Emanuel Pick Underscores Balancing Act Ahead in Reshaping Financial Industry By BRODY MULLINS and SIOBHAN HUGHES
President-elect Barack Obama's new chief of staff, Rep. Rahm Emanuel of Illinois, will be working on overhauling the same financial industry that brought him millions of dollars as an investment banker.
Mr. Obama's choice of Mr. Emanuel to lead his White House staff through the economic crisis symbolizes the awkward balancing act that Democrats will face as they reshape the financial industry that they have also cultivated for political support.
Mr. Emanuel earned $16.2 million in a two-year stint working in Chicago for investment-banking firm Wasserstein Perella & Co. He also served on the board of Freddie Mac, the mortgage giant that was nationalized this year in the financial crisis.
Since he came to Congress, Mr. Emanuel has been a top recipient of campaign donations from Wall Street firms. His new boss, likewise, was a favorite of financial executives during his campaign for the presidency.
Nick Papas, a spokesman for Mr. Emanuel, said Mr. Emanuel has "consistently stood with taxpayers and investors and against Wall Street." He said that Mr. Emanuel's experience in government and the private sector will be "a tremendous asset as he works with President- elect Obama to help get our economy back on track."
Since being elected to Congress six years ago, Mr. Emanuel has raised $1.5 million in campaign donations from Wall Street employees, making the industry the single largest backer of his political career, according to the nonpartisan Center for Responsive Politics.
This election, Mr. Emanuel collected more money than any other House member from hedge funds, private-equity firms and the broader securities and investment industry, even though he faced no serious opposition.
Mr. Emanuel worked as a White House adviser during the Clinton administration. After leaving in 1998, Mr. Emanuel served on corporate boards including Freddie Mac; the Chicago Mercantile Exchange, now owned by CME Group Inc.; and public relations firm BSMG Worldwide Inc., now a part of Interpublic Group.
The Securities and Exchange Commission last year charged Freddie Mac with accounting fraud between 1998 and 2002, a period that overlapped with Mr. Emanuel's tenure on the board. Mr. Emanuel was not accused of any wrongdoing.
When he was elected to Congress in 2002, Mr. Emanuel took seats on committees that oversee Wall Street. He started on the House Financial Services Committee and later moved to the coveted tax-writing Ways and Means Committee. He currently serves as the fourth-ranking leader of House Democrats.
The accounting problems at Freddie Mac were made public while Mr. Emanuel was serving on the Financial Services Committee. He recused himself from votes related to the company.
Republicans say Mr. Emanuel could provide a counterbalancing support for business interests at the White House at a time when big companies are on the defensive, and even some conservatives are blaming Wall Street executives for the financial crisis.
"There's going to be a huge desire by some elements in the White House and some in the Congress to move sharply to the left," said John Feehery, a Republican strategist. "I think Emanuel's natural instinct would be much more moderate, especially on business issues." Added Mr. Feehery, "He probably has a lot of friends there who could tell him that raising the capital-gains tax is not a good idea if you want to strengthen the economy."
Mr. Emanuel's interest in business and finance deepened in Congress, where he used his position to help Chicago companies. Last year, Mr. Emanuel and Sen. Richard Durbin (D., Ill.) wrote to the Federal Communications Commission, urging the agency to act quickly on the sale of Tribune Co. to real-estate magnate Sam Zell. The lawmakers said the FCC shouldn't allow its review of government media-ownership rules to delay completion of the transaction.
Earlier this year, the two Illinois lawmakers wrote to the Justice Department, criticizing it for raising questions about the merger between CME and the New York Mercantile Exchange.
As Congress and the administration work to overhaul Wall Street regulations, Mr. Emanuel could help Mr. Obama look out for the Chicago exchanges and their regulator, the Commodity Futures Trading Commission.
Mr. Emanuel has also taken actions that hurt Wall Street players. He pressed the SEC to speed up its investigation of the backdating of stock options.