WITH ONLY WEEKS LEFT in Ted’s Senate term, I received an e-mail from the staff director of the Permanent Subcommittee on Investigations asking me to fill in for her on a panel entitled, “Financial Crisis and Financial Crimes,” held at the New York Fed on Election Day, 2010. It was an all-day seminar cosponsored by the New York District Attorney’s office, and the organizers expected three hundred Wall Street attendees. This would be walking into the lion’s den to talk about fraud at the heart of the financial crisis and the failure of federal law enforcers to prosecute it effectively. I sucked in my breath and agreed to go.
I was to follow Neil Barofsky, the Special Inspector General for TARP, himself no shrinking violet at poking Secretary Geithner and the Treasury Department. So I was emboldened that Barofsky would set the tone, and I could put the hammer down as hard as I wanted. On the other hand, I didn’t want the speech to be a polemic, subject to counter-attack. It had to be factual and reasoned and not go beyond what I could defend. I was looking forward to giving a speech myself. Ted had tried his best to stay the most humble of men, but two years as a senator (this time with me always staying behind) had taken him to a higher plane. Now it was my turn to speak truth to power.
I opened with a joke about how I’d received two invitations for that day: one to speak on Wall Street about financial crimes and the other to help get out the vote in a tight Senate race in West Virginia. I said I’d thought about it, and I’d much rather be talking to Wall Street about fraud than going door-to-door in West Virginia (I’m from Alabama, and we never miss an opportunity to make a joke at West Virginia’s expense).
Then, I launched into four questions. First, was there fraud at the heart of the financial crisis? Second, has the law enforcement response so far achieved effective levels of deterrence against financial fraud? Third, are federal law enforcement agencies sufficiently capable of detecting fraud and manipulation, particularly in markets that are increasingly complex? And finally, should Wall Street itself care about all this? In short, I said, my answers would be yes, no, no, and yes.
I wasn’t far into my fifteen-minute presentation when I noticed you could’ve heard a pin drop. The audience was listening to me, as my points came straight and fast about how no American should believe that Wall Street is effectively policed. That the Justice Department evidently was failing where the Permanent Subcommittee on Investigations and the Lehman Brothers bankruptcy examiner had succeeded in putting together convincing evidence of fraud. That the SEC was letting firms off with parking-ticket fines rather than holding individuals accountable. That the regulatory agencies had fallen so far behind in monitoring increasingly complex trading markets that we have no systems in place even to detect what might be rampant manipulation by high-speed traders. And that after a devastating financial crisis, the flash crash, and a woefully inadequate governmental response, investors justifiably had lost confidence in whether Wall Street operates lawfully and their investments are dealt with fairly.
Then I came to my close: “Senator Kaufman’s term, and my time as a Senate staffer, ends in twelve days, but this is not a fight for one senator to wage. These are questions that go to the foundations of the rule of law and America’s future economic success. For the common good, I hope you answer them well.”
As I walked through the crowd afterward toward the exit, every regulator in the audience—from the FDIC, HUD, and the New York District Attorney’s office—came up and congratulated me. Among the Wall Street crowd, I heard two comments as I made my way to the door: “We appreciate someone coming here and not wasting our time.” And: “That took guts.” Afterward, I stood at the corner of Wall Street and Nassau and felt exhilarated. I called Ted. We did it. We had tried our best for two years. And by my lights I’d just told the clearest truths in the most effective way I could to Wall Street itself, in the New York Fed, no less. It felt good.
Another moment passed and another thought came to me, as I looked around and noted again just where I was standing. I didn’t remember that Nassau was a downtown street, so prominent where it intersects with Wall, and wondered if I should move to the Bahamas. In reality, Ted and I had achieved very little. And, I thought, “Wow, I just blew myself up on Wall Street.” I don’t think I’ll ever again be part of the Permanent Class. What will I do next?
When I decided to leave QGA to join Ted at the beginning of his Senate term, I had felt a diabolical tug. I thought I might pull my punches, go through the motions with Ted, be a managerial chief of staff, not upset any apple carts, solidify my reputation in town as a Biden guy, and then go right back to making big bucks while Biden was still vice president. If Ted and I weren’t genuinely outraged that our system had failed so egregiously, that’s probably what I would’ve done.
