Letters given to the Securities and Exchange Commission in January revealed several Wall Street banks pay their executives huge sums of money to work for the government.
New Republic reported Citigroup, Goldman Sachs and Morgan Stanley are seeking exemption from a proposal that would force them to identify all executives eligible for financial rewards for working in government and the the dollar amount they would receive.
The proposal, which was filed by bank shareholders with the AFL-CIO labor coalition, may make the relationship between Wall Street and the government more transparent.
“As shareholders of these banks, we want to know how much money we have promised to give away to senior executives if they take government jobs,” said AFL-CIO President Richard Trumka in a statement. “It’s a simple question, but the banks don’t want to answer it. What are they trying to hide?”
The financial incentives for taking government jobs came under speculation when Antonio Weiss, the former investment banker at Lazard, now serving as counselor to Treasury Secretary Jack Lew, disclosed he would be paid $21 million in unvested income and deferred compensation upon taking a job with the government.
Weiss withdrew from consideration for the position of undersecretary for domestic finance after facing pressure over his links to the finance industry, but his current job as counselor entitles him to the $21 million.
Though some banks have explicit payout policies, others use less obvious tactics. Some banks defer compensation to retain their best employees, and when an executive leaves the company, that money is forfeited. But when executives leave for government jobs, they’re allowed to keep their bonuses.
“It fuels the revolving door between banks and the government,” said Michael Smallberg, an investigator for Project On Government Oversight, who discussed these practices in a 2013 report.
Critics argue these “golden parachute” policies are not only a conflict of interest, they also result in favorable treatment towards Wall Street banks. In response, Citigroup penned a no-action letter saying its policy is a way to “encourage public service.”
Evidence suggests the critics may be onto something. For example, Martin Dunn, who served SEC for 20 years deciding on no-action letters, became a lawyer for O’Melveny and Myers and obtained favorable rulings from his former employer on behalf of Alaska Airlines, Yahoo, UnitedHealth Group and JPMorgan Chase.
The SEC will rule on no-action letters within the next few months, meaning the bank’s shareholders who filed the disclosure proposal with the AFL-CIO may know how much money is going to government employees who used to work for Wall Street soon.
“At a time when people are worried about the over-representation of Wall Street in policymaking positions, we see that the revolving door is baked into the compensation structure,” said Smallberg. “It’s worth considering whether these provisions should be banned altogether.”