Get our free newsletter
There’s a lot of handwringing on the internet today about the lack of handwringing that accompanied the announcement last week that former Obama budget director Peter Orszag is going to work for Citigroup. James Fallows started it by wondering on his blog why the announcement had warranted nary a mention in the Washington Post, and it slowly a picture began to emerge of a Washington media that had been yet again hesitant to rub salt into the publicity wounds of a guy they generally liked. Even Fallows apologetically qualified his critique with the disclaimer that he while not personally acquainted with Orszag, he believes the man to be “faultlessly honest”, perhaps due in part to the endorsements of better-sourced commentators like Ezra Klein, whose friend Matt Yglesias attests he knows Orszag much, much better than Yglesias himself does, and assures us today that Orszag has been “uncommonly honest”.
This flurry of testimonials to Orszag’s infallible moral compass caused me to wonder if his defection to Wall Street symbolized a much larger phenomenon, not so much about the intractable corruption of government Fallows seems hung up on but a related “This is what passes for [blank] in Washington” problem. By which I mean, perhaps the problem with Washington is that passes for “honest” in Washington is a guy who left the Administration, according to a senior White House official quoted anonymously in the book Revival, because “he was worried about deficits and felt we weren’t pushing hard enough,” whose very first public statement upon leaving the White House was a New York Times column calling for the government to waste hundreds of billions of dollars extending the Bush tax cuts on the wealthy.
Orszag is also, quite famously, what somehow passes for “sexy” in Washington, perhaps owing less to his looks than his willingness to flout authority and convention, as in this passage about daily White House briefings on page 138 of former car czar Steve Rattner‘s recently published Overhaul:
There was a no-BlackBerry rule—attendees were supposed to deposit the devices in a small basket outside the door, with a yellow Post-it to identify the owner. A few regulars, like Peter Orszag, chose to ignore the rule. (Like many of us, Orszag carried both a government BlackBerry and a personal one. His were strapped to his belt like a pair of six-shooters.)
Perhaps most disturbingly, Orszag is also what passes not only as a “liberal” but a bona fide liberal “activist” in Washington, as Ryan Lizza noted in an exceedingly dull New Yorker profile of one apparently exceedingly dull wonk:
Orszag, despite his image as a number-crunching technocrat, considers himself an activist. He has always been interested in the intersection of economics and politics, rather than in economics as a purely academic or ideological pursuit. As a high-school student at Exeter, when all his political friends wanted to intern for the liberal hero Ted Kennedy, Orszag went to work for a far less glamorous figure—Tom Daschle. While his friends spent their time answering phones, he was writing Daschle’s speeches. At Princeton, he wrote his senior thesis on the relationship between the Federal Reserve and Congress. One of his conclusions was that “it is clear that Congress suffers from a lack of understanding of even the most rudimentary economics.”
It was of course precisely this sort of contempt for the nation’s legislative branch that enabled the entire shameful existence of Citigroup in the first place, since it was Bob Rubin who as Treasury Secretary gave Sandy Weill the thumbs-up to merge the banking giant Citicorp with the Wall Street broker/trading conglomerate Traveler’s Group in 1998 despite the fact that it violated a federal law called Glass-Steagall, which their administration speedily repealed in the single most ruinous piece of legislation in world history (although this thing it passed the next year comes close to tying). Citi would have been seized and broken up by the FDIC after the housing crash plunged it into a $45+ billion solvency crisis if Tim Geithner had not banned FDIC chairman Sheila Bair from the proverbial “loop” after she thwarted his attempt to make Citigroup actually bigger by handing it the business of failing Wachovia (and also, the use of reality based accounting standards.)
And so it is tough to feign much of a reaction when someone like Orszag “sells out” to a job at an enterprise like Citigroup since Citigroup seems so much the apotheosis of what “passes for” the “private sector” in Washington. When Orszag’s old mentor Rubin quit his Treasury post he asked AIG’s Hank Greenberg for a job, but Greenberg says he was unimpressed with his offer “to make eight million dollars a year just to travel the world”; Citi was more than happy to pay him more than $100 million over the years for such a gig. Citi is also the venerable institution that tried to recruit Tim Geithner to be its CEO as the subprime Ponzi scheme first began spiraling out of control, and it is the bank from which Geithner poached Orszag’s replacement as budget director Jack Lew.
But Klein accurately describes as a “really big, powerful institution” is not, is a particularly impressive or highly regarded institution. Remember the chump who explained, as the bond markets were seizing up in the summer of 2007 over the Bear Stearns hedge fund blowups:
When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.
Because I guarantee you no one on Wall Street forgets that quote, or that it belonged to Chuck Prince, the then CEO of Citigroup, the biggest failure by far of the too big to fail banks, the only Wall Streetbank so reckless and stupid it didn’t even attempt to “hedge” its gazillion dollar stockpile of liar loans with credit “insurance” from AIG, the finance equivalent of a “development admit” at Duke, the impossibly privileged underachiever whose pedigree and highly-placed connections impress Saudi princes and other cash-rich foreigners whose complicity in the whole scam keeps the vital cycle of moral hazard in motion.
All of which is to say, the Orszag-Citigroup saga is a story (perhaps like that of his current engagement) of two parties that surely deserve one another, at least inasmuch as anyone “deserves” anything in Washington, where what passes for “brilliant” are men like Orszag, Rubin and Larry Summers, whohave all done their part to create and preserve a system that bestows its greatest rewards on the entrenched, moneyed and persistently myocpic individuals and institutions that deserve them least.