On Oct. 29, 2013, Hillary Clinton joined Lloyd Blankfein, the CEO of Goldman Sachs, for a discussion at its Builders and Innovators Summit, at the Ritz-Carlton Dove Mountain resort, near Tucson. During the discussion — one of more than 50 appearances for which Clinton received $225,000 since leaving the State Department — she lamented that the public’s wariness of Wall Street had made it difficult for top people in finance to move into government. For one thing, in order to avoid conflicts of interest, they often faced demands to relinquish financial holdings. “There is such a bias against people who have led successful and/or complicated lives. You know, the divestment of assets, the stripping of all kinds of positions, the sale of stocks — it just becomes very onerous and unnecessary,” she said, according to a transcript released last month by WikiLeaks.
That is not the kind of thing that Sen. Elizabeth Warren, of Massachusetts, likes to hear. Warren supports Clinton, and has been one of her most effective advocates during the current campaign, but she has also made it clear that, if Clinton is elected, she will closely monitor the people she names to key posts. On Sept. 21, in a speech at the Center for American Progress, a left-of-center think tank based in Washington, Warren said, “Personnel is policy. When we talk about personnel, we don’t mean advisers who just pay lip service to Hillary’s bold agenda, coupled with a sigh, a knowing glance, and the twiddling of thumbs until it’s time for the next swing through the revolving door — serving government, then going back to the very same industries they regulate. We don’t mean Citigroup or Morgan Stanley or BlackRock getting to choose who runs the economy in this country so that they can capture our government.”
People with experience in business or finance are a necessity in Washington, but the specter of a privileged executive elite circulating in and out of government and the private sector — especially Wall Street — has shadowed the American political system for more than half a century. The financial industry still favors the Republican Party, but, since the 1990s, it has become more closely affiliated with the Democrats, and that has provoked a resurgent left, led by Warren and by Sen. Bernie Sanders, of Vermont.
Hillary Clinton’s own relations with Wall Street date back to her husband’s administration, but they grew during her eight years representing New York in the U.S. Senate, from 2001 to 2009. She received more than $5 million in Senate campaign contributions from the financial industry. She did not defend the industry as aggressively as Chuck Schumer, her fellow-senator from New York, but she also did not take a lead on reforming it; in 2001, she voted for bankruptcy legislation favored by the banks, despite the fact that Warren, who was then a bankruptcy-law expert at Harvard, had counseled her against it. In this year’s primaries, though, Sanders’ unexpectedly strong challenge to Clinton helped prompt her to adopt tougher stances, such as calls for a “risk fee” on the largest banks and a tax on high-frequency trading.
If Clinton defeats Donald Trump, she will face a long list of economic tests to determine the future direction of the Party, including: what to do about the more than a trillion dollars that corporations hold overseas; how to enforce antitrust laws; how high to raise the minimum wage; and how to protect and strengthen the Dodd-Frank financial reforms. Warren has gone so far as to present Clinton with a list of people she would find acceptable for top administration posts. It is known that she and her allies look favorably on people such as Sarah Bloom Raskin, a deputy treasury secretary, and Tom Perez, President Obama’s labor secretary. They have also expressed strong reservations about Laurence Fink, the C.E.O. of BlackRock; Hamilton James, the president of the Blackstone Group; and Blair Effron, the founder of the investment firm Centerview Partners.
Lately, critics have focused on Thomas R. Nides, who is seen as a contender for a prominent position in a Clinton administration, possibly even chief of staff. (Other candidates mentioned lately include Ron Klain, Vice President Joe Biden’s former chief of staff.) From 2011 to 2013, Nides worked for Clinton as the deputy secretary of state for management and resources. He has served Democratic administrations since the Carter White House, and is widely admired for his commitment and his judgment, as well as for his humor and his personal warmth. But he has also been involved in some of the major episodes that pulled the Democrats closer to big business and to Wall Street. Worse, from the left’s point of view, is the fact that he spent most of the past decade as an executive at Morgan Stanley, a bank that helped precipitate the 2007–08 financial crisis, received a $10 billion bailout from the government, then fought efforts to reform the financial sector.
To his critics, Nides embodies a political class whose members’ success is no longer just a mark of accomplishment but also a possible detriment — a sign of disconnect from the vast numbers of Americans who have fallen behind in an era of growing inequality. Activists have described Nides as “out of central casting for the Washington revolving door,” and it was assumed that when Warren warned against appointees from Morgan Stanley she meant Nides.
