WASHINGTON — President Barack Obama on Wednesday named a politically connected top executive of a financial services company that's seeking federal bailout money to be his chief legal counsel on the economy, a move raising ethical concerns with watchdog organizations and casting a shadow on Obama's campaign theme of change.
In a statement on Wednesday morning, Obama said he appointed Neal Wolin, division president of The Hartford Financial Services Group Inc., to become his deputy White House counsel for economic affairs. That makes Wolin the top legal adviser on economic issues.
The Hartford in mid-November purchased a Sanford, Fla., thrift — Federal Trust Bank — a move that allowed it to seek as much as $3.4 billion in Wall Street bailout money. On Nov. 14, it applied to become a thrift holding company entitled to between $1.1 billion and $3.4 billion in funds under the much-maligned Troubled Asset Relief Program, or TARP.
No decision has been made yet on that request for funds from the $700 billion bailout passed by Congress. Consumer advocacy groups are upset. And not just because Wolin was a top executive of a company seeking bailout money, but also because of the regulatory reform Obama promised that includes calls for first-ever federal regulation of the insurance industry.
"It raises questions. He may be a great lawyer, but he has to be walled off from insurance decision-making, and I assume he will be, based on Obama's statements," said Robert Hunter, director of insurance for the Consumer Federation of America, a consumer watchdog organization. "If he isn't, I would be very troubled."
Hunter's concerns carry weight. He's a former Texas insurance commissioner, and a former federal insurance administrator in the Ford and Carter administrations. He said Wolin's need to recuse himself may extend beyond insurance issues and to the TARP, since Hartford is awaiting word on whether it qualifies for federal bailout money.
Consumer advocates want to know if Wolin will recuse, or distance, himself from any financial matter that affects Hartford.
"That could be an awful lot of stuff," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, or CREW. "It seems like it is very hard for him to both work on economic issues and not work on issues affecting The Hartford. It will be interesting to hear from the administration how they will walk that line."
White House spokeswoman Jen Psaki defended the selection last night.
"Neal has unparalleled experience in dealing with financial issues as a lawyer in both government and the private sector," she said. "We are fortunate to have his counsel in this time of financial crisis. It is unlikely he will have any need to address the Hartford specifically in his work in the White House, and if he does he will recuse."
The Hartford's spokesman David Snowden had no comment. A statement on their website congratulates Wolin on his new job.
Also sure to draw attention is the handsome compensation Wolin is leaving behind at The Hartford. In the most recent documentation available on www.forbes.com, Wolin received a salary of $762,000 and another $1.4 million in restricted stock awards. His total compensation package was valued by Forbes.com at more than $4.49 million.
The administration also provided little comment on word that new Treasury Secretary Timothy Geithner planned to make Mark Patterson, a top lobbyist for well-connected investment bank Goldman Sachs & Co. his chief of staff. Obama has criticized lobbyists' influence in Washington.
Hartford — and Wolin, who was the company's chief legal counsel from 2001 until 2007 — has been deeply involved in almost all aspects of the Wall Street crisis.
A giant of the insurance industry, Hartford's stock came under fire last September after the government rescue of its competitor American International Group. Investors fled Hartford upon learning that it held $250 million worth of Lehman Brothers debt and stock and $15 million in AIG debt. It later revealed that it had exposure to more than $500 million in Fannie Mae and Freddie Mac preferred stock and $80 billion of their bonds through insurance-like products called credit-default swaps.
In September, Lehman went bankrupt, the U.S. government seized Fannie, Freddie and AIG and the ensuing global financial turmoil brought attention to the opaque credit-default swaps, which trade in an unregulated market valued in the trillions.
Wolin has longstanding ties to the Clinton administration. He was the chief legal counsel from 1999 to 2001 at the Treasury Department, serving under both Secretary Robert Rubin and Secretary Lawrence Summers. Those two men were instrumental in loosening financial regulation, later supported by the Bush administration, that allowed the rapid expansion of unregulated financial products that have come back to haunt the federal government and the global financial system.
Summers now heads Obama's National Economics Council, and both he and Wolin have Facebook pages on the Internet that link to each other.
Wolin appears to be a late arrival to the Obama team. The website www.campaignmoney.com said that Wolin contributed $2,300 to Hillary Clinton's campaign in March, contributing the same amount to Obama in late August for his general election effort.
The American Insurance Association, in a statement issued to McClatchy, saw merit in the very thing that concerned consumer advocates about Wolin's appointment.
"Neal's strong legal background, previous government experience, and knowledge of the federal financial regulatory environment will serve the Obama administration well, especially in the midst of the economic crisis and regulatory reform debate, both of which are high on the agenda," said Leigh Ann Pusey, the group's incoming president.
Steven Thomma and Marisa Taylor contributed to this article.
ON THE WEB:
White House announcement on Neil S. Wolin
Forbes compensation profile of Wolin
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(e-mail: khall(at)mcclatchydc.com)
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