So Why DID H. Rodgin Cohen Withdraw as Treasury's No. 2? Press Is Curiously Not Curious
There seems to be a wall of silence surrounding the sudden withdrawal of H. Rodgin Cohen (pictured at right) from consideration for the Number 2 job at the Treasury Department.
The party line, according to ABC's This Week host and former Clinton administration adviser George Stephanopoulos, is that "an issue arose in the final stages of the vetting process." David Cho at the Washington Post reports that "two sources familiar with the matter" confirmed this, but that they "declined to identify the reason."
Perhaps the press is not really interested in finding out that reason, or reasons. Or worse, they've got a pretty good idea, and they'd rather not dig; because if they don't dig, they won't have to tell us. Stephanopoulos appears to be giving away that he knows more than he's willing to reveal when he writes that "Cohen has been a counsel to just about every major player on Wall Street, which perhaps complicated his nomination."
"Perhaps"? A review of some of Cohen's known history makes it clear that he carries quite a bit of potentially heavy baggage.
All I had to do is a Googe Web search on "Rodgin Cohen" (in quotes) to find these two items at the sixth and seventh listings:
Together, these items, plus a Wall Street Journal report relied on by TheDeal.com, point to the logic that may have been behind Cohen's withdrawal: Over the years, the man appears to have accumulated quite a list of bruised feelings, grudge-holding enemies, and politically problematic involvements. Taken as a whole, I believe they would have called into question not only his ability to oversee the banking and financial sectors impartially and in the country's best interests, but also the degree of support he would have had from his own party if he were to stumble even slightly. I believe it's possible that his nomination would have been opposed by some Democrats as well as many Republicans at at time when the last thing the Obama administration needs is a protracted and embarrassing nomination fight.
The New York Times item goes all the way back to June 11, 1989. Reporter Michael Quint's portrayal is of a man who was on the cutting edge of a historic wave of consolidation in the banking industry, something populist Democrats and perhaps even some Republicans would have found hard to swallow in Treasury's second-in-command:
THE LAWYER OF CHOICE: H. Rodgin Cohen; He's the Counselor Banks Call in a Crisis
Talk with a banker about hostile takeovers and more than likely the first lawyer to be mentioned will be H. Rodgin Cohen, partner at the New York law firm of Sullivan & Cromwell.
..... With more than 13,000 banks in the country, analysts have been predicting for years that thousands will eventually be eliminated by mergers. According to Mr. Cohen, that consolidation is likely to include combinations of many large banking companies, despite studies showing that efficiency does not increase when large banks become giants.
"There is room for substantial cost savings, even if there are no economies of scale to be gained,'' he said. ''They will not need two accountants, two law firms, two advertising agencies and two corporate development staffs."
The trend toward larger mergers is likely to continue, he said, "because the difficulty of putting together a series of small deals can exceed that of a single big deal."
Quint also recalls that Cohen was heavily involved in the negotiations to release American hostages held in Iran for 444 days from 1979 to 1981:
The Iranian hostage crisis in 1980 was a different kind of banking story. Representing Marine Midland Bank and European American Bank, he was part of what he called the ''cash-for-people'' negotiations. If the banks would unfreeze Iranian deposits, the Iranians agreed to use some money to pay outstanding loans, and the remainder was to be sent to their bank accounts outside America. ''When the phone call came saying the hostages had landed, it was the most exhilarating feeling I've experienced,'' Mr. Cohen said.
Though Cohen was no doubt working with the outgoing Carter administration during these negotiations, the Iranian regime, in what was seen as a parting personal insult to Carter, did not actually release the hostages until minutes after new president Ronald Reagan was inaugurated in January 1981. It's not unreasonable to believe that several Democrats with long memories are more than a little displeased with Cohen's "most exhilarating feeling."
Cohen's more recent work might also have posed more than a few unwanted problems for the administration, as an October 9, 2008 article at TheDeal.com describes (bold is mine):
Fed bailouts, mergers, stake sales and bankruptcies ... as Wall Street has transformed, Sullivan & Cromwell LLP chairman H. Rodgin Cohen has been there.
Alongside Wachtell, Lipton, Rosen & Katz co-chair Edward Herlihy, Cohen is easily one of the top banking M&A attorneys and as a Wall Street Journal item Thursday put it, counts "virtually all of Wall Street as his client." He's had a busy few months and in particular, a busy few weeks.