Tom Nides, 55, was born in Duluth, Minnesota, the youngest of eight children. His mother was a teacher; his father ran a consumer-loan business, which went bust in 1971, after being undercut by a competitor, and he took a job selling life insurance and investment products for American Express. Nides sometimes accompanied him on weekend sales trips. Nides’ friend Bill Daley, who served as secretary of commerce under Bill Clinton and was briefly President Obama’s chief of staff, told me that “seeing his father lose it all” has been “a big driving motivation” in Nides’ life. (I spoke with Nides several times, but he declined to be interviewed for this article. Many of his former colleagues, however, were eager to speak about his record.)
Duluth was a Democratic bastion — the unions were strong on the Lake Superior docks — and Nides’ parents instilled in their children the importance of public service. In 1979, when Nides was assigned to find a speaker for his high-school graduation, he asked the former Minnesota Sen. Walter Mondale, who was then Jimmy Carter’s vice president. Nides called Mondale’s chief of staff, Mike Berman, a Duluth native, at 5:30 in the morning, because Berman’s parents, who were family friends, had told him that was the best time to catch him. Mondale agreed to speak.
The following summer, after Nides completed his freshman year at the University of Minnesota, he became a Mondale intern. Amy Klobuchar, the senior senator from Minnesota, who was an intern at the same time, remembers walking into the Old Executive Office Building on the first day and seeing Nides sitting with his feet up on a desk, answering the phone: “Tom Nides, vice president’s office.” Klobuchar was assigned to inventory office furniture, while Nides managed to secure actual political work. Among other tasks, he successfully acted on a Duluth pizza tycoon’s request to save a historic foghorn in the harbor. Klobuchar laughed as she recalled Nides’ ambition. “He always had this eager, earnest way about him,” she told me.
At the age of 23, Nides was made the Midwest field director for Mondale’s 1984 presidential campaign. After Ronald Reagan was re-elected, Mondale recommended Nides to Rep. Tony Coelho, of California, who was the chairman of the Democratic Congressional Campaign Committee. Coelho was working to increase fundraising from lobbyists and corporations, who had traditionally given more to Republicans. Nides was put in charge of guiding a number of House races in the 1986 midterm elections, and the Democrats gained five seats.
A few months later, Coelho was made House majority whip, and Nides became his liaison with outside interest groups — business, labor, environmental. He also began offering his boss blunt advice. Coelho has epilepsy — he introduced the Americans with Disabilities Act in the House — and he started a foundation to raise money for epilepsy research. Nides told him that the foundation could be perceived as a problem if anyone with interests pending before the House contributed to it. Coelho was annoyed, but he shut down the foundation, and now says of Nides’ intervention, “I grew to appreciate that he had the balls to do it.”
Coelho resigned in 1989, amid scrutiny of his personal finances (he was not accused of any criminal wrongdoing), and Nides went to work as a senior aide to Tom Foley, the speaker of the House. In 1993, when Bill Clinton entered the White House, Nides became the chief of staff for the new U.S. Trade Representative, Mickey Kantor, and was assigned to help shepherd through Congress the North American Free Trade Agreement. At the time, more Republicans than Democrats supported the bill, which eliminated barriers to trade and investment between the U.S., Canada and Mexico. It was deeply unpopular with unions, and caused a rift inside the administration, but Clinton wanted to burnish the Democrats’ pro-business credentials. Nides’ task was to get it passed, not to engage on its merits. “It was ‘This is what the president wants,’ ” Bill Daley told me.
Within a year, NAFTA had been approved by both houses of Congress, and Clinton signed it into law in December 1993. The agreement vastly expanded commerce with Mexico, but many on the left and the right blame it for the gutting of U.S. manufacturing (even though economists tend to tie that decline more directly to automation and to competition with China.) Perhaps as a reflection of that response, Hillary Clinton, who publicly supported NAFTA as first lady, last year came out against the latest proposed major trade agreement, the Trans-Pacific Partnership. The shift within the Democratic Party irks Kantor, who told me, “We’ve now decided that NAFTA is the culprit for everything, including the common cold.”
