Personnel Is Policy

The vital importance of appointing people who work—and think—in the public interest.

By Jeff Hauser David Segal

Tagged CorruptionDemocratsElections

We’ve become accustomed, watching the Democratic debates, to hearing the moderators focus on the practicability of candidates’ plans to move to Medicare for All, reform immigration policy, and fight gun violence. Make no mistake, these bills are important. They’re the type of policies a functional Congress would advance, and markers of a candidate’s vision for the country. But the media’s near-exclusive focus on these legislative proposals is deeply flawed.

If a Democrat wins the White House in 2020 she or he is likely to enter office facing a U.S. Senate still controlled by Mitch McConnell—the shameless obstructionist who in 2010 declared his party’s top priority was not to help Americans recover from the Great Recession, but to make Barack Obama a one-term President.

Even if Democrats take back the Senate and ditch McConnell’s favorite tool of obstruction, the filibuster, it still wouldn’t be smooth sailing. A progressive President should of course fight hard to advance strong legislation. But even in a best-case scenario, the limits of what Congress can achieve will likely be set in large part by the one or two Democratic senators most opposed to reform. Imagine, for example, the climate legislation that pro-coal Senator Joe Manchin would support, or the financial regulations that would win the vote of pro-Wall Street Senator Kyrsten Sinema.

A hyper-focus on legislation ignores perhaps the most pivotal decisions the next President will make: the appointments they make to top positions within the executive branch. The policies these officials push for can touch on nearly every aspect of our economy and broader society.

A President’s Most Important Choices

You see, executive branch personnel hold the keys to wide-ranging authorities—ones already on the books. They just need the willingness to apply these untapped powers to today’s problems and the backbone to stand up to powerful industries while doing so.

For decades, Democratic voters and activists have treated personnel as an afterthought, but corporate interests—often working alongside elected Democrats—haven’t. Even presidents whose campaigns have focused on taking on the powerful have found space for corporate insiders in their administration’s top roles.

But that is starting to change. Progressives have learned from the failures of some of Democratic administrations’ worst appointees. Mary Jo White, Obama’s pick to lead the Securities and Exchange Commission, is an infamous example. White was notoriously weak on Wall Street, and mired in conflicts of interest after spinning through the revolving door, having defended big banks at a white shoe law firm. She even blocked a proposal to help protect the public from undisclosed corporate “dark money” in elections. (White has stayed true to form after leaving government, representing the Sackler clan against lawsuits blaming the Purdue Pharma family for pushing opioids like OxyContin onto millions of Americans.)

But when White pressured Obama to fill an SEC vacancy with Covington & Burling partner Keir Gumbs, whose practice involved helping companies mask their political spending, progressive opposition successfully torpedoed that revolving-door nomination in favor of a public-interest pick. Gumbs has now decamped for Silicon Valley, where he serves as a top lawyer at Uber as it takes legally dubious approaches to avoid giving its workers the protections owed to employees.

The predations of the Trump Administration only drive home the damage the wrong people can do with executive power. The coal lobbyist President Trump put in charge of the EPA replaced the strong Clean Power Plan with the pro-fossil fuel “Dirty Power Plan.” The former Verizon lawyer leading the Trump FCC killed net neutrality—a priority for his former paymasters. And don’t forget the laughably unqualified Betsy DeVos, whose years bankrolling Republican campaigns brought her control of the Department of Education, where she installed for-profit college lobbyists and ended debt relief for most students scammed by exploitative for-profit schools.

Ronald Reagan’s director of personnel, Scott Faulkner, once said, “personnel is policy.” During the 1980 presidential transition, hard-right conservatives led an internal insurrection against moderate Republicans so fierce it was analogized to the Korean War’s Battle of Inchon. It was just as pivotal, too. The conservative faction gained control over hiring and was able to set the course of the Administration.

