The issue of speeding up deferred pay got much more attention in late 2014 when President Barack Obama nominated Antonio Weiss, an investment banker at Lazard Ltd., for a top Treasury job.
Senator Bernie Sanders, who’s now seeking the Democratic presidential nomination, and Senator Elizabeth Warren blasted the selection, arguing it was a prime example of the revolving door between Wall Street and Washington that results in regulators going soft on industry. Lazard agreed to give Weiss about $21 million in stock and delayed pay when he left, income he had earned but that had not yet vested.
At the time of the battle over Weiss’s nomination, Richard Trumka, president of the AFL-CIO labor federation, sent a letter to Lazard and six other Wall Street banks arguing that accelerating payments was akin to receiving a “golden parachute for entering government service.”
Regulators benefit by hiring from financial firms, according to supporters, because an industry background provides expertise that can’t be replicated in Washington. In addition, such experience can be helpful in ferreting out wrongdoing. Often top bankers give up seven-figure salaries for jobs that pay less than $200,000 a year.
Career Building
“Most people who go into government don’t go because they want to get their stock options to accelerate,” said Peter Wallison, a former White House counsel to President Ronald Reagan who is now a fellow at the American Enterprise Institute. “They want to build a career. And they want to learn things.”
While the debate over whether companies gain when their executives join the government has long raged, it has become even more of a flash point after taxpayers were forced to bail out the biggest U.S. banks during the 2008 financial crisis.
Last year, Democratic lawmakers proposed legislation that would ban financial firms from issuing deferred compensation immediately.
“No company would offer these payments if they didn’t yield some benefits to them,” U.S. Representative Elijah Cummings of Maryland said when announcing the bill in July with Senator Tammy Baldwin of Wisconsin. There’s “absolutely no reason that someone entering government service would need a payment from any outside source as a reward for that service.”