My June 13 New York Times carries the sad and confusing tale of the trouble that the Obama campaign is encountering in pumping Wall Street for 2012 cash. Apparently, the president “enraged many financial industry executives a year and a half ago by labeling them ‘fat cats’ and criticizing their bonuses.” As a result, “executives at large investment banks, a group that gave generously to Mr. