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Politico: The Wall Street-D.C. Connection Is a Highway Lined with Cash

By John Morgan   |   Friday, 10 May 2013 09:32 AM

The merry-go-round between Wall Street and Washington, D.C., has evolved into a two-way highway, with the latest trend being Beltway insiders flocking to Wall Street instead of vice versa, according to Politico.

"The current exodus to New York reflects something of an historic shift," Politico stated, noting that in the past, Washington obtained talent from Wall Street to help politicians understand fiscal policy and its effect on markets and the economy.

Goldman Sachs, Morgan Stanley and Citigroup are among the big financials, some of them dubbed "too big to fail" in the 2008 financial crisis, that are now padding their payrolls with former political and regulatory officials from the nation's capital.

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"It has really turned around and it's now much more about Wall Street collecting political knowledge and influence," Charles Geisst, a Wall Street historian at Manhattan College, told Politico.

Reform-minded observers believe the banks have a single purpose in bringing in Washington insiders — influencing the writing of Dodd-Frank Act rules and defeating legislation that would force banks to hold more capital as protection against taxpayer bailouts, Politico reported.

Jim Rickards, senior managing director of Tangent Capital Partners and a frequent critic of U.S. monetary policy, tweeted about the Politico story: "Fact that #WallSt is hiring heavily from #Washington confirms former is out of ideas & latter's running a rigged game."

Careers with salaries capped between $100,000 and $200,000 in Washington can multiply to $500,000 with bonuses that add up to much more on Wall Street, Politico reported.

"They [Wall Street firms] are paying them millions of dollars for direct access to the most senior policy makers that nobody else gets," Dennis Kelleher, CEO of the financial reform group Better Markets, told Politico.

Some of those gravitating to Wall Street's sizeable payouts and perks include: Michele Davis, former chief adviser to then-Treasury Secretary Hank Paulson, landed at Morgan Stanley as a managing director and global head of public affairs; Ed Skyler, former deputy New York City mayor and a confidante of Mayor Mike Bloomberg, is now an executive vice president at Citigroup; Calvin Mitchell, former head of press operations at the Federal Reserve, now resides at Credit Suisse; veteran Democratic campaign strategist Mark Kornblau now works for JPMorgan Chase; and former U.S. Treasury bigwig Andrew Williams now hangs his hat at Goldman Sachs.

"There is absolutely a value to banks hiring these people, and it is about connections and relationships and that opens the door to potentially inappropriate influence," Rep. Jim Himes, D-Conn., an investment banker at Goldman Sachs before running for office, told Politico.

Himes himself certainly knows something about the D.C.-Wall Street connection, according to The Huffington Post.

The Post said Himes was one of the primary Democratic supporters of a bill to repeal sections of the Dodd-Frank Act targeting derivatives, the complex financial transactions at the center of the 2008 financial crisis.

The legislation, which passed the House Financial Services Committee this week, would expand government backing for derivatives by permitting banks to sell them from their taxpayer-insured divisions.

Himes was among those who argued that ordinary taxpayers don't provide assistance to the bank divisions involved, although The Post noted ordinary taxpayers were forced to pick up the tab for financial institutions in the savings and loan crisis of the early 1990s.

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