The top staff lawyers in charge of crafting the legislation in both chambers of Congress have both left Capitol Hill for K Street, as has a Securities and Exchange Commission staffer who helped implement the law. This is "private-sector job creation, Obama-style," as blogger Ira Stoll drolly notes.
The Great Wall Street Cashout is another example of how President Obama's agenda of bigger government -- and congressional Democrats' style of leaving the key details up to executive-branch regulators -- accelerates the revolving door and breeds crony capitalism.
Dodd-Frank was supposed to prevent future bailouts, tamp down on excessive risk taking by financial institutions and, through a new agency called the Consumer Financial Protection Bureau, protect regular people from predatory lenders or harmful and complex financial products.
Then-Sen. Chris Dodd, D-Conn., was banking committee chairman and the Senate sponsor of the bill. Banking committee chief counsel Amy Friend was a chief aide in crafting the Dodd-Frank bill, and she also played a central role in crafting a housing bailout bill (known as "The Bank of America Bill") in the summer of 2008 and the Wall Street bailout that autumn.
Dodd retired from the Senate in January to make millions running the Motion Picture Association of America (Hollywood's lobby shop) and Friend also monetized her public service -- particularly her role in writing Dodd-Frank. She became a managing director at Promontory Financial Group, which describes itself as "the premier global financial services consulting firm."
Promontory, founded by longtime Democratic operative (and maximum donor this year to Obama and Dodd's House counterpart, Rep. Barney Frank) Eugene Ludwig, bragged that Friend was instrumental in shaping Dodd-Frank, and that at Promontory she would help clients with "the regulatory implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which, at 2,300 pages, is one of the most complex and wide-ranging overhauls of the financial regulatory framework in decades."
So Friend's job is to use her firsthand knowledge of the bill and connections to power (in addition to Capitol Hill connections, Friend visited the White House at least five times during the Dodd-Frank process) in order to help banks and Wall Street firms navigate and tweak the new regulations. That's putting public service experience to work for special interests.
Friend's House counterpart did the same thing. Daniel Meade came to serve as chief counsel on Barney Frank's Financial Services Committee from K Street's Hogan & Hartson. After passing Dodd-Frank, he went back to K Street (the firm is now called Hogan Lovells) to help the regulated entities deal with the regulations.
Hogan Lovell's announcement on Meade's return called him "a principal draftsperson of substantial portions of the Dodd-Frank Wall Street Reform" and assured clients, "At Hogan Lovells, Meade will resume his practice representing financial services entities and other entities impacted by the regulation of those entities in connection with a broad range of regulatory and transactional matters, including issues related to the Dodd-Frank Act. ..." Credit Suisse is a Hogan client, as are mortgage insurance companies.
Then there's SEC official Jordan Thomas, who cashed out to law firm Labaton Sucharow. Thomas will start Labaton's "Whistleblower Protection Practice," a role for which he is particularly fit, the firm explained in its release: "Notably, Mr. Thomas played a leadership role in the development and implementation of the SEC's Whistleblower Program, which was enacted by the Dodd-Frank Act."
It might not be fair to blame Friend, Meade, Thomas or the dozens likely to follow in their footsteps for finding the most lucrative use of their skills and experience. But this Great Wall Street Cashout -- parallel to the Great Health Care Cashout that has already sent lawmakers and staffers scrambling to represent the drug makers, hospitals and insurers affected by Obamacare -- reflects bad incentives. Banks would feel less compelled to hire these legislative authors if industry faced simpler, fairer, or cleaner laws and regulations (not to mention less-intrusive or more laissez-faire legislation).
Consider the moral hazard created as those left behind on Capitol Hill and the SEC watch their colleagues triple their salaries thanks to their role in crafting major legislation. Everyone will want a hand in some major regulation or subsidy bill affecting a deep-pocketed industry.
If you're looking for Dodd-Frank's big winners, they're easy to spot: They're the ones passing through the revolving door.
The big losers, according to a Bloomberg Government Study: 23 of the largest public financial companies in the United States face $22 billion in additional expenses and lost revenue, and likely a good deal more once all the regulations are put in place.
Timothy P.Carney, The Examiner's senior political columnist, can be contacted at email@example.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.