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Op-Ed | The American Prospect | November 16, 2022

The Biden Administration Does Not Need Another Wall Street Adviser

Ethics in GovernmentFinancial RegulationRevolving Door
The Biden Administration Does Not Need Another Wall Street Adviser

This article was first published by The American Prospect. Click here to read it on the original site.

Democrats defied expectations and dueled the Republicans to a draw in the midterm elections last week. Public rage at corporate price-gouging is a big part of why. As the Prospect’s David Dayen wrote, swing-seat candidates from Alaska to Minnesota to Pennsylvania won when they campaigned against corporations using inflation as a smoke screen to jack up prices.

Far from sinking Democrats’ electoral chances, economic populists showed how to successfully turn the issue of inflation back around on Republicans. One of the clearest takeaways from the midterms is that if Joe Biden wants to defang criticism of how he’s handled inflation—which does appear to finally be dropping, but still bothers voters—he should target big business and Wall Street.

Instead, the Biden White House is apparently desperate to bring a Wall Street businessman into a senior administration job. And the Wall Streeter they’re publicly considering made his wealth doing everything the administration claims to stand against.

On Friday, Axios reported that White House officials “are considering recruiting a seasoned business executive—potentially a Wall Street banker—to join the White House in a senior role.” According to Axios, “After being blindsided by inflation, the president’s team wants to ensure he is getting a 360-degree view of the economy, even if that means inflaming the party’s progressive base by bringing in a figure with corporate finance and investment expertise.”

First, this argument is ludicrous. The White House does not need to hire someone to get a banker’s perspective on inflation. They just need to tune in to CNBC or Fox Business, read Bloomberg, The Economist, or The Wall Street Journal, or read any of the dozens of white papers on the topic from Wall Street–funded think tanks, from the Brookings Institution to the Peterson Institute to the American Enterprise Institute. All of this is before you even consider that Wall Street has one of the best-funded lobbying operations in D.C. It would scarcely be possible for the White House to avoid learning what finance thinks even if it tried.

In fact, the White House already employs people in senior economic-policy jobs who came straight from Wall Street. National Economic Council Director Brian Deese, Treasury Undersecretary Wally Adeyemo, and Chief Economic Adviser to the Vice President-turned-Deputy National Security Adviser Mike Pyle all came to the White House from BlackRock, the multitrillion-dollar asset manager. Admittedly, all of them are at least tolerated, and in some cases quite well liked, by progressives—they all have certainly exceeded the Revolving Door Project’s initial dismal expectations of them. But if Biden really needs someone with experience on The Street to advise him on inflation, he can just call some of his extant employees.

A more plausible explanation, at least in terms of what the administration is thinking, is Axios’s second one: “Team Biden is preparing for a reelection campaign during a likely economic downturn. Officials want to improve their relationship with the business community.” This is the kind of thing that anxious politicians tend to think, but there are two problems. First, it appears that inflation really is moderating, and job growth remains relatively strong. There might be no economic downturn at all.

Second and more importantly, bringing on another rich finance guy will hurt Biden’s electoral prospects instead of helping them. Just consider one candidate who is reportedly toward the top of the list of possibilities.

“BLAIR EFFRON, A CO-FOUNDER of Centerview Partners, an investment banking advisory firm, is among the potential candidates,” Axios reported. Effron has never held public office, but he has donated millions to Democrats for decades, and was on the short list to become Treasury secretary in Barack Obama’s second term.

How did Effron make his money? By doing everything the Biden administration has fought against.

Centerview is often described as a “boutique investment bank,” meaning it caters to corporate clients who need expertise in very particular, complex business transactions. Their biggest line of work is in mergers and acquisitions. Among other deals, Effron advised on Time Warner’s $79 billion acquisition of Charter Communications; Kraft’s $58 billion merger with Heinz; Heinz’s later $28 billion sale to 3G Capital and Berkshire Hathaway; and News Corp’s $6 billion acquisition of Dow Jones, which is how Rupert Murdoch came to own The Wall Street Journal.

