Politics & Policy

Elizabeth Warren’s Wall Street Money Machine

She doesn’t rely on Wall Street bankers; she relies on Wall Street lawyers.

Elizabeth Warren has called Massachusetts Senator Scott Brown the “poster boy for Goldman Sachs.” Her aide Alethea Harney had this to say: “Unlike with Scott Brown, middle-class families won’t have to wonder whether Elizabeth Warren will choose them over Wall Street.” And why might Scott Brown, who does not have particularly deep ties to Wall Street, choose distant financiers over the voters in his backyard? The answer, Professor Warren says, is filthy lucre, i.e. campaign donations. “The Wall Street guys have been meeting aggressively to say, ‘How many different ways can we fund Scott Brown to make sure Elizabeth Warren does not go to the United States Senate?’” she has charged. A Massachusetts Democratic spokesman, Kevin Franck, made a similar charge: “It’s no surprise that Wall Street and the big banks continue to finance Scott Brown’s campaign, because he continues to put their interests first, ahead of middle-class Massachusetts families.”

Senator Brown shares with President Barack Obama the distinction of being a recipient of very generous campaign donations from Goldman Sachs, his third-largest contributor behind two Massachusetts mainstays: Boston-based Fidelity and Boston-based Liberty Mutual. If these donations make Senator Brown the “poster child for Goldman Sachs,” then we must think of a comparable epithet for Professor Warren, whose campaign also takes in a great deal of money from Wall Street — or, in the interest of more precise metonymy, from the sewers beneath Wall Street. I am in general not much of an admirer of Wall Street bankers, but the bankers are scholars and gentlemen compared to Wall Street lawyers, who combine the rapacity and cleverness of the financier with the paid-by-the-hour-plus-a percentage complacency associated with the legal profession. With apologies to Matt Taibbi, Wall Street lawyers are the sort of people who give vampire squids a bad name.

If she wants to play the guilt-by-association game, Professor Warren should begin by quitting her $350,000-a-year job at Harvard, where she is the Leo Gottlieb Professor of Law. That chair was endowed in memory of Mr. Gottlieb by the law firm he founded, the high-powered Cleary Gottlieb, which is not primarily in the business of helping middle-class Americans secure their legal interests against the dreaded 1 Percent. Instead, these lawyers make their living in part by helping multinational banks that profited from the Bernie Madoff fraud avoid paying compensation to Madoff victims. Professor Warren, a critic of cozy ties between regulators and industry, surely will be fascinated to learn that in the interest of maximizing its expertise in the finer points of such securities law, the firm went so far as to hire the former general counsel of the Securities and Exchange Commission — a man who resigned from the SEC after being sued by Madoff victims over $1.5 million in Madoff money that ended up in his pockets and those of his siblings. The SEC lawyer and his siblings later turned the money over to Madoff victims in a settlement. 

In the interest of fairness, it should be noted that there are all sorts of reasons that Cleary Gottlieb might want to write a great big check to endow a chair at Harvard, a gift that will long outlast Professor Warren’s tenure. But there are good-faith reasons that firms — even Goldman Sachs — make political donations, too. Imagine that Scott Brown held a lifelong fellowship endowed by the Koch brothers — can you begin to imagine the Klaxons of panic that fact would raise on the left? 

Endowing a professorship is a very different thing from making a campaign donation, it is true. The relationship is in some ways more intimate: Election cycles come and go, but Cleary Gottlieb’s profits funded the professorship that pays Elizabeth Warren’s salary and has done so for years. Wall Street lawyer money doesn’t just help pay for Professor Warren’s campaign commercials — it puts food on her table and gas in her tank, maintains her multimillion-dollar home, and keeps her in an Ivy League sinecure on flexible enough terms that she can spend her day running for political office rather than, to mention one possibility, teaching law.

But Cleary Gottlieb’s beneficence is not limited to Ivy League law schools. At least one lawyer in the firm has donated to the Warren campaign, and Cleary Gottlieb has an apparent interest in Massachusetts Democrats: It was a very generous benefactor of John Kerry’s presidential campaign. Beyond that donation to the Warren campaign proper, the firm’s relationship with Democrats is much deeper: Two of its attorneys by themselves have given more than $60,000 to the Democratic Senate Campaign Committee, which will of course help Professor Warren. One gave another $9,200 to the DSCC, another gave $10,000 to the DNC Services Corp. The firm donates to the abortion fanatics at Emily’s List, which Catholic Massachusetts might note is Professor Warren’s largest single contributor, and the firm has made very generous contributions to the campaigns of such notable Democrats as Barack Obama, Kirsten Gillibrand, Al Franken, Mark Warner, and others. (Republicans? I found two donations to Mitt Romney. Check out the data yourself, if you’re so inclined.)

#page#Other Warren financial benefactors include the Berkshire Group, a firm that recently found itself involved in some thorny litigation with investors alleging that it had “falsely bolstered the collateral of Philadelphia-based subprime lender ABFS by nearly 350 percent.” (Berkshire has always maintained that it did not break the law in the case, and last July a judge agreed, though the ruling is the sort of thing that reminds one that there is a world of difference between “not guilty” and “innocent.” For more on the ugly ABFS story, see this Wall Street Journal report.)

If you have an interest in the enormously profitable field of asbestos litigation, you might consult another of Warren’s donors, a law firm with the Mad Men–worthy man Bergman Draper. Perhaps your thing isn’t asbestos; if it’s white-collar crime and escaping federal prosecutions for same, another Warren donor, Brown Rudnick, would be pleased to help you out, for a large fee.

The times being what they are, every business needs legal representation, even coal businesses seeking federal handouts, one of which has been wise enough to seek representation from Elizabeth Warren ally Mintz Levin. In fact, the list of Warren’s top donors is practically a roll call of lawyers up to their ears in the arcana of structured finance, mortgage-backed securities, and general Wall Street shenanigans. The first guys to securitize credit-card debt? Elizabeth Warren donors. Big banks back Brown, you say? What about the world’s largest and most influential investment firm? Yes, BlackRock backs Professor Warren. Any time you have Moveon.org and Wall Street on the same side, you should hide your assets.

Practically all of the exotic structured-finance products you hear about exist as a direct response to regulation. That being the case, they are not the product of financial engineers only: They are the result of a collaborative effort between financial engineers and Wall Street lawyers. Professor Warren gets some financial support from the former and a hell of a lot from the latter. While I very much doubt that the ghost of Leo Gottlieb or the guys at Mintz Levin would be calling the shots behind the scenes were Professor Warren elected to the Senate, until she is willing to extend the same assumption of good faith to her opponent, she should be held to the standard she sets for him. In which case, we must conclude that the candidate of Occupy Wall Street is also the candidate of Wall Street — which, given the left-leaning, pro-Democrat, bet-hedging nature of the Manhattan-based financial world, is no surprise.

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