Movement between Wall Street and Washington is as old as the republic: Alexander Hamilton, after serving in the Continental Congress and before becoming secretary of the treasury, founded the Bank of New York. It has long been identified with Republicans, the traditional party of business, but it became more common among Democrats during the Second World War, when businessmen of both parties were brought into government. Herbert Lehman, a liberal Democrat and a partner in Lehman Brothers, his family’s investment firm, succeeded Franklin Roosevelt as governor of New York, before directing the State Department’s foreign-relief effort, and then served in the Senate. Robert Lovett, a Republican, was an executive with the investment bank Brown Brothers Harriman, then served as a deputy to Gen. George Marshall and as Harry Truman’s secretary of defense, and helped create NATO and the CIA. Lovett was one of the so-called foreign-policy Wise Men, a term that captured how benignly Wall Street-Washington traffic was viewed in that era.
Following the war, the economic boom and the growth of the regulatory state created during the New Deal accelerated movement between the two realms. John F. Kennedy appointed C. Douglas Dillon, a former investment banker, to be secretary of the treasury. Lyndon Johnson’s treasury secretary, Henry Fowler, was recruited to join Goldman Sachs. For the Republican Party, the transfers became so predictable that few people objected when Donald Regan, the CEO of Merrill Lynch, became Ronald Reagan’s treasury secretary, or when Sen. Phil Gramm, of Texas, was named vice-chairman of the investment-bank division of UBS, or when George W. Bush appointed the Goldman Sachs CEO Henry Paulson to be treasury secretary.
But, after NAFTA, Democrats became sensitive to the charge that they were abandoning their roots. The tenure of Robert Rubin, the former Goldman Sachs executive whom President Clinton named treasury secretary in 1995, and who went on to earn $126 million at Citigroup, was so controversial that “Rubinite” remains a term of opprobrium in liberal circles. Rubin and his successor, Lawrence Summers, pushed for several policies that benefitted Wall Street. The most significant were thwarting an attempt to regulate financial derivatives and repealing the Glass-Steagall Act, which separated commercial and investment banking. Rubin did oppose welfare reform and the 1997 capital-gains tax cut, but his progressive measures tend to go unmentioned in the left’s critique of him.
The unease about people moving between commerce and government springs from a concern that, subconsciously or not, they will act in the interests of their former and perhaps future employers. (Economists call this “cognitive capture.”) It also often comes with a value judgment — a sense that there’s something unseemly about government employees profiting from their experience. For years, it was argued that government work is undervalued, at least financially, and so people could only really afford public-sector jobs if they occasionally made private-sector salaries. That case was hard to put across convincingly, though, since federal salaries were far higher than the American median.
But in recent years Washington has become a much more expensive place to live: the median value of a house there has more than quadrupled since 2000, while a top federal salary is less than $200,000 a year. Prices have been driven up, in part, because high-ranking professionals in the private sector earn so much more than they used to. Data compiled by Daniel Markovits, a professor at Yale University’s School of Law, shows that a member of Congress who became a lobbyist in 1960 earned about the same as he had in government. Today, he or she can easily expect to make 10 times as much.
By 1993, when NAFTA was passed, Nides had been in Washington for a decade. He had recently married Virginia Moseley, a TV news producer, and they were planning a family. In 1994, he left the government and joined the Federal National Mortgage Association, better known as Fannie Mae. The association was created as part of the New Deal, to help expand home ownership by buying mortgages from lenders, to allow them to make additional loans. It became a publicly traded corporation, but its credit was backed by the government. This gave it a big advantage over private competitors, and people with contacts in Congress or the administration were highly prized. In the 1990s, Fannie Mae hires included Robert Zoellick, a former U.S. trade representative; Jamie Gorelick, a former deputy attorney general; and Tom Donilon, a former assistant secretary of state for public affairs, who later became President Obama’s national-security adviser. The CEO was James Johnson, a Minnesotan who had chaired Walter Mondale’s 1984 campaign. Nides was hired as a vice president, responsible for opening branches around the country in an effort to increase home ownership among racial minorities and low-income families.