Top Republicans have continued to aggressively employ these same levers of power. Take the case of Senator Richard Shelby, the former leading Republican on the Senate Banking Committee, and his so-called “Shelby Mafia.” Shelby has served as a patron for the bulk of appointees to leading financial regulatory institutions during Trump’s tenure. Top Senate staffers for Shelby have recently been elevated to become chair of the Federal Deposit Insurance Corporation, director of the Federal Housing Finance Agency, the two newest Republican SEC commissioners, and chair of the Public Company Accounting Oversight Board. Ensuring that appointees are on-program is such a priority for Republicans that Andrew Olmem, another former Shelby staffer, was installed as special assistant to the President for financial policy—where he helps decide who will be appointed to high executive posts overseeing finance.

While Republicans prioritize the elevation of proven ideologues to these posts, Democrats’ approach stands in stark contrast. Obama recently had, and Senate Minority Leader Chuck Schumer currently enjoys, a controlling position over selecting regulators. At best, they have sought to split the difference between the wants of the elite funder class and the leanings of the populists who make up the party’s base. At worst, they have simply allowed the agencies to become organs of the industries they are meant to regulate. During the 2008 transition, for instance, Wall Street quickly won the fight for the soul of the incoming Administration, seizing control of the executive branch functions that would steer the fiscal response to the financial crisis and the re-regulation of the finance industry.

Democrats should, instead, approach these appointments just as energetically as the GOP, but on behalf of the public interest. It will not be enough for the next President to merely replace Trump and remove his crony Cabinet. Restoring people’s faith that government can be a force on their side requires urgently repurposing the machinery of government to advance the public interest. Part of the task is blocking the worst, most conflicted individuals, the ones who treat government as a means to advance their own interests or those of their past—or future—employers.

Beyond that: We need executive branch officials with a proven track record of effectively advancing the public interest. We believe there are a few characteristics that each of the next Democratic president’s appointees should meet.

Good Personnel Means Good Policy

1) Proven Commitment to the Public Interest

First, good personnel must have a professional track record of effectively advancing the public interest. Their background might include work in federal or state government, in academia, at a think tank or advocacy organization, as legislative staff, or in providing direct services to affected communities.

Too often, nominees are drawn from the confines of the Washington cocktail party circuit. But some of the best personnel have come from outside it. Take Sarah Bloom Raskin, Maryland’s commissioner of financial regulation before joining the Federal Reserve Board of Governors and then serving in the number two role at the Treasury Department. Financial reformers hailed her as a “champion” after she led efforts to restrict executive compensation at big banks, took a sometimes lonely position seeking to focus the Obama Administration’s attention on the struggles of families facing foreclosure, and combated abuses by student loan servicers.

Any official who is effective at taking on powerful industries like Pharma, Wall Street, or Big Tech can expect to face blistering criticism. So equally important is a readiness to withstand personal criticism from powerful people. Phyllis Borzi, assistant secretary for employment benefits security during the Obama Administration and the architect of the “fiduciary rule,” comes to mind. The retirement advisory industry vehemently opposed the fiduciary rule’s common sense requirement that investment advisors make decisions in their client’s best interest—not based on kickbacks or conflicts of interest. Borzi refused to stand down in the face of years of spirited attacks from industry. It was thanks to her persistence that the fiduciary rule eventually saw the light of day.

Commitment to the public interest also means being willing to fully serve out one’s term in office. Positions of public trust are not an academic sabbatical or a quick credential to add as a resume line. Former SEC Commissioner Kara Stein showed the importance of staying on to fight under a hostile Administration, serving out her term through early 2018 even as many of her peer officials resigned early to take plum new jobs.

2) Ability to Creatively Apply the Tools of Government

The right personnel will also share a second trait in common: having shown themselves to be effective and energetic in leveraging whatever tools are available to them to drive change. The exact set of authorities of an independent agency commissioner or executive department head will be new for virtually any appointee. Quickly learning the contours of these powers and figuring out creative ways to apply them is essential.

Commissioners Rohit Chopra and Becca Slaughter at the Federal Trade Commission exemplify this trait. They’ve explored how the agency’s untapped rulemaking authority could be used to take down “pay-for-delay,” when pharmaceutical companies maintain inflated drug prices by paying off competitors to keep cheaper, generic drugs off the market.

