Save the outrage: The news that Lawrence Summers, Barack Obama’s top economic advisor, collected a total of $7.7 million from hedge funds and Wall Street outfits in 2008 shouldn’t surprise anyone. The paved-with-gold revolving door between Wall Street and Washington has been swinging for years, and the Obama administration is no different from any of the crowds before it.
“It’s the mythology of the Beltway,” one Houston energy analyst said recently. “You are hopelessly compromised if you are anywhere close to the oil industry.”
Summers, who heads the National Economic Council and made millions from his Wall Street connections, including $135,000 from Goldman Sachs for one day of work in April 2008, has plenty of company. Rahm Emanuel, Obama’s chief of staff, raked in $16.2 million in three years as investment banker, during a brief window between the Clinton administration and his election to the House of Representatives. Treasury Secretary Timothy Geithner was president of the Federal Reserve Bank of New York—while not technically from Wall Street, he was charged with policing some of the very same banks he’s now eagerly propping up.
And, of course, there are abundant Goldman Sachs connections. Goldman has all but had a special pneumatic tune that feeds personnel into the top economic jobs in government over the past few administrations. Geithner’s predecessor at Treasury, Henry Paulson, moved directly from the chief executive spot at Goldman. Under Bill Clinton, Robert Rubin moved straight from Goldman's top spot to job that Summers now holds. In 1995, Rubin moved over to the Treasury Department and began putting his signature on U.S. greenbacks, a job he held for four years. In 2002, yet another Goldman boss, Stephen Friedman, moved from Wall Street to Washington, becoming George W. Bush’s director of the National Economic Council. And Obama recently appointed Gary Gensler as the head of the Commodity Futures Trading Commission. Gensler’s previous employer? You guessed it, Goldman Sachs
Throughout all of these appointments, the justification from the White House has been the same: We need experienced people running our financial system. In announcing the appointment of Geithner last November, Obama touted the fact that he “has played a key role in formulating the nation’s monetary policy."
Yet when it comes to energy policy, where Obama's vision is at least as sweeping at it is at the Department of Treasury, Washington has a completely different standard. Specifically, the U.S. has never had a secretary of Energy who has actually drilled an oil well, built a nuclear power plant, or dug coal out of the ground. Indeed, actual experience in the energy business appears to be grounds for disqualification.
This is stunning. At the same time that the Treasury Department has begun looking like a wholly owned subsidiary of Goldman Sachs and the other Wall Street mega-firms that are too big to fail, the top leadership at the Department of Energy remains a bastion of anything-but-Big Oil. “It’s the mythology of the Beltway,” one Houston energy analyst told me recently. “You are hopelessly compromised if you are anywhere close to the oil industry.”
At the same time that America is being held hostage by a bunch of Wall Street pirates who have done nothing to create real wealth, the Obama administration and the leading Democrats on Capitol Hill are working to marginalize America’s single biggest sector, the sliver of the economy that produces our most essential commodities: gasoline, diesel fuel, jet fuel, coal (which provides about half of the country’s electricity) and natural gas.
At the same time that Geithner and Summers are providing tens of billions of dollars in taxpayer money to the oligarchs on Wall Street, the Obama administration and the Democrats on Capitol Hill have introduced legislation that will eliminate the key tax incentives (total annual cost to taxpayers: about $2 billion) that encourage U.S. companies to drill for oil and gas here in America. And they are doing so even though they continue to clamor for “energy independence.”
None of this seems to matter to Obama’s Energy secretary, Steven Chu. A Nobel Prize-winning physicist, Chu has experience in energy-related issues, including his job as director of the Lawrence Berkeley National Laboratory, but he’s never been in the energy business. And he's an historical improvement, résumé-wise. Jimmy Carter named James Schlesinger—an apparatchik with no history in the energy sector—as the nation’s first Energy secretary. A few years later, Ronald Reagan claimed he was going to dismantle the Department of Energy. His pick for Energy secretary was James B. Edwards, a man who understood drilling—he was a dentist.
Bill Clinton’s choices for the top Energy spot were: Hazel O’Leary, a lawyer; Federico Pena, another lawyer; and finally Bill Richardson, a politico and diplomat. George W. Bush’s choices to head the Department of Energy included Spencer Abraham, a lawyer who’d just lost his seat in the U.S. Senate, and Samuel Bodman, an engineer whose professional career was in investments and chemical production. None of them had any experience in the energy sector before being appointed.
There’s some powerful irony here. Americans love their cars—the bigger and more powerful, the better. They love gasoline—the cheaper, the better. But they hate Big Oil with an abiding passion. A 2006 Gallup poll found that just 15 percent of Americans had a positive view of the oil and gas industry while 77 percent had a negative image. Out of 25 sectors that Gallup asked about, the oil and gas industry ranked dead last. Even the federal government ranked ahead (but just barely) of the oil and gas industry in the collective opinion of the general public.
Americans can hate the oil and gas industry all they like. They can hate coal, too. But they should consider a few numbers: Oil now provides nearly 40 percent of America’s total primary energy use. It also provides nearly all of the energy needed for the transportation sector. Coal and natural gas together provide about 50 percent of America’s primary energy needs. Solar power and wind power are sexy, but together, those sources currently provide about 0.16 percent of America’s total energy needs. Obama’s single-minded focus on “cleaner energy” has huge political appeal. Fine. So where’s his concomitant desire for “cleaner banking”? Remember, Summers was one of the leading opponents of greater regulation of derivatives.
Maybe some good can come of this. Perhaps there’s a way to turn some of the billions of dollars being thrown at our hypertrophied financial sector into something useful. Here’s a suggestion: The next time you stop at the service station for some fuel, try to fill up with some of those credit-default swaps or maybe top off your tank with a few of those collateralized debt obligations, or maybe some high-octane mortgage-backed securities.
After you do that, pause for just a moment, no more, and consider this idea, horrendous though it might be: Maybe—just maybe—those energy companies aren’t so villainous after all. And here’s another wacky thought: Maybe—just maybe—we should have a few people in government who really understand how the energy business works.
Ha! Never mind. I was just joking. It’ll never happen.
Robert Bryce is the author of Pipe Dreams: Greed, Ego, and the Death of Enron, which was named one of the best nonfiction books of 2002 by Publishers Weekly. His latest book, Gusher of Lies: The Dangerous Delusions of “Energy Independence,” was published in 2008 by PublicAffairs. An apiarist, he lives in Austin, with his wife, Lorin, their three children, and a hyperactive bird dog named Biscuit.