Saturday, April 18, 2009

Rattner Probe

Is anyone in the administration working on the bailouts clean? The latest revelation that car czar Steve Rattner is being investigated for his potential role in a kickback scheme with the New York state pension fund does little to contradict the perception that political and financial insiders play by a different set of rules, and have gamed the system at the public's expense. From the WSJ:
A Securities and Exchange Commission complaint says a "senior executive" of Mr. Rattner's investment firm met in 2004 with a politically connected consultant about a finder's fee. Later, the complaint says, the firm received an investment from the state pension fund and paid $1.1 million in fees.

The "senior executive," not named in the complaint, is Mr. Rattner, according to the person familiar with the matter. He is co-founder of the investment firm, Quadrangle Group, which he left to join the Treasury Department to oversee the auto task force earlier this year....

In the long-running pay-to-play case, authorities allege that about 20 investment firms made payments in exchange for investments from the $122 billion New York State Common Retirement Fund....

The main legal issue for the investment firms turns on whether they knew, or should have known, that fees they paid to certain entities for access to the New York fund were legitimate or were improper kickbacks, and whether they were properly disclosed, according to people familiar with the matter.
Even if there was no wrongdoing, this appearance of impropriety and insider dealing is horrible press. Nothing galvanizes populist rage like financial and political elites playing the system for themselves. I guess this will take Rattner out of the running as potential Treasury Secretary-in-waiting, should Geithner ultimately "decide to spend more time with his family."

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