Their history shows this shouldn’t come as a surprise. Chopra assertively marshaled the powers of the Consumer Financial Protection Bureau to hold predatory for-profit schools accountable, then joined the Education Department as it pushed dust off its authority to secure debt forgiveness for tens of thousands of students cheated by for-profit colleges. For her part, Slaughter had just created a bold trust-busting plank of the Democrats’ 2018 “Better Deal” agenda before joining the Commission, one that would “overthrow a legal paradigm that’s existed for about 40 years” and use antitrust law to “advance a populist economic agenda.”

Effective leadership also requires motivating agency staff to carry out a top official’s vision. Gina McCarthy did this while using the EPA’s Clean Air Act powers to implement the climate-protecting Clean Power Plan. This ability was true to form. While in Connecticut government, she sidestepped federal climate inaction by helping create the Regional Greenhouse Gas Initiative—leveraging state authorities to cover a substantial portion of the country with a comprehensive framework to cut climate pollution. Both efforts took the leadership and management skill to hire the right people and get existing staff to buy in to a new vision. McCarthy earned enormous popularity among EPA staff along with a reputation for her “ability to squeeze the best out of people.”

3) Reflectiveness of the Country as a Whole and Willingness to Engage Affected Communities

Last, it is critical to name appointees who are reflective of the country as a whole and engage with the broader public. Diversity of race and gender should of course be a given in the next Democratic administration—especially after white men filled the top ranks of the Trump Administration at staggering rates. But progressives should also go a step further to restore ordinary Americans’ confidence that government is fighting for them.

Naming officials with different life experiences, educational backgrounds, and geographic roots brings valuable perspectives into government. And this can translate into a government that is more responsive to the public’s concerns. Rohit Chopra is the first FTC commissioner in years not to be a lawyer by training. Yet despite this supposed deficit, he has helped drive a level of attention to the agency’s work unseen in decades by encouraging membership-based organizations to give public comment and otherwise engage with the agency.

A willingness to listen to mass movements is vital as well. When the Fed Up campaign began to bring low-income workers to the tony Federal Reserve symposium in Jackson Hole, Wyoming, many elite economists turned up their noses. It was Janet Yellen, the first woman to chair the Federal Reserve Board of Governors, who broke with precedent to hear out the concerns of these activists. While no official is perfect, many of Yellen’s best actions arose from her atypical willingness as Fed Chair to engage in earnest with movements. Millions of workers may have her to thank for the Fed not needlessly hiking interest rates to respond to Fed watchers’ odd consensus at the time that inflation should have been her top concern. An effort to stave off nonexistent inflation by raising rates would have satisfied elites while choking off job growth, just as many workers were first starting to feel the economic recovery.

4) Excited to Wield Structural Public Power against Extractive Corporations

Ideal appointees will believe that public power derived from free and fair elections is more, rather than less, legitimate than the power held by corporations with extractive business models. Be it wealth based on manipulating the tax code, building a monopoly, taking advantage of the federal student loan program, or engaging in regulatory arbitrage a la Uber, this era’s consolidated wealth is often derived by undermining the rule of law. We need a government led by people excited by the opportunity to fight back on behalf of ordinary Americans against enormously wealthy grifters.

In particular, regulators should recognize that structural solutions and bright-line rules are generally preferable to technically complex solutions: The former are broadly legible, straightforward to enact, and easier to enforce; the latter tend to obscure matters from the general public and remove them from the realm of politics, are harder to implement, and are easier to evade. Further, technocratic intricacy tends to reflect excessive concern with avoiding “false positives” rather than ensuring society is protected adequately – a concern that is often fueled by close social ties between regulators and the potentially regulated.

That’s likely why regulators have a history of approving mergers while instituting complex divestiture provisions or regulatory regimes to attempt to manage harms that would more easily be prevented by simply disallowing the mergers to being with: For instance, the Obama Administration approved the 2011 Comcast-NBC merger while requiring it to abide by net neutrality principles for seven years. Those seven years are up, Comcast is the leading wireline broadband provider by market share, and now it is free to warp information flows in its own favor.