Meanwhile, John Mack, a colorful former Duke football player whom Nides had come to know when he worked for Tony Coelho, became the CEO of Morgan Stanley. (Mack is a Republican, but he had sought Coelho’s help in unseating his congressman — also a Republican — who had refused to oppose the construction of a delivery warehouse near Mack’s neighborhood, in Westchester County.) In the spring of 1996, Mack persuaded Nides to move to New York to be Morgan Stanley’s head of corporate affairs and government relations. Nides excelled at the work, but he and his wife didn’t like life in the city, and a year later he returned to Washington and a new job at Fannie Mae.
Nides was made vice president of human resources. At the time, Fannie Mae’s executives were pushing for higher compensation. The pay system was based on stock performance, but the executives wanted to base it on earnings per share. Nides made the switch, and the new system proved highly lucrative. Franklin Raines, who left the Clinton administration to succeed Johnson as CEO, in 1999, collected $90 million in six years, $52 million of it tied to earnings-based incentives. But the system also spurred Fannie Mae to emphasize short-term earnings gains over long-term stability. “They had a fortress mindset, and thought they were a damn sight better than everyone,” Karen Shaw Petrou, a banking-policy analyst, told me. “They looked at it as ‘If I were working on Wall Street, my pay would be triple.’ It wasn’t ‘I’m making more than I would be elsewhere in Washington.’”
One of the ways that Fannie Mae managed to increase short-term earnings was to relax the credit requirements for the mortgages it was buying from other lenders. By 2007, Fannie Mae and its sibling, Freddie Mac, had acquired billions of dollars in subprime loans, for which they had to be bailed out, a year later, with $187 billion of taxpayer money. Many Fannie Mae executives were called to answer for their role in the financial crisis, but Nides was not — he had left in 2000, to be Joe Lieberman’s chief of staff during the presidential campaign. Gorelick, who served as Fannie Mae’s vice chair during Nides’ tenure, said, “It’s one mark of how skillful he is that it hasn’t really affected him.” She added, “He’s hard not to like.”
For most of the past hundred years, it was rare to find a top Wall Street executive who hadn’t come from the trading floor or worked with corporate clients. The exception was the consigliere role, which was typically filled by an institution’s general counsel. That pattern began to change as the financial sector expanded — by 2006, it held three times as big a share of the economy as it had in 1950 — and the industry’s stake in government policymaking became more clear. Banks and other businesses began spending much more on lobbying; the total amount more than doubled between 2000 and 2010, to $3.52 billion. They awarded bonuses to executives who left to take high-level positions in government, providing an incentive to get allies in place there. And they promoted people with strong ties to government. For Goldman Sachs, John F. W. Rogers, who served as an under secretary of state in George H. W. Bush’s administration, was that power player. For John Mack, it was Tom Nides.
After the 2000 election, Nides went to work again for Mack, who was then the CEO of Credit Suisse. In his role as chief global administrator, Nides oversaw more than 2,000 employees in the divisions of corporate communications, human resources, and government relations. This time, he commuted twice weekly from Washington, where he and his wife bought a six-bedroom home in the affluent neighborhood of Spring Valley. Nides referred to it as “the house that Mack built.”
In 2005, he kept up the commute as he followed Mack back to Morgan Stanley. Critics note that he arrived just as the firm was running up outsized profits from loans it had bought from New Century, one of the leading subprime lenders in the country. In December 2007, Morgan Stanley suffered an unprecedented, $9 billion loss in a single trading unit. Then, in September of 2008, after Lehman Brothers declared bankruptcy, hedge-fund managers targeted Morgan Stanley’s stock in a devastating short-selling run, betting on its collapse.
As Andrew Ross Sorkin tells it in “Too Big to Fail,” Nides pushed Mack to appeal to federal officials for a ban on short selling, saying, “We’ve got to shut these assholes down!” He set up calls for Mack with the Securities and Exchange Commission and the Treasury Department, as well as with Sens. Hillary Clinton and Chuck Schumer. On Friday, Sept. 19, the SEC announced a temporary ban on short selling, infuriating hedge-fund managers, who saw it as political favoritism that interrupted the natural course of the markets.
Less than two months later, Barack Obama won the presidency, and the tensions within the Democratic Party were brought into the open. The crisis prompted calls for an overhaul of the financial sector from people such as Elizabeth Warren, who, after making her name as an expert in bankruptcy law, was selected to chair the Congressional Oversight Panel, which reviewed the government’s bailout program. But Obama had many supporters on Wall Street, and his advisers, notably his Treasury Secretary, Timothy Geithner, cautioned that cracking down too drastically would imperil the recovery.
