(Bloomberg View) -- The European Commission wants a copy of the employment contract its former President Jose Barroso has signed with Goldman Sachs. Barroso responded by accusing his former employer of being “discriminatory against me and against Goldman Sachs.” He’s right, but the uproar over his career choice is a sad reminder that the financial industry still hasn’t shed the stigma resulting from its culpability in the financial crisis almost a decade ago.
If Barroso’s new berth weren’t at Goldman, it’s probable there wouldn’t be a kerfuffle. The U.S. investment bank has failed to shake off Matt Taibbi's description of it in a 2009 Rolling Stone article as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money.”
Goldman is still the poster child for the perceived ills of finance, still the whipping boy when banker-bashing resurfaces, still suspected of breeding alumni that go on to run important parts of the world. Its Chief Executive Officer Lloyd Blankfein didn’t help the rehabilitation of finance when he said bankers perform “God’s work.”
But that was way back in 2009; notwithstanding the recent scandal of Wells Fargo and its 2 million unauthorized bank accounts, you’d hope that a much improved regulatory environment combined with stricter capital adequacy standards would have gone some way to restoring confidence in the honesty of the moral compass that guides our banks.
Not, it seems, in the corridors of Brussels -- at least where Goldman is concerned. European Ombudsman Emily O’Reilly cites “the global power, influence and history of the bank with which he is now connected” as reasons to be concerned about Barroso’s new business cards. Brussels is undoubtedly a hotbed of lobbying -- Google is second only to BusinessEurope, an advocate for European companies, in pitching to Commission officials, according to Transparency International. But finance is far from the most important topic for those trying to peddle influence:
It’s true that there are lots of Goldman people running things around the world, including William Dudley at the Federal Reserve, Mario Draghi at the European Central Bank and Mark Carney at the Bank of England. But that’s got more to do with the bank’s historical ability to attract and train the brightest and best, who then go on to stellar careers outside of banking.
I'd be more worried about groupthink, and how a homogeneous group from an institution with a self-proclaimed culture of being “long-term greedy” views the world. It seems reasonable to worry a bit that the alumni of arguably the world’s most successful investment bank will conduct public services knowing the prices of lots of things but the value of nothing, to quote Oscar Wilde.
Goldman’s prominence among the business and political elite is certainly not because of a secretive Illuminati organization or a race of Reptilians pulling the levers of global power; it’s just smart people doing well. There are also lots of Oxbridge graduates running the U.K. civil service and its government, and lots of graduates of the HEC and Insead, two elite French business schools, and the London Business School running European companies.
Frankly, it’s ridiculous to worry about the revolving door between public and private organizations, whichever direction the traffic is moving. My colleague Matt Levine has argued counterintuitively that market regulators, for example, have incentives to be stricter if they’re hoping to eventually get hired by the banks they oversee. At a time when economics and finance are more important than ever, there is social merit in the cross-fertilization of ideas between public policy and banking.
Career crossovers are only a concern if there’s a suspicion that an individual in public service made decisions designed to secure a lucrative position in their public afterlife, a risk of the old role promoting malfeasance in the new role, or the prospect of privileged access obscuring the true nature of intercourse between the public and private sectors.
The solution to these issues, as is often the case, is greater transparency. The Commission’s over-the-top reaction to Barroso’s career choice arguably highlights internal doubts about its ability to avoid the undue influence from a former employee who it now says it will regard as a “representative of interests, as a lobbyist really.”
The EC’s register of lobbyists, in place since 2011 but beefed up at the end of 2014, has too many loopholes, according to public advocacy group LobbyControl. One gray area regards law firms acting as legal representatives. Other watchdogs have argued that the data produced by the Commission is too complicated to lend itself to proper transparency.
“I have never sought a privileged position but I would not expect to be discriminated against,” Barroso wrote in a letter to current President Jean-Claude Juncker that was reported by the Financial Times. Barroso quit the Commission in October 2014. In his new role, it is right and proper that he should be treated as a lobbyist, with no special prerogatives or access bestowed by his previous status. But his choice of employer shouldn’t become an excuse for either vitriol or victimization.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.