In November 2019, Obama’s Democratic appointees to the Federal Reserve (Lael Brainard) and FDIC (Martin Gruenberg) joined with Republicans to approve the Suntrust-BB&T merger. These Democratsfavored modest concessions over outright opposition to the largest post-crisis bank merger, despite substantial systemic risks that Gruenberg laid out at length even as he voted yes.

As the Trump Administration seeks to unwind the post-crisis Volcker Rule, prospective regulators must incorporate into their understanding of it the fact that, no matter the noble intentions of those who drafted it, its complexity and the attendant byzantine implementation process meant it took years too long to put in place and is unduly vulnerable to evasion and being unspooled. Vigilant regulators will understand that structural separations like a restoration of Glass-Steagall, size caps, and the prevention of mega-mergers are the best way to rein in the power of Wall Street firms and the risks they pose to the financial system and real economy.

Keeping Out the Bad

While searching out the best possible nominees, progressives should stay vigilant against corporate insiders clawing their way into the next administration. The next Democratic transition team, senators exercising their advice-and-consent role, and grassroots advocates should keep a skeptical eye out for the following.

1) Representing Interests at Odds with the Public Good 

For too long, professional experience advancing the interests of companies positioned against the public good has been seen as a neutral credential. Many political figures viewed this background as evidence an individual was “smart,” understood the industry, and wouldn’t rock the boat.

Lanny Breuer is a prime example of why this belief could not be more incorrect. Breuer spent most of his career defending corporations against government scrutiny when they got wrapped up in wrongdoing. Breuer couldn’t seem to shake that approach when given the task of leading the Criminal Division of the Justice Department in the wake of the financial crisis. His actions suggested, and a speech of hisconceded, that the possibility “a company or bank might fail if we indict” a bank executives (the type of people he spent years defending) influenced whether he would or would not indict a bank.

Breuer is as responsible as anyone for the pitiable fact that no bankers went to jail after the crisis. His former benefactors noticed. Breuer’s old firm Covington & Burling eagerly created a brand new “vice chairman” position specifically for him to step into when he grew tired of merely upper-middle-class government compensation.

Fortunately, picks with these sorts of backgrounds have started to receive tough scrutiny. Thanks to concerted progressive opposition, for example, tech lobbyist and former Schumer Chief of Staff David Hantman was passed over for an appointment to the tech watchdog FTC, which he had previously urged not to scrutinize tech companies.

No one would say a hardened criminal is the best pick for police chief because they “understand the system.” There’s scarcely more reason to think an expert in helping companies skirt regulation would make the best regulator.

2) Having Compromising Ties to Industry

Stunningly, many officials maintain compromising financial ties and conflicts of interest with the industries they regulate. For example, while SEC Chair, Mary Jo White had an ongoing interest in the profitability of her former Wall Street law firm Debevoise & Plimpton, which had promised her half a million dollars each year in retirement benefits for as long as it remained profitable. Today, she is once again back at Debevoise. Similar concerns arise for elected officials who have raked in campaign money from special interests before being named to an executive branch role overseeing their former benefactors.

A skeptical eye should also be cast on those whose companies gift them a “golden parachute” of up to millions of dollars upon leaving their firm for government. That encompasses people like Obama-era Treasury Secretary Jack Lew and Katheryn Rosen, a candidate for a seat on the SEC last year. Rosen had received $800,000 in deferred income from J.P. Morgan Chase when she left to work for the House Financial Services Committee as it wrote Wall Street reform legislation after the financial crisis.

Companies have every incentive to cultivate continuing relationships with their executives who enter government. But after consistent progressive agitation against this corrupting practice, Secretary Hillary Clinton announced during her 2016 presidential campaign that she supported a categorical ban on golden parachutes for executive branch officials. Senator Elizabeth Warren’s ethics bill would also require senior executive and legislative branch staff to divest their assets into conflict-free mutual funds instead of retaining individual stocks and assets, whose value might rise or fall based on their actions—they could be rich, but not biased. The next nominee should accept and build on these stances.

