Kasich and Bush: the Lehman Brothers

Most of the stuff being written about soon-to-be official GOP presidential candidate John Kasich involves his struggle to qualify for the August 6 Fox News debate, though some observers really seem to think he’s a serious dark horse candidate if he can get his act together and deal with conservative anger at his decision to accept a Medicare expansion as governor of Ohio.

But an old problem for him is beginning to reemerge: his seven years as a managing director at Lehman Brothers, the firm whose meltdown in 2008 touched off the global financial crisis that in turn led to the Great Recession. Bloomberg Politics‘ Mark Niquette has the story:

Kasich’s Lehman career, which included deals for companies from Google Inc. to Cleveland-based manufacturer ParkOhio, will test the presidential campaign that the two-term Ohio governor plans to start this month.

While his opponents have depicted his stint at the doomed bank as a period during which he cashed in as millions suffered, Kasich makes the case that he gained finance experience that made him a better public official.

“If people want to attack me, I’ll tell them what I did, and I think it’s been great,” Kasich said in an interview Wednesday during a visit to South Carolina.

This is why Niquette describes Kasich’s Lehman tenure as representing a “Rorschach Test” for how one view’s Kasich’s career: did it taint him or enhance his long resume? The same could be asked of his service as one of Newt Gingrich’s lieutenants in the Republican Revolution of the 1990s.

As it happens, Kasich is not the only Republican candidate who worked extensively for Lehman Brothers. So did Jeb Bush, who was an “advisor” to the firm and then to its successor, another bank with a less than ideal reputation, Barclay’s. In a Daily Beast column last week, Charles Gasparino suggests that Bush’s refusal to answer questions about what he did for both banks could significantly undermine the claim of total transparency he made when releasing old tax returns.

Not much is known about what Bush actually did for Lehman—the firm that went belly-up in 2008 and sparked the wider financial crisis, and Barclays, the bank that purchased Lehman out of bankruptcy and continues to work out of its midtown Manhattan headquarters. He began working for the former after his term as Florida governor ended in 2007, and continued working for the latter until the end of 2014, when he decided to run for president.

The two banks were his biggest sources of income in recent years: Bush earned more than $14 million working for Lehman and then Barclays, which based on my understanding of simple math accounted for nearly half of the $29 million he made after he left government. Yet in Tuesday’s disclosure, and even in many of his public comments, Bush has downplayed his work for the two banks.

“I also was hired as a senior advisor to Barclays where I advised their clients on a wide range of global economic issues with a mind towards navigating government policies,” he writes in an essay that accompanied the tax returns. It is the only sentence that refers to his time at Barclays. And he doesn’t mention Lehman at all.

Bush has denied any responsibility for one bit of toxic Lehman Brothers fallout: the huge bath taken by Florida state agencies and local governments who invested their assets in a state fund managed by the bank when it folded. Despite the denials, suspicions remain thanks to this big coincidence noted by the Tampa Bay Times:

The storied bank hired former Gov. Jeb Bush as a consultant in June 2007, five months after he left office. As governor, Bush also served as a trustee for the State Board of Administration, which invests public money.

Lehman was the dominant Wall Street broker that sold the SBA $1.4 billion of risky, mortgage-related securities that started tanking in August 2007.

Bush has said he had nothing to do with those sales.

So there’s some smoke but no fire so far, but I doubt the association of two presidential candidates with a bank whose name is a byword for failed promises will entirely go away. Indeed, if Kasich’s campaign survives its early tests I wouldn’t be surprised if one of their many rivals starts referring to them together as the “Lehman Brothers.” No specific allegation will be necessary to make the line damaging. Them’s the breaks when you mix investment banking with politics in a Robber Baron era.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.