Bowles Says He Kept Morgan Stanley Job Separate From U.S. Plan to Cut Debt
Bowles Says Kept Morgan Stanley Job, U.S. Debt Plan Separate
Jay Mallin/Bloomberg
Co-chairman of President Barack Obama’s debt-reduction commission Erskine Bowles.
Co-chairman of President Barack Obama’s debt-reduction commission Erskine Bowles. Photographer: Jay Mallin/Bloomberg
Erskine Bowles, co-chairman of President Barack Obama’s debt-reduction commission, said his job as a Morgan Stanley (MS) director didn’t influence his work on the panel’s recommendations for balancing U.S. spending, which said taxes are sapping the competitiveness of companies.
He and the commission’s co-chief, Alan Simpson, told an audience of bankers, investors and executives at an Economic Club of New York lunch meeting March 7 that the country may face a crisis if it doesn’t rein in the debt. Bowles, 65, has been a member of the bank’s board since the end of 2005.
“It didn’t have any effect on me at all,” he said in an interview after the lunch, when asked if his work for New York- based Morgan Stanley influenced the commission’s December proposals. “We tried to gore every ox we could.”
The panel’s $3.8 trillion budget-cutting plan would trim Social Security, overhaul the tax code and cut defense spending. The Washington-based Center for Economic and Policy Research’s co-director, Dean Baker, wrote in November about his concerns that Bowles was leading a panel whose recommendations could affect Morgan Stanley.
The commission’s plan won backing from 11 of 18 members in December, falling short of the 14 votes needed to forward it to Congress.
Tax Considered
Bowles yesterday testified to the Senate Budget Committee about his report. He echoed the message he delivered to the Economic Club, where he had said, “this debt is like a cancer that will truly, over time, destroy this country from within.”
Asked afterward if the commission discussed raising taxes on Wall Street firms, Bowles said, “yeah,” without elaborating on a specific proposal. “Every topic like that, where we looked at sources of revenue, was discussed and discussed fairly,” he said. “Where we could find the support, we went with it. And where we couldn’t, we didn’t.”
Morgan Stanley has paid Bowles $335,000 a year for his work on the board, the bank said in regulatory filings. On March 7, he took a moment during the speech to poke fun at Morgan Stanley Chairman John Mack, an alumnus of Duke University, who sat at a nearby table. Bowles, the president of the University of North Carolina system until last year, said “some cuts” to research spending are necessary.
“And we did beat Duke,” he said. “I’m looking right at John Mack.” The 66-year-old banker, who sits on Duke’s board of trustees, smiled from his table by the stage.
Koch, Paulson
Bowles, a former chief of staff to President Bill Clinton, and Simpson, 79, a former Republican senator from Wyoming, spoke on a stage whose dais included club trustee David H. Koch of Koch Industries Inc., which funneled campaign funds to Republican governors who are trying to curb state workers’ bargaining rights and cut spending. Also at the dais was John Paulson, whose firm, Paulson & Co., made $15 billion betting against subprime mortgages in 2007.
Simpson called the U.S. fiscal position “unconscionable.”
“People just sit out there and blink like a frog in a hailstorm,” he said. “They don’t have any idea what the hell’s going on.”
Bowles said in the interview that he didn’t discuss the panel’s deliberations with Morgan Stanley colleagues.
“They have said nice things about it since it came out,” he said, as guests finished what the program called an “East Coast Cranberry Brown Betty” dessert with yuzu and whipped cream. “But I had zero input going into it,” he said.
To contact the reporter on this story: Max Abelson in New York at mabelson@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.
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