When financial conflicts require an official to recuse himself from a large number of matters his agency covers, he quite literally cannot do that portion of his job. Consider the current head of consumer protection at the FTC, who has to leave the room any time investigators discuss inquiries into Facebook or many other significant companies. Is it a surprise that the agency’s enforcement action against Facebook’s privacy violations was panned by Republicans and Democrats alike as a “parking ticket”?

3) Taking Harmful Policy Positions

Individuals whose policy positions conflict with the key priorities of the grassroots coalition that elected a President should not be named to key roles. This seems like common sense, but recent history shows it bears repeating. President Obama appointing Ken Salazar to be Interior Secretary, after a career in which he repeatedly supported opening public lands to coal and oil extraction, was a needless betrayal.

Nor is a lack of clear policy positions acceptable. While some judicial picks seemingly aspire to be a cipher with no identifiable public positions before reaching the bench, a presidential nominee who lacks clear positions or gives evasive responses during her confirmation process raises a bright red flag.

4) Using Public Service for Personal Gain

Finally, many potential appointees do not have the character and orientation toward public service that is necessary of a steward of the public trust. Some officials have treated government roles as little more than rungs in their ladder of career advancement, making them more valuable to a lobbying shop or law firm down the line. This careerism may be good for the individual and is certainly helpful to industry efforts to capture government. But the American public loses out.

The next administration should look beyond those who have spun around and around through the revolving door, leveraging positions of public trust for personal gain. Michael Froman typifies the type of background to avoid. He revolved from the Clinton Treasury Department to Citigroup (which continued to pay Froman while he filled the Obama Administration with Wall Street insiders as part of the 2008 transition team), then back to government to push the Trans-Pacific Partnership, which most progressives see mainly as a massive corporate giveaway, as U.S. Trade Representative. Now, he’s in the financial industry once again, at MasterCard.

Froman exemplifies another unseemly practice that’s been tolerated for far too long in Washington: treating key positions as patronage jobs for big campaign donors. Froman introduced then-Senator Obama to Wall Street rainmakers like Robert Rubin, raising hundreds of thousands of dollars in the process. Hacked emails show Froman effectively selected most of Obama’s Cabinet. Another big donor, Donald Gips, ran hiring for the White House in 2008 and 2009. Eighty percent of top Obama bundlers received senior government positions, according to one study.

President Obama’s first Federal Communications Commission Chair Julius Genachowski had raised half a million dollars for Obama (they’d been law school classmates) before beginning a chairmanship advocates blasted as full of “broken ideas” that “catered to corporate interests.” His opposition to strong net neutrality rules helped open a saga that has spanned the FCC, courts, and Congress for more than a decade, with many chapters yet to be written. These roles are too critical to be put up for sale. (Genachowski now serves as a Managing Director at private equity powerhouse The Carlyle Group, where he oversees mergers in the telco, media, and tech industries.)

Yes, There Are Plenty of Qualified Nominees

Any effort to dislodge undue corporate influence in government receives criticism. This one is no different. The tired pushback often boils down to a belief that enacting high standards for presidential appointees will leave no qualified choices—as if knowledgeable people are exclusively found in corporate boardrooms and lobbying firms.

Far from sidelining relevant expertise, drawing from a broader pool of backgrounds can inject valuable new perspectives into government. And asserting that state regulators, senior Senate committee staffers, or academic and think tank researchers don’t understand their issues of expertise strains belief. Furthermore, room can be made for technical issue experts without opening the door to those with years in industry at the executive or business interest level, for whom the “expertise” excuse is most often deployed. Remember, too, that every key official will have staff supporting them and focusing intently on technical details.

The State Department offers a promising example. It has a long traditionof elevating career Foreign Service Officers into senior leadership positions, and the second-in-commandunder both Secretaries Clinton and Kerry drew on 30-plus years of diplomatic experience. Promoting from within takes advantage of expertise developed on the job and sends the message that revolving in and out of government is not the only path toward advancement. In addition to adopting this model in other executive branch departments, the future President should consider applying the lesson in other parts of the State Department. Ambassadorships can be filled with experienced civil servants rather than high-dollar donors, a practice that’s hardly distinguishable from quid-pro-quo corruption but is nearly unchallenged in the federal government.

