President Obama’s nominee for deputy secretary of state has earned more than $8 million in salary and bonuses since January 2009 as an executive at a Wall Street bank that received a federal bailout.
Thomas R. Nides, a six-figure fundraiser for Hillary Rodham Clinton during her 2008 presidential run, disclosed his compensation from Morgan Stanley in a recent filing with the U.S. Office of Government Ethics.
Mr. Nides, the company’s chief operating officer, also said he remains eligible for additional bonus money at Morgan Stanley, which repaid its share of the federal bailout last year.
As deputy secretary of state for management and resources, Mr. Nides would replace Jacob Lew, who is awaiting confirmation as Mr. Obama’s federal budget chief and whose own nearly $1 million bonus at bailed-out banking giant Citigroup last year came under scrutiny.
The powerful position is one of two deputy secretary slots at the State Department, a post described on the department’s website as chief operating officer and “alter ego” to Mrs. Clinton, the secretary of state.
Mr. Nides told ethics regulators that he could receive a prorated bonus from the company based on his work there this year. He will remain with the firm during the Senate confirmation process, the company said in a Securities and Exchange Commission (SEC) filing. Morgan Stanley did not return telephone and e-mail messages seeking comment.
White House spokesman Tommy Vietor said that like all nominees, Mr. Nides will be subject to ethics restrictions barring his participation for two years in particular matters involving his former employer.
Asked whether Mr. Nides’ fundraising helped him get the job, Mr. Vietor said, “Mr. Nides was selected because he’s extremely well qualified for the job.” He referred questions about Mrs. Clinton’s involvement in Mr. Nides’ selection to the State Department. A State Department spokesman said officials there do not discuss pending nominations as a matter of policy.
Mr. Nides is well-connected politically. According to the watchdog group Public Citizen, he raised at least $100,000 for Mrs. Clinton’s 2008 campaign and election records show he personally donated tens of thousands of dollars to other federal politicians, including Mr. Obama.
Craig Holman, legislative director for Public Citizen, said money is the most effective way to befriend a politician and to gain access and appointments.
“Tom Nides from Wall Street has established a close relationship with Hillary Clinton and gets appointed into the department she oversees,” he said, adding that Mr. Nides joins Robert Hormats, a former Goldman Sachs executive who is now undersecretary of state for economic, business and agricultural affairs. Mr. Hormats “also established a long and substantial funding relationship with the Democratic Party and Hillary Clinton in particular,” Mr. Holman said.
But even though the appointment of major fundraisers for government jobs “reflects politics as usual,” Mr. Holman said, there is a critical difference between the Obama administration and previous administrations.
“These appointees are required under an ethics pledge to recuse themselves from official actions that directly and substantially impact their former employers and thus avoid the traditional capture of regulatory agencies by business interests,” Mr. Holman said, adding that Mr. Nides and Mr. Hormats won’t be involved in decisions affecting Morgan Stanley or Goldman Sachs, respectively.
Mr. Vietor said Mr. Nides’ ethics agreement addresses his potential 2010 bonus by requiring a recusal period of up to two years, as well as a commitment to divest his interest in stocks within 90 days of confirmation.
“Once he divests his financial interests in Morgan Stanley, he will not have any further conflicts as a result of those holdings,” Mr. Vietor said. “The remaining pledge and other ethics restrictions on Morgan Stanley will not impact his ability to serve as deputy secretary of state for management and resources.”
According to Mr. Nides’ ethics disclosure, he also holds an interest in a Morgan Stanley real estate fund that has extensive retail and residential investments overseas.
Mr. Vietor said the foreign investments, too, are also subject to ethics rules.
“For as long as he maintains his investment in the fund, Mr. Nides will of course comply with all applicable ethics rules as to those investments, including those limiting his participation in any particular matter that has a direct and predictable effect on any of the individual underlying investments,” Mr. Vietor said.
However, Mr. Vietor added that the deputy secretary doesn’t usually participate in matters involving real estate in foreign countries and “can easily be recused” from any such matters.
Mr. Nides was named chief operating officer at Morgan Stanley in December, though he already was serving as the company’s chief administrative officer. He has worked at the firm since 2005, not including a stint from 1996 to 1999.
It’s unclear how much, if any, of Mr. Nides’ bonus compensation was paid out when Morgan Stanley was taking taxpayer bailout funds. The company repaid taxpayers last year.
Morgan Stanley was among a group of Wall Street banks singled out by Obama administration pay czar Kenneth Feinberg in a report on executive pay earlier this year. The report derided as wasteful most bonuses that were paid out to executives by companies that took bailout assistance, but Mr. Feinberg’s review did not identify any executives by name and stopped short of recommending that they return money.
Tom Fitton, executive director of the conservative watchdog group Judicial Watch, which last year sued the Treasury Department to obtain records concerning the bailout, said he was less concerned with the Morgan Stanley ties than what he called the trajectory of Mr. Nides’ career. He called Mr. Nides a “Washington creature” and said the Senate ought to give close scrutiny to his time a decade ago as a senior vice president at Fannie Mae, which collapsed in 2008 amid an accounting scandal.
If both are confirmed, Mr. Nides would replace Mr. Lew, who is awaiting confirmation as director of the federal Office of Management and Budget. The Washington Times first reported this summer that Mr. Lew took a nearly $1 million bonus from Citigroup weeks before joining the State Department in 2009 at a time when the company was receiving federal bailout funds.
Asked about how his bonus served the public’s interest, Mr. Lew told Sen. Charles E. Grassley of Iowa, ranking member of the Senate Finance Committee: “My position at Citi was a management position. I was not an investment adviser. … My compensation was in line with other management executives at the firm and in similarly complex operations.”