John Mack stepped back from his responsibilities, but his successor as CEO, James Gorman, asked Nides to stay on. Nides’ government-relations team in Washington, along with its counterparts at other Wall Street firms, successfully resisted calls to break up the banks or impose caps on their size. They also took on the Dodd-Frank Act, proposed by the new Democratic majority in Congress, which aimed to rein in risky behavior by the financial sector, protect consumers, and prevent future crises. Liberals championed Dodd-Frank as the greatest regulatory overhaul since the New Deal. But the financial sector chipped away at the bill’s “Volcker rule” — which set limits on the proprietary trading that had generated the huge losses — and at the regulations for derivatives. Dennis Kelleher, a Democratic Senate staffer at the time, who now leads a financial-reform group, said that the banks “didn’t want any limitations on trading.”
Nides oversaw the efforts not only in his capacity at Morgan Stanley but as the chairman (a rotating role) of the Securities Industry and Financial Markets Association, a Wall Street trade group. He mostly avoided direct contact with lawmakers and regulators, indicating that he understood the need for reform, while suggesting milder alternatives. “He was careful,” Greg Fleming, a former Morgan Stanley executive, told me. “He’d say, ‘Given what you’re trying to accomplish, this would be the better way to go.’”
When Dodd-Frank passed, in July 2010, the results were plain. Many exemptions were built into the Volcker rule, such as allowing offshore trading and trading in government securities, and the law left many of the new limits on derivatives to be defined by regulators, giving the industry’s lobbyists more time to weaken them. The derivatives market has since become more transparent, but it is also more concentrated among the biggest banks than it was before the crisis.
Between 2008 and 2010, Nides received $17 million in compensation. This made it possible for him to buy a condominium in Sun Valley, Idaho, a few doors down from his former boss Mickey Kantor, who had returned to corporate law. It also made it possible for Nides to consider a return to public service.
In 2009, when Hillary Clinton became Secretary of State, one of the two deputies she hired was Jack Lew, who had been a budget negotiator for Bill Clinton’s administration, before spending several years at Citigroup, as part of a proprietary trading unit that bet heavily on the housing market. (When he left, Citigroup gave him a $945,000 bonus.) In July of 2010, Obama selected Lew to be his next budget director, and Lew suggested to Clinton that she hire Nides to be his replacement.
Clinton had not known Nides well when he worked in her husband’s administration, but he had supported and raised money for her 2008 Presidential campaign. (He has given more than $150,000 to candidates over the years.) He had no foreign-policy experience, but he won over career diplomats with his jocular informality. As Melanne Verveer, then the ambassador for global women’s issues, told me, “He can endear himself in situations where someone viewed as a great authority or extremely formidable cannot make the connections that he can.”
Nides was engaged in “economic statecraft” — persuading companies to invest in trouble spots such as Iraq, and promoting U.S. companies around the world. He became Clinton’s informal link to the Israeli government and to the pro-Israel lobby in Washington. He played a leading role in the fraught effort to scale back the State Department’s presence in Iraq. He sat in for the department in the Situation Room. And, after 24 Pakistani soldiers were killed in a U.S.-led air strike on the border with Afghanistan, he took charge of the delicate negotiations with Pakistan to reopen NATO supply lines to Afghanistan. Nides “was the king of getting shit done,” Dan Feldman, the former special representative to Afghanistan and Pakistan, told me.
Then, in September of 2012, the U.S. consulate in Benghazi was attacked, and four Americans, including Ambassador Christopher Stevens, were killed. It was two months before the presidential election, and Republicans were in an uproar over the lapse in security procedures. Clinton put Nides and her other deputy, Bill Burns, in charge of a review of department policy. Clinton and Nides had developed a trusting rapport by then; shortly after the attacks, he invited her to a private dinner in New York with John Mack and his wife; she initially accepted, then declined.
In December, as Clinton was preparing to testify about the attacks before Congress, and recovering from the flu, she fell and hit her head. She asked Nides and Burns to testify in her place, and they did so, just before Christmas. The next month, Nides prepared Clinton for her rescheduled testimony. It was a five-hour ordeal, in which Clinton was considered to have bested even the most persistent questioners. Afterward, Nides emailed her, “Ok I hate to admit this but u did a better job than me! Really great.” “Couldn’t have done it without you,” Clinton replied.
