Pres. Trump Appointed an Insurance Industry Lobbyist to Advise on Reforming an Insurance Industry Regulator
Pres. Trump has appointed a former lobbyist for an insurance company, which has sued one of its regulators, as a special adviser with a role in shaping that very same regulator.
And to do so, his administration granted a secret ethics waiver to the section of the White House ethics pledge which specifically forbids former lobbyists from working on issues related to their former employers.
This act, along with the issuing of a secret ethics waiver that allows a former energy industry lobbyist to work on energy and environmental policy and an another that allows a former financial industry lobbyist to advise on reforming tax and retirement policy, shows that the Trump White House ethics pledge means absolutely nothing.
The Trump administration is intent on turning government over to private interests, in secret if necessary.
Published: January 30, 2018
The Financial Stability Oversight Council
With the U.S. financial system on the brink of collapse in late 2008 - the result of a global financial crisis that began in 2007 - the U.S. government authorized a taxpayer-funded bailout of financial institutions that were deemed “systemically important.”
That is, certain financial institutions were deemed to be so large and so interconnected with other financial institutions, that their demise would threaten the stability of the entire global financial system.
Deciding that it would be too dangerous to let these institutions fail, the U.S. government used taxpayer money to rescue them.
When the dust eventually settled on the financial crisis, the government turned to trying to prevent having to use taxpayer money to rescue financial institutions in the future.
To this end, it enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010.
Among other things, the Act created the Financial Stability Oversight Council (FSOC), a body that would be based in the U.S. Treasury and tasked with identifying risks to financial stability and reducing investor expectations that taxpayer-funded bailouts of financial institutions would occur again.
The FSOC is chaired by the Secretary of the U.S. Treasury and consists of ten voting members:
The Treasury Secretary
The Chairperson of the Federal Reserve
The Comptroller of the Currency
The Director of the Bureau of Consumer Financial Protection
The Chairman of the Securities and Exchange Commission (SEC)
The Chairperson of the Federal Deposit Insurance Corporation (FDIC)
The Chairperson of the Commodity Futures Trading Commission (CFTC)
The Director of the Federal Housing Finance Agency
The Chairman of the National Credit Union Administration Board
One independent member who is nominated by the President and confirmed by the Senate and has expertise in insurance.
Designating a financial institution as systemically important means that it becomes subject to enhanced regulatory oversight.
Of course, financial institutions dislike the additional regulatory scrutiny that comes with being label a SIFI.
The Trump White House Ethics Pledge
U.S. law gives the president the authority to prescribe regulations for the conduct of executive branch employees:
"The President may prescribe regulations for the conduct of employees in the executive branch."
On January 28, 2017, Pres. Trump exercised this authority by signing Executive Order 13770 into effect.
(Click here to learn about executive orders.)
This executive order, entitled “Ethics Commitments By Executive Branch Appointees,” specifies the ethics commitments Pres. Trump’s executive branch appointees are ostensibly expected to uphold.
Every White House staff member was required to sign the ethics pledge, contractually committing them to abide by it.
If a staff member violates the pledge, it is then up to the White House to determine whether it warrants disciplinary action.
(Click here to learn more about White House ethics pledges.)
One of the provisions contained in the ethics pledge is a two year restriction on former lobbyists working in the Trump White House participating in matters related to any lobbying they had done within the past two years:
“If I was a registered lobbyist within the 2 years before the date of my appointment ..... I will not for a period of 2 years after the date of my appointment participate in any particular matter on which I lobbied within the 2 years before the date of my appointment or participate in the specific issue area in which that particular matter falls.”
However, Pres. Trump, like his predecessor, chose to reserve the right to issue exemptions to this ethics pledge.
The ethics pledge contains a specific provision which allows Pres. Trump or a designee to grant any of his appointees a waiver which exempts the appointee from certain restrictions in the ethics pledge:
"The President or his designee may grant to any person a waiver of any restrictions contained in the pledge signed by such person."
Ethics Waiver for Andrew Olmem, Special Assistant to the President
Until May 31, 2017, the Trump administration had been issuing ethics waivers to its staff in secret.
And it's no wonder the administration attempted to keep its waivers secret: when the administration finally released the ethics waivers to the public, after pressure from outside watchdog groups, it was revealed that the administration had been issuing waivers allowing former lobbyists who have now taken positions in the administration to work on the exact issues they had previously lobbied on.
(To learn about who lobbyists are and what they do, click here.)
One of the ethics waivers allows a former energy industry lobbyist to work on energy and environmental policy.
Another allows a former financial industry lobbyist to advise on reforming tax and retirement policy.
Today Andrew Olmem is Pres. Trump’s Special Assistant for Financial Policy.
However lobbyist disclosure forms reveal that, prior to taking this position, Olmem was a partner at Venable LLP where he lobbied for MetLife Inc. and Lloyd’s, two of the world’s largest insurance firms.
(To learn about lobbyist disclosure forms, click here.)
Among other things, the ethics waiver issued on behalf of Olmem exempted him from the restrictions in the ethics pledge and U.S. law which prevent a lobbyist from working on issues pertinent to a former employer.
Specifically, it allows Mr. Olmem to participate in activities related to reforming the Financial Stability Oversight Council’s procedures.
The Trump administration thus issued an ethics waiver that allows a former lobbyist for insurance companies to participate in reforming a body tasked with determining which insurance companies should be deemed systemically important and subjected to additional regulatory oversight.
Oh, and by the way, MetLife, for whom Olmem worked as a lobbyist until joining the Trump administration, has actually sued the Financial Stability Oversight Council, which Olmem now has a role in shaping.
MetLife Inc. v. Financial Stability Oversight Council
On December 18, 2014, the FSOC deemed MetLife to be a systemically important financial institution.
MetLife responded to the decision by suing the FSOC, arguing that the FSOC made four “critical errors” in the reasoning behind its decision to label MetLife a SIFI.
On March 30, 2016, a U.S. district judge determined that the FSOC’s designation was “arbitrary and capricious” and ruled in favor of MetLife.
However, on April 21, 2017, a recently sworn in Pres. Trump issued a presidential memorandum directing his Treasury Secretary, Steven Mnuchin, to review the FSOC’s procedures for labeling financial institutions as SIFIs.
(You can learn how presidential memorandums work here.)
The Treasury released the results of its review on November 17, 2017. The review recommended significant changes to the way the FSOC determines which financial institutions should be labeled systemically important.
And on January 18, 2018, the Trump administration filed to end the government's appeal of the district court's ruling that had been launched by the Obama administration, ensuring that Metlife will not be designated as systemically important.