A DC Insider Explains How the Wall Street Lobby Owns DC: Crony Capitalism Prevails at Every Turn
Wednesday, 27 March 2013 09:51By Jeff Connaughton, Prospecta Press | Book Excerpt
Jeff Connaughton found out Wall Street always wins in DC. (Photo: Courtesy of Jeff Connaughton)It's not always readily apparent how Wall Street pulls the strings in DC. Although sometimes it is indeed blatant, most of the financial "too big to fail" control of the capital is a bit more subtle.
Jeff Connaughton started off on Wall Street at Smith Barney. He gravitated to assisting Joe Biden in his ill-fated 1988 quest for the White House, and then onto Biden's senate staff. After clerking for DC Federal Appellate Judge Abner Mikva, he joined him when Mikva became Clinton's White House counsel. After that, he remained on the inside of DC power manipulation when he opened a K-Street lobbying firm – another member of the revolving door government.
When Biden was elected vice-president, Ted Kaufman, Biden's top aide, was appointed to replace him for two years in the Senate for the remainder of Biden's term. Kaufman, in turn, asked Connaughton to be his chief of staff. Together, they vowed to take on Wall Street. Given that Kaufman was not going to run for a full term, they figured that they had no need to depend on campaign funding that might influence their crusade.
In the end, they stood proud but defeated. Wall Street had prevailed almost entirely across the board.
Eventually, disillusioned and repulsed by the crony capitalism he witnessed and later even facilitated as a lobbyist, he retired from the Wall Street money zone in our nation's capital and moved to Savannah, Georgia.
Connaughton's gradual epiphany is our gain, as he reveals detailed accounts of how the Wall Street chess board works at the expense of sound financial law. Although he was not at the epicenter of power, he was close enough to smell the malodorous scents of a city bought and paid for.
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In the following excerpt from "The Payoff," Connaughton explains how a former Democratic Senator, a Wall Street point man, undercut President Bill Clinton on even a minor amendment to hold corporations accountable for intentional deceptive securities fraud.
It's revealing in both how a key Democrat at the time was carrying the water for Wall Street – and his loyalties were greater to the financial world than to the president of his party. Furthermore, it reveals that if Wall Street can defeat an amendment that just required honesty to potential stockholders about future company performance, then they were in charge down to the smallest detail.
WALL STREET VETOES THE PRESIDENT
It was past nine o'clock in the evening when President Clinton strode into the room. He was dressed immaculately in a suit and tie, yet he strongly resembled an older version of the Arkansas kid he'd once been, perhaps because of the way his face lit up when he saw Bruce Lindsey, his long-time friend and deputy White House counsel. It was as though [White House Counsel Ab] Mikva and I weren't even there.
The president asked Bruce whether he remembered an old visitor from northwest Arkansas. "Well he was here last night, and I offered to let him stay in the Lincoln Bedroom, and you know what he said to me?" Clinton affected an even deeper Arkansas accent: "Mr. President, I know you think Lincoln was a great president, but if he was so great, why'd we even have to fight that war?" We all laughed, and Clinton continued, "Can you believe that? Half the country wants to see the Lincoln Bedroom, and he didn't want to stay in it."
Clinton turned off the mirth like a faucet. He asked Bruce: "So what have we got?" What we had, as Bruce explained, was the Private Securities Litigation Reform Act of 1995, now before the Senate. A corporate coalition—Wall Street banks and brokers, accountants, insurers, Silicon Valley—wanted the bill, which would make it more difficult to prove securities fraud, passed intact. The bill's opponents felt it would shield securities fraud by these companies. Particularly troublesome to them were provisions regarding the statements companies make about future performance.
The bill's opponents felt that its language threatened their ability to sue for securities fraud when a company's executives talked up the price of its stock by issuing misleading forecasts while simultaneously selling their own shares. Those behind the bill, however, wanted to make it harder to prove wrongdoing in such cases. According to them, whenever a stock's price dropped, securities class-action lawyers quickly filed suits against companies in the hope that they would settle out of court rather than risk losing at trial. Wall Street and others viewed these suits as extortion. They wanted increased protection in such cases, but the bill's opponents felt that the proposed legislation gave Wall Street and the others too much leeway. Mikva, Bruce, and I believed some adjustment may have been needed, but the proposed bill set an almost impossibly high bar, giving Wall Street and the others too much protection. The White House was under tremendous pressure.
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