One of Biden’s most widely praised economic policies on the left, center, and right has been a reinvigoration of antitrust enforcement. But Effron profits from monopolism, and is unsurprisingly critical of reform plans. In late 2019, Effron pooh-poohed then–presidential candidate Elizabeth Warren’s anti-monopoly plan. “Walmart adapted to Amazon. You see that everywhere,” Effron said. Biden’s Federal Trade Commission chair, Lina Khan, made her name by using Amazon as a case study in everything wrong with antitrust enforcement.

Mega-mergers aren’t the only business practice which Biden has criticized and from which Effron profits. Centerview Partners works on many corporate “inversions,” which are international mergers conducted explicitly for tax reasons. In an inversion, an American corporation buys a competitor that’s headquartered in a country with lower corporate taxes. Then, the American firm shifts its corporate headquarters to the newly acquired firm’s building. This almost never means that the CEOs and executives actually pack their bags and move to the new country. It’s just a legal fiction that the company is now headquartered somewhere where it won’t have to pay as much to the new government.

Inversions have become less popular in recent years, but they were once big business for Effron. Centerview Partners advised on Pfizer’s purchase of Allergan in 2015 before the deal was scuttled. Centerview later led the charge on Johnson Controls’ successful purchase of Tyco in 2016. (Allergan and Tyco were both Irish firms.) Hillary Clinton criticized both of those deals on the 2016 campaign trail, even as she happily accepted Effron’s campaign donations and considered him for major Treasury jobs.

Six years later, Biden’s Treasury Department is now leading a major global push to standardize and raise corporate taxes worldwide, an admirable effort to end the current “race to the bottom” dynamic. His plan even includes specific measures to deter inversions. So it would be quite strange if Biden gave a man who made millions off of inversions and oligopolies a prominent economic-policy role.

Clinton’s past hypocrisies about Effron also speak to how Centerview Partners in particular could be an easy Republican punching bag. It’s so effective at clearing its clients’ mergers in part because it has several key players in the Democratic Party on retainer. Robert Rubin, Bill Clinton’s Treasury secretary and the father of Wall Street–friendly “Rubinomics,” is a counselor to the firm. Former Obama chief of staff and current ambassador to Japan Rahm Emanuel also took a job at Centerview after the end of his term as mayor of Chicago. (He decided not to run for re-election after it came out that he covered up a child’s murder by city police.)

Effron’s loyal campaign contributions have already won him A-lister business partners who help his transactions go through Democratic administrations smoothly. If Biden ties himself to that practice, he’s begging for attack lines from Trump and any other Republican calling him corrupt. The GOP, of course, doesn’t have a leg to stand on in this department, but egregious hypocrisy didn’t stop Trump from using such attacks to great effect.

To be blunt, hiring a Wall Street guy post-midterms is a great electoral strategy if Team Biden wants to give the Republicans ammo to confirm the public’s worst suspicions about him. Nothing says “nothing will fundamentally change” better than crawling back to big business days after the public delivered corporate America a clear rebuke. All of the Democrats who lost re-election bids this year are members of the New Democrat Coalition, the centrist caucus with strong Wall Street ties.

Now, it’s possible that Effron genuinely doesn’t want to impair the Biden administration’s policies, even the ones that cut into his bottom line. It’s mighty implausible, but perhaps the responsibilities of government would reorient his thinking. But if Biden is already thinking about 2024, then he has to recognize that the political downsides of tying himself to a sketchy Wall Street insider massively outweigh any possible benefit.

If Effron and the financial services industry in general really do want to help Biden defeat American fascism in the next election, they can just let others take the lead. They can recognize that this is one fight where, if they insist on enlisting, they are best deployed on the sidelines. Wall Street has more than enough means to make its opinions heard in Washington in the first place. If bankers feel demeaned by the fact that the government isn’t doing everything that it wants, welcome to what normal people feel like all the time.

PHOTO CREDIT: “‘Wall Street Bull’” by thenails is licensed under CC BY 2.0.

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