial regulation, an issue that is of critical importance at a time of mounting inequality and continued destruction and domination of the economy by the big banks and financial firms. With the economy still recovering from the meltdown of 2008 that was caused largely by a lack of financial oversight and big financial firms run amok, chipping away at the cozy relationship between those in Washington and on Wall Street is a commonsense measure that protects the interests of the American people. And while financial groups, and Citigroup in particular, are the worst offenders, large companies in many other sectors similarly compensate their former employees for providing the company with what is essentially an officially-sanctioned lobbyist within the halls of power.
In an op-ed announcing her support for the bill today, Clinton said that “the American people need 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. We want to make sure that happens.” She added, “if you’re working for the government, you’re working for the people – not for an oil company, drug company, or Wall Street bank.” Representative Elijah Cummings of Maryland, the bill’s sponsor in the House, explained succinctly that “There is absolutely no reason that someone entering government service would need a payment from any outside source as a reward for that service or to incentivize favorable treatment—including from a previous employer—and no company would offer these payments if they didn’t yield some benefits to them.”
Besides aiming to end golden parachute payouts, the bill also proposes raising from one to two years the period in which government employees are prohibited from engaging in regulatory work over companies they were formerly employed by and adding a similar provision prohibiting former government employees from taking a position at a firm they previously regulated for two years after leaving government service. Finally, the bill would close several loopholes that allow former government officials to avoid lobbying regulations by working under other titles.