The Deal.com piece leans heavily on that Wall Street Journal report, which appeared that same day (link will probably go to article preview; Google the article's title, "A Lawyer for All Wall Street Navigates Tempestuous Times," to see the whole thing). Journal reporters Matthew Karnitschnig and David Enrich paint a picture of man who may, as much if not more than anyone else, be responsible for why the banking business is in its current condition (bolds are mine):
Mr. Cohen is also in demand because he helped mold the financial system that is now under assault. He helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S. and lobbied, in the early 1990s, to expand the Federal Reserve's power to provide the emergency loans now being employed by the government.
But Mr. Cohen's immersion in the banking system also has at times put him in a difficult position. As he jumps from one client to the next, it is sometimes hard to tell whom he may be representing at a given moment.
In mid-September, Mr. Cohen represented Wachovia in its preliminary merger talks with Morgan Stanley. Several days later, after those talks faltered, he advised Japanese bank Mitsubishi UFJ Financial Group as it negotiated a 21% stake in Morgan Stanley.
Mr. Cohen was counseling Lehman Brothers until it sought bankruptcy protection Sept. 15, and then pivoted to represent Barclays, which ended up buying the failed investment bank's U.S. operations. Late last month, as banks and private-equity firms rushed to examine WaMu's books, Mr. Cohen had to choose between four clients that wanted to hire him before settling on J.P. Morgan.
"Sometimes you just have to pass" on assignments, he says. Mr. Cohen says that most of his clients have "extraordinary understanding of the circumstances."
..... The recent troubles -- which Mr. Cohen describes as his "five weeks in hell" -- started when his phone rang around 11 a.m. Sept. 5. Fannie Mae needed Mr. Cohen in Washington for emergency meetings about its future with government officials including Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. Within days, Mr. Cohen had helped broker the deal that put Fannie and Freddie into conservatorship.
With all of these entanglements, Cohen's nomination might not have received the same "extraordinary understanding" his clients purportedly had from senators who were in essence blackmailed by Paulson and Bernanke into passing the $700 billion Troubled Assets Relief Program (TARP) last fall, and from banks who less than two weeks later were forced, with "a (figurative) gun to their heads," to acquiesce to partial government ownership funded with that same TARP money. In light of the browbeatings bankers have received recently over executive compensation and perks, Cohen's and his firm's take from their work might have, and in my opinion should have, been fair game in a Senate hearing.
Given all of this, it would not be all surprising if Cohen's problems with those he would have been charged with regulating were in some cases very personal. The most obvious potential example is in the first sentence of that October 9 Journal story: "When Wachovia Corp. ditched its merger deal with Citigroup Inc. for a rival bid from Wells Fargo & Co. last week it stunned many Wall Streeters."
Jilted Citigroup angrily sued for $60 billion (quixotically, at least according to Steven M. Davidoff's Dealbook Blog at the New York Times). It seems pretty unlikely that Citi's Richard Parsons, who last night said that his bank (paraphrased by Reuters) "does not need any more capital injections from the government," would have stood by idly if Cohen's nomination had gone forward to hearings.
Then there's this: Cohen's firm, Sullivan & Cromwell, gave $241,975 to the Democratic National Committee during the 2008 election cycle. Pay to play, perhaps?
Finally, add this wild card: Given current Treasury Secretary Tim Geithner's continued underwhelming performance, the prospect that Cohen, given his history, might actually take charge of Treasury if Geithner proves he's not up to the task may have been too much for his financial industry adversaries to bear.
So what really is the "issue (that) arose in the final stages of the vetting process"? What I've covered here points to the idea that the supposedly singular "issue" with Cohen was one of basic viability that really had to do with quite a few underlying "issues."
The establishment press's lack of curiosity in all of this is itself quite curious. I suspect that investigation and speculation would have run rampant if a Republican president had pulled the nomination of someone like Cohen; witness the feeding frenzy that followed Bush Homeland Security nominee Bernie Kerik for several days in 2004 even after his nomination was pulled. Instead, we're supposed to just let this Cohen thing go and move on. I would hope in light of what's I've noted here that someone closer to the situation and with more resources than yours truly says, "not so fast."
Cross-posted at BizzyBlog.com.