Wall Street ties complicate the politically touchy search for economic adviser

By Peter Wallsten and Perry Bacon Jr.
Washington Post Staff Writers
Sunday, January 2, 2011; 7:32 PM

President Obama is expected to name a new chief economic adviser as early as this week, but the months-long search process has proven difficult and politically touchy.

The departure of National Economic Council director Lawrence H. Summers, whose last day was Friday, has left a crucial vacancy in the president's inner policy circle as the economy remains his top domestic focus and shapes up to be the No. 1 issue of his 2012 reelection campaign.

Liberals in the president's base, who often criticized Summers as a symbol of the administration's closeness with Wall Street, want an NEC director who would push the White House to challenge the financial services industry and stand up to deficit hawks pushing the White House to cut programs such as Social Security. Business groups and Republican lawmakers, who have charged that the White House is hostile to corporations, want someone with practical business expertise.

And even some in the administration have suggested appointing a person with a business pedigree rather than a background primarily in academia or government.

Summers announced his departure in September. Obama asked him to remain until the end of 2010. Amy Brundage, a White House spokeswoman, said the president has considered "a number of qualified candidates" but as of Sunday had not made a decision or offered the job to anyone.

One of the leading contenders is Gene Sperling, a longtime Democratic policy guru and veteran of the Bill Clinton White House who has spent two years advising Treasury Secretary Timothy F. Geithner. But some liberals say Sperling is too close to Wall Street after being paid $887,727 in 2008 by Goldman Sachs, one of several part-time jobs he held that year. Administration officials say Sperling was paid to develop a charity that has taught business skills to women in developing countries and did no commercial work.

Another contender, Roger Altman, has strong business ties as a longtime investment banker who now runs his own firm - but liberals charge that he, too, is too close to Wall Street.

"It's a big concern when there are these high-level advisers who have been marinated in the industry," said Robert Borosage, co-director of the liberal Campaign for America's Future.

Sperling declined to comment, while a call to Altman's firm in New York, Evercore Partners, was not returned.

A third leading candidate is Richard Levin, an economist and longtime president of Yale University who also serves on the board of directors of American Express. A Yale spokesman, Robin Hogen, said Levin was declining all requests for comment on the NEC post.

"The most important qualification is finding the right person for the job who can lead the team at this pivotal time in recovery," said Brundage, the White House spokeswoman.

The criticism from the left reflects a broader tension between Obama and liberals over his economic agenda and the makeup of his policy team.

Summers, the former president of Harvard University, received about $5.2 million in compensation from hedge fund D.E. Shaw in the year before he entered government, and he also received hundreds of thousands of dollars in speaking fees from major financial institutions.

Some liberals had hoped the financial regulation bill that passed last year would have done more to curtail the size and power of large banks and put more severe limits on their activities, such as operating hedge funds.

The new NEC director is likely to play a central role in guiding Obama through additional tension points with the left, such as selling a new proposed free-trade deal with South Korea and deciding what programs could be trimmed in pursuit of deficit-cutting compromises with Republicans. Both issues could further dampen enthusiasm among labor unions and other groups that Obama needs for financial and grassroots support in his reelection bid.

But the new adviser also must help build rapport with the GOP, particularly the party's new House majority, if the president hopes to rebuild his image among centrist, independent voters.

Incoming House Speaker John A. Boehner (R-Ohio) has been a vocal critic of Obama's economic team as unseasoned in business. Boehner spokesman Brendan Buck said Obama should name an economics adviser who "knows what it's like to create a job in the private sector."

Some experts see Sperling, 52, as the president's most likely choice. He held the same post under President Clinton and has enjoyed good relationships with Democrats and Republicans. Moreover, as an aide to Geithner, he is already an Obama administration insider.

Administration officials said he was a leading internal voice last year for an Obama proposal to charge big banks a fee to recoup money from bailed-out institutions - a plan that drew opposition from Wall Street and, officials said, demonstrated Sperling's willingness to challenge the industry. In the Clinton administration, Sperling was an advocate for middle- and lower-income tax credits and a liaison both to liberals and business types.or

"It just doesn't compute that Gene's approach is what Wall Street wants," said Robert Greenstein, executive director of the Center for Budget and Policy Priorities and a veteran of Democratic administrations who has known Sperling for years.

Many colleagues and outside observers had expected Sperling to leave Treasury last year to take the No. 2 post at the White House's Office of Management and Budget. Later, he was mentioned as a possible replacement for OMB director Peter Orszag, who stepped down last summer.

Kevin Hassett, an economist at the conservative American Enterprise Institute, said Sperling "seems like the most logical candidate" of the known leading contenders," an "old Washington hand" with ties to both parties and political savvy that could prove useful in 2012.

"He is a seasoned campaigner," Hassett said. "Sperling is one of the best campaign policy men in the business, and one cannot overestimate the value of that."

A Treasury official said a review of Sperling's financial disclosures determined that he was in "full compliance" with ethics rules.

But Dean Baker, co-director of the liberal Center for Economic and Policy Research said Sperling's Goldman compensation - even for charity work - was worrisome.

"I don't think it's a question of outright corruption, it's a question of orientation," Baker said. "Most people hear you got almost a million dollars for a part-time job, and they think there's a problem there. But people on Wall Street say, a million bucks is chicken feed."

wallstenp@washpost.combaconp@washpost.com Staff writer Brady Dennis contributed to this report.

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