William M. Daley, President Barack Obama's new chief of staff, is a major Wall Street player who sought to loosen corporate reform laws and protect big accounting firms from investor lawsuits and criminal prosecution.
His pro-business credentials are so impeccable the U.S. Chamber of Commerce enthusiastically embraced Daley’s appointment Thursday, calling him “a man of stature and extraordinary experience in government, business, trade negotiations, and global affairs.”
Daley was Secretary of Commerce during the Clinton administration, and since leaving government he’s held posts in the highest reaches of corporate America, serving as president of SBC Communications Inc. and, most recently, as a top executive at one of Wall Street’s most powerful firms, JPMorgan Chase & Co.
At JPMorgan, Daley’s portfolio has included supervising government lobbying for a bank with $2 trillion in assets that has fought efforts to limit the size of megabanks.
In early 2007, Daley played a star role in the business community’s push to roll back regulations imposed after the Enron debacle and other accounting scandals. Daley co-chaired a U.S. Chamber of Commerce commission that urged the federal government to revise the 2002 Sarbanes-Oxley corporate reform law and protect corporate auditors from lawsuits and investigations.
Ira Rheingold, executive director of the National Association of Consumer Advocates, a Washington, D.C.-based group, said frauds revealed by the market meltdown that gained steam later in 2007 provide compelling evidence that Daley and other champions for deregulation were blind to the dangers of unbridled corporate power.
“It makes you pause when you see people who worked in the banks that caused the problems – people who lobbied for positions that would have done even greater damage to the economy – being recycled into government,” Rheingold told the Center for Public Integrity. “What’s amazing about Washington is the short-term memory. History is just completely forgotten.”
Chamber of Commerce President Thomas Donohue countered that Obama’s choice of Daley is a “strong appointment.” Daley is “an accomplished manager and strong leader,” Donohue said. “We look forward to working with him to accelerate our recovery, grow the economy, create jobs, and tackle America's global challenges.”
Daley’s predecessor at Commerce, Mickey Kantor, said Daley was an inspired choice. “His experience in the business community at a very high level will be helpful to him and the president and administration – not just because of credibility, but because he knows so much how business works and what are the problems and opportunities that we all face in trying to work together in moving this economy forward.” Kantor is now in private law practice in Los Angeles.
Obama appointed Daley to succeed Rahm Emanuel, his first chief of staff. Emanuel left the White House to run for mayor of Chicago, an opportunity that arose when Daley’s older brother, Richard M. Daley, announced he would not run for re-election.
The Center’s efforts to reach William Daley for comment were unsuccessful. A spokesman for JP Morgan told the Center that he “is not doing interviews.”
Daley was more outspoken in March 2007, joining other business leaders in raising the specter of competition from London and Hong Kong to make the case that Wall Street needed a break from excessive oversight. “International financial markets are becoming increasingly competitive, and we need to step up our game and respond,” Daley said when the chamber’s capital markets commission released its recommendations.
Daley added that there was “a perception around the world that we’ve got problems because of a regulatory and legal climate. Whether it is true or not, the fact is that perception creates its own reality.”
The commission report said banking rules needed to be modernized, because “the U.S. regulatory structure is deeply rooted in the reforms put in place in the 1930s, a period that was closer in time to the Civil War than it is to today.” It said worries about “burdensome and duplicative regulatory schemes and an inefficient and unfair legal system” were making U.S. capital markets less attractive to companies.
It also warned that the Big Four accounting firms, which audited most of the nation’s publicly held companies, were being endangered by the risk of criminal indictment by the federal government or by “mega-claims” filed by class-action attorneys.
Critics at the time charged that the commission’s report was a smokescreen for a campaign to free Wall Street banks and other big firms from oversight. AFL-CIO chief John Sweeney called the report one “in a series of fundamentally irresponsible efforts by elements of the business community to attack the very investor protections that ultimately have ensured the competitiveness of our capital markets.”
William Daley grew up in a legendary political family. He is youngest son of the late Richard J. Daley, the Democratic power broker who ruled Chicago as mayor from 1955 until his death in 1976.
After earning a law degree, William Daley worked at Mayer Brown, one of the nation’s largest corporate law firms, and as president and chief operating officer of Amalgamated Bank of Chicago.
In 1993, he went to the White House to work as special counsel to President Bill Clinton, coordinating the campaign that won passage of the North American Free Trade Agreement. NAFTA’s approval was a big win for business leaders, who hailed it as a boon to economic growth. Labor leaders and other critics have complained that the pact didn’t include enough protections for workers and the environment.
Daley was Clinton’s Secretary of Commerce from 1997 to 2000, running a department of more than 40,000 people.
After chairing Al Gore’s unsuccessful 2000 presidential campaign, Daley spent three years as president of SBC Communications, the telecommunications giant that later acquired AT&T Corp. and adopted its name. He joined JPMorgan in 2004 as Midwest chairman. He was given an additional title in 2007 as head of the bank’s Office of Corporate Social Responsibility. JPMorgan says Daley “oversees and coordinates the firm's global strategy and efforts in government affairs, public policy, charitable giving, and environmental and community affairs.”
JP Morgan and its chief executive, Jamie Dimon, have been credited with navigating the financial crisis better than many competitors. A recent New York Times Magazine profile described Dimon as “America’s Least-Hated Banker,” crediting him for reining in lending earlier than other banks and keeping his institution “not only solvent but profitable every quarter.”
The bank didn’t completely avoid the go-go lending practices that sparked the financial crisis, though.
JPMorgan ranked No. 12 on the Center for Public Integrity's “Subprime 25” list of the biggest players in the market for high-cost mortgages. The bank and its subsidiaries originated at least $30 billion in high-interest loans in 2005-2007, according to Home Mortgage Disclosure Act data analyzed by the Center.
JPMorgan was also a player in packaging subprime loans into mortgage-backed investments. In 2006, JPMorgan pooled more than $26 billion in subprime loans into mortgage-backed securities deals, ranking No. 9 on Inside Mortgage Finance's list of the top underwriters of securities backed by subprime home loans.
In the aftermath of the financial meltdown, JPMorgan emerged as an opponent of efforts to limit the size of big banks. Dimon told The New York Times: “Economies of scale are a good thing. If we didn’t have them, we’d still be living in tents and eating buffalo.”
Damon Silvers, policy director at the AFL-CIO, said JPMorgan lobbied in early 2010 against proposals to limit the size of banks and the kinds of risks they could take. “They fought any structural reform to make them actually be a bank as opposed to a house of financial speculation,” Silvers said.
During the fight this spring over the Obama administration’s financial reform bill, The Wall Street Journal reported that JPMorgan opposed the creation of the proposed Consumer Financial Protection Bureau. The newspaper said that “when White House Chief of Staff Rahm Emanuel called a top JPMorgan executive to ask for the bank's support in creating a new consumer-protection agency, the executive – former Commerce Secretary William Daley – said no, according to people familiar with the conversation. His boss believed that sufficient consumer safeguards were already on the books.”
The consumer bureau became law, but Republicans and business interests have vowed to undercut the agency’s power as it begins its rulemaking process.
Reporter Josh Israel contributed to this story.
Correction: An earlier version of this story misspelled Thomas Donohue's name.