Furthermore, the skepticism raised by one’s past professional ties creates only a rebuttable presumption, which can be outweighed by enough positive evidence. Consider the frequently cited example of former Commodity Futures Trading Commission Chair Gary Gensler. Even after he helped former Senator Paul Sarbanes clean up the accounting industry following the Enron scandal, many progressives had justifiable qualms about Gensler’s nomination for CFTC chair at the time, based on his years in the finance industry. But his later tenure transforming the CFTC from a backwater into a bold and aggressive regulator can outweigh those concerns were he to be nominated again in the future. He reined in complex derivatives like the ones that fueled the financial meltdown, even taking on the Obama Treasury Department to push for stronger regulation of “over-the-counter” derivatives. And he “went to the mat” to block industry efforts to water down the Volcker Rule that restricts banks from gambling with their customers’ money. Corporate ties don’t mandate someone acts in bad faith, but they do make it more likely, and so sharp observers take both general and specific evidence into account with any potential appointee.

Beyond keeping individuals with conflicts of interest and harmful policy positions out of government, progressives can also expand the pool of possible appointees. Looking to non-traditional experience or credentials exponentially increases the number of possible picks compared to narrow establishment circles.

Some factors that have been thought of as disqualifying in the past should be reconsidered. Personal debt from student loans or real-world financial struggles would likely have doomed a nominee in past vetting processes, but such picks may be able to better understand the struggles of the people they serve. Contrast this with wealthy individuals who didn’t pay their taxes, like former Senator Tom Daschle and Tim Geithner.

While rooting out influence peddlers is a laudable goal, relying on the deeply flawed federal lobbying registration guidelines is the wrong way to do so. Simply banning that designation sweeps in those it shouldn’t—like a non-profit advocate for the AARP—and misses those it should—such as corporate “shadow lobbyists”who have no ethical qualms with evading registration, even if it violates the spirit of the law.

Finally, Trump’s proto-authoritarianism has hopefully exposed the downsides of prioritizing “loyalty” to the President, or its gentler cousin, “being a team player.” Too many progressive champions were blocked from the Obama Administration for having been willing to criticize their own party when it was off-base.

So, What Do We Do Next?

The progressive movement is more intensely energized than any other moment in a generation.

That energy brought widespread success in the polls in 2018. While we should never take anything for granted, we have seen a sea change in the progressive world since Obama’s first term. There is now an appreciation that the grassroots must mobilize to elect the right person—but also to keep pushing them once in office. The list of nominees whose troubling track records have brought them down under progressive opposition only continues to grow. And the Facebook and hedge fund executives rumored for Treasury Secretary three years ago would be unthinkable today. The focus on presidential appointments is broadening, too, with prominent judicial activists pushing to rule out naming corporate law firm partners to the top federal courts.

Democrats running for President need to be clear about their philosophy on personnel to be viewed as credible. The next President will likely make most of his or her progress in the executive branch, so their choice of personnel to fill key positions is perhaps the most consequential decision they will make.

A note of caution as well: Appointments have long served as a “back door” for corporate interests to undermine the progressive policies candidates promised on the campaign trail. If a candidate won’t talk about appointments, it’s reasonable to wonder why. Are they propping open that back door to put the brakes on progressive change? Is this how they’re reassuring corporate donors at closed-door fundraisers? Publicly affirming the vision of presidential personnel that we’ve laid out can show a candidate is serious about following through on their promises.

Ultimately, it’s up to us as voters. We can build on the advocacy that prompted Secretary Clinton to commit to prohibiting her team from taking Wall Street golden parachutes upon entering government.

If you care about climate change, ask who the candidate will put in charge of the EPA and Energy Department. Prioritizing health care? Who will run the Department of Health and Human Services? Want to turn back income inequality? Ask about the Treasury Department and Federal Reserve.

This is how we can get a President who can not only win on a platform of bold progressive change on November 3, 2020, but stand ready to implement it on January 20, 2021 and every day after.

Read more about CorruptionDemocratsElections

Jeff Hauser is the Executive Director of the Revolving Door Project at the Center for Economic and Policy Research.

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