Beltway Insider Tell-All Explains Why Wall Street Always Wins
Lobbyist and Democratic operative Jeff Connaughton’s memoir is a must-read for anyone who wants to understand money and influence in U.S. politics.
Jeff Connaughton worked for twenty-plus years as a lobbyist and Democratic operative for Senator, and now Vice President, Joe Biden and Biden’s successor Senator Ted Kaufman. His career, and eventual political disillusionment, was the subject of a profile in the New Yorker by George Packer in late 2012 and then a featured spot in Packer’s new book, “The Unwinding”.
Connaughton’s 2012 memoir, “The Payoff: Why Wall Street Always Wins” is full of quotes and anecdotes that describe, first-hand, that messy, self-serving, and sometimes ruthless political process, on both sides of the aisle. He paints an ugly picture of democracy. Connaughton’s book tells the tale of “professional Democrats”, the life-long, practical and unswervingly loyal cogs in what used to be a “machine” but is now just the struggling status quo. The memoir is the ultimate career-limiting move.
It’s time people understand why – and how – Wall Street always wins. It’s not a tale of bags filled with cash and quid pro quos. It’s more subtle than that, and in some ways best told by my own personal story and the compromises I made along the way. Party cohesion and the desire to make a munificent living in DC go a long way to enforce silence. Yet I’m willing to burn every bridge.
Packer’s “The Unwinding” tells a broader story of the “coming apart of something in the national fabric” using five characters according to a review in The Guardian. That review characterizes the Connaughton vignette as, perhaps, Packer’s most poignant.
Some of The Unwinding’s most vivid scenes concern Jeff Connaughton, a politics nerd from Alabama who is 19 when he first spies Joe Biden, then a youthful senator, and becomes a lifelong “Biden guy”, hitching his wagon to the future vice-president, despite all obstacles – not least Biden himself, who emerges from this book not as garrulous and folksy but as self-obsessed and ungrateful. (“Jeff, don’t take this personally,” an old Biden hand tells him, after the senator refuses to repay years of loyal sweat with a single phone call to commend Connaughton for a job. “Biden disappoints everyone. He’s an equal opportunities disappointer.”)
Connaughton’s “The Payoff” is a must read if you’re interested in the corrupting influence of lobbyists, the revolving door between Wall Street and those that govern and regulate the financial services industry, and the immense and ultimately untraceable amounts of money that grease government wheels at every step.
His profound disillusionment with the political process set in long before he decided to tell his tales. Jeff Connaughton joined Joe Biden’s first presidential campaign in 1987 as Deputy National Finance Director. He became Biden’s Special Assistant when Biden chaired the Senate Judiciary Committee. After graduating from Stanford Law School, Connaughton clerked for Chief Judge Abner Mikva of the United States Court of Appeals for the DC Circuit, then followed Mikva to the White House when Mikva was appointed Counsel to President Bill Clinton. In 2000, Connaughton co-founded Quinn Gillespie & Associates, a bi-partisan lobbying firm with Jack Quinn (Democrat) and Ed Gillespie (Republican).
Connaughton first met Biden in 1979 while still in college when he invited the Senator to speak at an event at the University of Alabama. Biden hooked the young Connaughton with his mastery of the crowd, an extemporaneous ninety-minute speech, his tragic personal story, and a very personal touch. In the car on the way to the airport, the young student organizer asked the Senator for a memento of the occasion:
I wanted Biden to sign something, but all I had with me was a spiral notebook with me. He wrote on the back of it:
To Jeff and the APU,
Please stay involved in politics. We need you all.
Joe Biden, USS 1979
I did for the next 31 years, with that piece of cardboard framed and hanging on the wall of wherever I lived. Sometimes I eyed it with disdain, sometimes with admiration. Ultimately, I saw it as my meal ticket…
As right-hand man to Senator Kaufman, Biden’s successor when he left for the White House, Connaughton was intimately involved in the legislative process that resulted in the Dodd-Frank Act.
For two years, Senator Kaufman and I kicked Wall Street in the groin every day. We loudly advocated the prosecution of financial fraudsters, prodded the SEC to do something – anything – about high-frequency trading and the vertiginous market swings it was causing, and pushed for meaningful financial regulatory reform. Despite our nearly fanatical dedication, we and other reformers failed.
It certainly seemed so when Attorney General Eric Holder told the Senate Judiciary Committee this past March:
I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.
I met Jeff Connaughton in early 2010, in the midst of the debate over financial reform and the Dodd-Frank Act. A profile of Senator Ted Kaufman in BusinessWeek by Paul Barrett where I was generously quoted led to a meeting with Kaufman and his staff in Washington DC. Connaughton gave me thirty-minutes to pitch my concerns about how the sins of the audit industry during the crisis were being ignored in the post-crisis reforms. I was also interested in a bill co-sponsored by Kaufman with Senator Arlen Specter to counteract the Stoneridge decision and bring back the right to private litigation for aiding and abetting by auditors, lawyers and other professional in securities class actions.
I wrote after the meeting with Kaufman:
Most regulators and legislators avoid talking about wholesale change to the structure of the accounting/audit industry. It seems too big a task and untenable. The refrain I hear most often both when attending conferences and events is, “We can’t get rid of the audit opinion. It’s required.”
Lack of vision and loads of cash. These are the fundamental obstacles to serving investors and other stakeholders with financial reporting that can be trusted.
In an interview with Connaughton via email for my Forbes.com book review, he told me, “Because of Chris Dodd, [the Specter bill] never had a prayer. That was one of the amendments that never even got a vote.”
I asked him about the bi-partisan lobbying by the audit industry and the corrupting influence on true financial reform of the audit industry’s money. I believe auditors spend money well for themselves and their clients’ interests. Connaughton agreed.
Connaughton has done a lot of thinking about the man he became in Washington DC.
I was willing to compromise my integrity — to endure the slights and the knowledge that he never brought me into his inner sanctum – to be a “Biden guy” for decades, because in Washington you have to be connected to a powerful figure. It’s like a feudal system with lords and serfs.
I wanted to be my own harshest critic as symbolic of something larger: If you stay in Washington long enough, you make little compromises to your integrity daily and, at least in my case, the next thing you know you’ve lost yourself in the culture of the swamp.
We may now be seeing a change of heart on the part of Attorney General Eric Holder and the administration regarding the prosecution of financial crisis major actors.
Holder told The Wall Street Journal on Monday of this week that his message to prosecutors has been consistent and strong all along:
“Remain aggressive and pursue these kinds of cases.”
When the reporters asked Holder specifically about the now significantly besieged JP Morgan and its chief executive, Jamie Dimon, Holder added:
No individual, no company is above the law. We don’t investigate companies based on who a CEO is, but we don’t avoid investigating companies based on who the CEO is, either.
Maybe Connaughton, and the rest of us, now have good reason to keep our hope for justice alive a while longer.
An earlier unedited version of this review first appeared in my column at Forbes.com on September 4, 2012.
