Gene Sperling, the leading candidate to replace Larry Summers as head of the National Economic Council, has run into a spot of trouble. It seems that while he was away from government service during the Bush years, Sperling was paid a lot of money by Goldman Sachs —$887,727, to be precise—to work part time on a philanthropic project.
This connection to the unloved investment bank, some critics suggest, should disqualify Sperling from being promoted from his current position at the Treasury Department to the bigger job. “By appointing Sperling, the president would fuel perceptions that his administration is overly close to Wall Street, installing a policymaker who has not only overseen monumental deregulation of the financial sector, but has also collected hefty paychecks from its leading firms,” William Alden of the Huffington Post writes.
This Main Street Puritanism epitomizes the ethical confusion that has grown up around public service in the wake of the financial crisis. Felix Salmon, the prolific business blogger, objects not only to Sperling but also to NEC mentionees Roger Altman and Richard Levin because of their Wall Street ties. (Altman runs a private-equity firm. Levin, the president of Yale, sits on the board of American Express.) As the first wave of officials leaves the Obama administration, objections are also raised about their career choices. Former Budget Director Peter Orszag was recently slammed by James Fallows for taking a highly paid investment-banking position at Citigroup. Fallows called Orszag’s move “damaging and shocking” because of the way it underscored cozy ties between Wall Street and Washington. Treasury Secretary Timothy Geithner has suffered similar complaints, although he has never even worked on the private side of the financial sector.
To sort this out, we need to return to first principles. What is clearly wrong, and under some circumstances illegal, is for people to leave government and then sell their influence as lobbyists. The most egregious offenders, in my book, are greedy guns-for-hire like Tony Podesta or—at the outer limit of clownish Beltway parasitism—Lanny Davis, who under pressure recently gave up a $100,000-a-month contract lobbying for the despotic president of the Ivory Coast.
It is also wrong, of course, for those in government service to be influenced by their future employment prospects. And there are secondary issues about fueling negative perceptions, which is essentially what Fallows charges Orszag with. He doesn’t think Orszag is being rewarded by Citi for helping arrange a government bailout, since there is no evidence the former budget director had anything to do with it. Fallows worries that Republicans may be able to hurt and embarrass Obama by using Orszag to paint the administration’s connection to the TARPed-up bank in dark tones.
Whatever one thinks of Orszag’s political judgment, it is important to remember that creating a potential appearance of conflict does not constitute unethical conduct. Sperling, however, can’t even be accused of poor judgment. He hasn’t done anything worthy of criticism at all. Ezra Klein writes: “It is very hard to believe that Goldman Sachs wasn’t attempting to buy influence with a politically savvy economist who had good relations—and would later go to work for—the incoming Democratic administration.”
Well, I’m sorry, but it isn’t at all hard for me to believe that. Goldman hired Sperling in early 2008, before the financial crisis hit and when Goldman wasn’t in any particular disfavor. At that point, he was one of many out-of-work Democratic policy wonks who might or might not go back into the White House someday when Democrats next won an election. And as it happens, he almost didn’t because he was supporting the wrong primary candidate—Hillary Clinton.
There is every reason to think that Goldman hired Sperling for precisely the job described, launching a global development program called 10,000 Women. Goldman likely undertook this project out of the mixed motives that underlie most philanthropy—the hope of doing good and the desire to be seen doing good. In hiring Sperling, the firm got someone who was both politically sophisticated and steeped in the substantive issues. The main idea Sperling tried to advance when he was out of power during the Bush years was that educating girls is a powerful development strategy. In 2002, he set up an institute called the Center for Universal Education. In 2005, he co-wrote an IMF report on the subject, and later a small book for the Council on Foreign Relations. He spoke, studied, agitated, testified to Congress, and drafted legislation.
Now when your big cause is an issue like women’s economic empowerment, and Goldman Sachs comes calling with $100 million to spend on it, with a nice salary for you into the bargain, you can say: A) No way will I help you spend your money, you dirty capitalist bastards; B) I will help you, but only if you don’t overpay me like one of your own; or C) sounds good to me, Lloyd. There are crazed purists who might choose option A, saints who might choose B, but please cast your stones after you tell me that your answer would not have been, like Sperling’s, C.
The Main Street Puritans raise other issues: that Sperling was well-paid for a monthly Bloomberg column (supposedly another surreptitious attempt to buy Washington influence); that he earned money giving speeches to financial firms, including one that turned out to be crooked; and that he is obviously guilty of something by dint of his association with Robert Rubin, who is himself presumed guilty of something or other. All of this misses the mark completely. Sperling is an economic populist whose views are diametrically opposed to Wall Street’s. (He pressed, for instance, for the banks to pay a huge, multibillion-dollar fee for the TARP bailout.) But whatever you think of his substantive views, Sperling’s career has been defined by a dogged, selfless effort to turn them into policy and put them into practice. He was a first-day-to-last day member of Bill Clinton’s economic team, rising to the NEC job he hopes to have again. At the beginning of the Obama administration, he took a humbling sub-Cabinet position at Treasury, which few in his place would have done, rather than remaining on the outside and continuing to earn a seven-figure income.
The shifting, impossible-to-refute charges against anyone with Wall Street ties amount to what has become a kind of Green Scare: Because Wall Street is tainted, anyone who had any connection with it—including, in Geithner’s case, proximity as a regulator—is deemed unfit to serve the public. I suppose that in a perfect world, officials would be members of a flagellant order, coming to Washington from their monastic cells and reaffirming their vows of poverty afterward. But that wouldn’t work, either, because economic policymakers would have no feel for markets, business, or life in the real world. We should demand ethical behavior, not public servants untainted by money or any effort to make it.