I felt the tug again as Ted’s term was ending. I knew I could go back into lobbying, certainly back to QGA. And more and more lobbyists were working below the radar as solo practitioners, picking up a few clients at lower fee levels than those charged by the larger firms. Or maybe I could be the head of a DC office for a major corporation, one whose brand I could feel positive about. Then I envisioned my tombstone: “Jeff Connaughton, Corporate Lobbyist.” I didn’t want that to be my epitaph. And I was tired of pretending to be close to Biden. That’s one fraud I could police.
When I was inside the lobbying world, I liked my colleagues and clients (at least most of them), and it was easy to rationalize that I was advocating for reasonable positions. After all, we live in a capitalist economy, and each corporation is trying to maximize its value to its shareholders. Moreover, as a lawyer, I’m trained to be a zealous advocate for my clients. But it’s one thing to be a frog in a pot on a stove that doesn’t notice the water is getting hotter; it’s quite another to jump back in when the water is at full boil. It was only after going back to the Senate and seeing how corporate interests completely overwhelm the public interest—in numbers, access, information, analysis, hiring through the revolving door, and most especially, fundraising—that it started making my stomach ache. While I enjoyed working at QGA and value greatly the friendships I made in lobbying, far more so than with the politicians I’d met, the system itself now seems deplorable.
This time, as the revolving door swung round, I knew the country was still suffering, while Wall Street banks had rebounded with taxpayer help, become profitable and bonus-laden again, and were, in my view, staggering inexorably toward yet another financial crisis. If I rejoined that system, it would be a conscious decision to put self over country. If I went back, it would be an act of pure greed, just to gild my personal lily.
Ted had wanted to start a not-for-profit to continue his work on financial issues, with me as the executive director. “I’ll fight Wall Street,” I told Ted, “But I’m not going to fight the Obama-Biden administration and Wall Street.” The American people elected Obama and Biden, and Obama had picked his regulators. Writing comment letters to those regulators and op-eds, staffing Ted as he continued the fight, just seemed inadequate. It was more of the same, operating on a losing scale when I already believed the Obama administration was hopelessly compromised on these issues. Tepid as the Democrats had been, the Republicans wasted no time urging Obama’s former Wall Street funders to switch sides. When it comes to Wall Street, America has no meaningful two-party system of governance.
After twenty-three years in Washington I started thinking about leaving. I wanted out of Ted’s shadow and didn’t really want to return to Jack’s.
Ted was receiving accolade after accolade. 60 Minutes featured him in a story on the rise of high-frequency trading. He appeared on The Daily Show with Jon Stewart. E. J. Dionne wrote a fawning column urging President Obama to keep Ted working somewhere in his administration. Biden introduced him in Delaware as the “best two-year senator in the history of the U.S. Senate.” It was typical Biden hyperbole, but Ted deserved the praise.
That same weekend, I visited my parents’ house in Alabama. In all thirty years, my parents had never met Biden. But they’d written $1,000 checks for his campaigns in 1987, 1990, 1996, 2002, and 2008 and for his PAC in 2006. After I told my parents that I was leaving Washington to live in Savannah, my eighty-seven-year-old father said to me, “Biden never offered you a job? I can’t believe after all those years of blood and sweat for Biden he never even gave you a crumb.” I didn’t even know how to put any context around that for him, it’s just too complicated. I’d learned the hard way: loyalty for loyalty’s sake is a fraud. I was guilty.
After that, I saw Biden only one last time. It was at the Kaufman Senate good-bye party. Ted had already received so much praise that I told everyone I wanted the party to be about the staff, not Ted. We’d all worked very hard, and we deserved a chance to pat each other on the back. Someone must have leaked word to Biden, because in the middle of my emotional farewell toast to the staff, in walked the Vice President of the United States. I kept speaking as though he weren’t there, while he and his entourage slipped quietly into the back of the room. Then I introduced Ted for his speech. Predictably, Ted handed things over to Biden. And equally predictably, Biden went on and on about how great Ted was and what a great senator he’d been. And then Biden was gone. Off somewhere being vice president, the second most powerful man in Washington. He didn’t once mention my name and left without shaking my hand.
In Washington, as a Professional Democrat, I could count on the corporate marketplace to pay me for the value I provided in access, insights, strategy, influence, hard work and—most especially—results. In politics, the box comes with no guarantee. When I finally opened mine, it was empty.