Clinton left the State Department in February of 2013, and Nides returned to Morgan Stanley, as a vice chairman. That April, she spoke at a dinner that the firm was hosting at the Library of Congress for some corporate clients. The format was a Q&A with Nides, who focused mostly on Clinton’s tenure as secretary of state. She opened by thanking James Gorman for “lending” her Nides. “There was a bit of a culture shock at first,” she joked. “You should have seen his face when he learned there were no stock options at the State Department. But he soon not only settled in very nicely, he became positively enthusiastic when I told him we did have our own plane.”
Nides’ new position at Morgan Stanley entailed fewer operational responsibilities, and this raised speculation on the left that he was biding his time until the 2016 election. During the past three years, he has raised more than $100,000 for Clinton’s campaign; been quoted occasionally, as a close adviser; and, as Clinton’s emissary, met with foreign dignitaries on their visits to the States.
Well before the 2016 campaign revealed the depth of populist resentment, on both the right and the left, Elizabeth Warren was stirring dissatisfaction within the Democratic Party. In 2009, she had clashed with Tim Geithner over the bailouts, and, after winning election to the Senate, in 2012, upbraided banking regulators in her first appearance with the Banking Committee. In late 2014, she signaled that she would oppose President Obama’s nomination of Antonio Weiss, a senior investment banker at Lazard, as the undersecretary for domestic finance, a key post in the Treasury Department. The administration withdrew the nomination and brought Weiss on in an informal role.
During the campaign, Clinton’s advisers, fearing that Warren would endorse Bernie Sanders, debated how much Clinton should distance herself from Wall Street. She had collected more than $4 million in speaking fees from banks since leaving the State Department, and she didn’t seem to understand the perception problem. In April of 2015, her campaign manager, Robby Mook, had to persuade Bill Clinton to cancel a paid speech to Morgan Stanley that was scheduled for just a few days after Hillary announced her candidacy.
Not all Democrats approve of Warren’s self-appointed role as the party’s moral arbiter. “If you hire people with integrity and intelligence, I don’t think they’re prisoners of their backgrounds,” Larry Summers told me. “The simplistic association of past experience with current convictions I don’t think is particularly supported by available evidence.” Summers had a personal stake in the debate: in 2013, his work for a hedge fund was partly responsible for undermining his candidacy for the chairmanship of the Federal Reserve, as he faced opposition from Warren, among others.
Some progressives say that they are not necessarily opposed to people who have held positions in the financial industry. They usually mention Gary Gensler, who worked for many years at Goldman Sachs, and then, in 2009, under President Obama, became an aggressive regulator at the helm of the Commodity Futures Trading Commission. And there are those who make allowances for Antonio Weiss, noting that Lazard is not as politically enmeshed as the big banks, and that he would have brought to the Treasury Department expertise in the functioning of capital markets.
Walter Mondale, who is still a Nides admirer, told me, “Just because someone’s been active in the business community, that he’s suspect because of that, I don’t agree with that at all. If you know Tom, you would never consider these complaints valid.” Mondale’s former chief of staff, Mike Berman, said, “It’s a bunch of horseshit. Liberal Democrats I’ve known and grown up with, we’ve all gone out and worked, and the day we give that up we’re back with the campaign and whatever the government is.”
Amy Klobuchar says that Nides has told her that “we need a fairer America.” In a 2011 interview with The Street, he said, “I think I’ve worked pretty hard; I think I’m a pretty honest guy; I think I’ve got decent values, but am I going to say, ‘Oh, my God, I’m worth every dime everyone’s paid me’? That’s ridiculous. None of these people are, including myself.” But Barney Frank, the former Democratic congressman — who, despite having co-authored Dodd-Frank, is not opposed to former Wall Street executives working in Washington — told me that, in a friendly debate that he and Nides have conducted in recent years, Nides has vigorously defended Wall Street compensation: “He said, ‘These are extremely talented people who do valuable work.’”
Ultimately, the question of how the party regards people like Nides goes beyond what he has or hasn’t said about his success. His competence is indisputable, but the debate centers on the ends to which his abilities and those of other Democrats in the Washington-Wall Street nexus have been put over the years. A party reanimated by the issue of inequality now has to confront the role that some of its leading members have played in expanding it.