- - Friday, February 5, 2016

ANALYSIS/OPINION:

Democrats have longed wanted to take down Wall Street while Republicans have traditionally stood by the financial insiders. But something is changing. Democrats are now often friends with bankers while Republicans are finding examples of a system needing reform.

Last week, political reporter Sam Stein of the liberal Huffington Post told MSNBC’s “Morning Joe” viewers that Hillary Clinton could reform Wall Street better than Bernie Sanders. Mr. Stein’s theory, he explained, was that Sanders doesn’t know Wall Street types and refuses to engage with them. Mr. Sanders, therefore, doesn’t know who the bad players are. Mrs. Clinton, Mr. Stein said, is an expert on Wall Street and has lots of friends there. Stein went on to say that Hillary Clinton knows who is good and who is bad on Wall Street.

Setting aside the hypocrisy of Mr. Stein, his news website and the Democrat party for ridiculing 2012 Republican presidential candidate Mitt Romney’s ties to Wall Street, Stein is actually right. Wall Street, like every industry, has good and bad players. In order to reform the financial industry, the next President needs to know its failings and understand what the fixes should be or risk an overreaction that makes the excesses worse.

Mr. Stein’s argument, launched just days before the Iowa Caucus began, is that the next President must know Wall Street to reform Wall Street. It is a shrewd new calculation if broadly accepted by Democrats. It is also a refreshing discussion long overdue for them. In the past, liberals have competed to see who could shout the loudest to shut down the banks, ridicule success and penalize anyone working in finance. In fact, the Occupy Wall Street movement was an aggressive liberal effort to shut down Wall Street banks.

Mr. Stein’s new argument is indicative of the fact that Mrs. Clinton is the inevitable nominee for the Democrats. Regardless of what happens in New Hampshire, Stein and other liberal reporters are desperate to turn around Clinton’s problems with the Democrat base of being too close to Wall Street. Everyone knows she cannot distance herself from a career of friendships and large financial support from New York’s main industry. In fact, her confidant and deputy while serving as Secretary of State was Morgan Stanley insider Tom Nides. Liberals have been forced to turn her closeness to the financial industry into a strength. But ironically, Mrs. Clinton’s knowledge of Wall Street is a strength. And so is Donald Trump’s and so was Mitt Romney’s.

Hillary Clinton and Donald Trump have deep ties to corporate money. They both have a detailed and complexed view of how some on Wall Street manipulate the game. They know where the excesses are and who is to blame. If willing to take on their friends, they both could reform Wall Street from the inside. So far, Mrs. Clinton hasn’t demonstrated a willingness to take on her friends, but rather, has defended her exorbitantly large speaking fees to Wall Street banks.

And there is certainly an immediate need to do something to clean it up. Thirty two year old former hedge fund founder Martin Shkreli was a dishonest manipulator of Wall Street’s rules even before he ran Turing Pharmaceuticals AG and increased the price of Daraprim by 5,500%. Mr. Shkreli’s unscrupulousness was only outed after increasing the price of the antimalarial drug. The FBI says Mr. Shkreli, arrested for securities fraud in December 2015, has been misleading investors since 2009.

But the young ambitious newcomers aren’t the only ones pointing politicians to the problems of Wall Street. Long time insider Sumner Redstone is 92 years old - and can barely speak. But yet he was only forced out yesterday as the Chairman of Viacom and CBS. Mr. Redstone won voting control over Viacom in a 1987 hostile takeover. He is one of the most well-known Wall Street insiders there is. Shareholders, however, were kept in the dark about Redstone’s mental capacity by the team of lawyers and loyalists propping up Mr. Redstone in order to keep their power. Mr. Redstone’s former girlfriend finally insisted the nonagenarian was not mentally fit to be making decisions for the sixth largest broadcasting and cable company operating in 160 countries. But it took irate shareholders to file a lawsuit saying Redstone had been paid $169 million over the last three years before the Redstone team forced his resignation.

And then there is Joe Perella of Perella Weinberg Partners. Mr. Perella has built his career and massive fortune on departing dramatically from big Wall Street banks where he takes his clients away to set up smaller boutique shops. But when a young partner of his, Michael Kramer, made the same move years later, Mr. Perella sued him for $60 million. Mr. Perella is now telling PWP’s clients that they will face lawsuits if they work with the younger banker.

The big ego temper tantrums of Wall Street’s titans must be a concern for everyone on Wall Street. Bad behavior and manipulation of the markets must be called-out by those in the industry concerned for its future. Without a better, louder strategy to rid Wall Street of the bad players, the entire banking industry risks new regulations proscribed by outsiders. Mr. Trump and Mrs. Clinton are the two candidates that know Wall Street best. Ted Cruz, whose wife Heidi was an investment manager at Goldman Sachs, and Chris Christie, who was U.S. Attorney for the District of New Jersey and whose wife Mary Pat was managing director at Angelo, Gordon and Co., would also be well-prepared to reform Wall Street.

Their connections to big money and the big egos of Wall Street could be beneficial if they are willing to be honest about their relationships. Voters from both parties should expect politicians and government regulators to take the time to understand the details of their policy positions before shouting slogans or making abrupt changes to critical industries. Getting policy details right takes time – but we don’t have time to educate someone on the particulars.

• Richard Grenell served as the U.S. spokesman for four U.S. Ambassadors to the United Nations. He is the longest-serving American to hold that position, having served from 2001-2008.


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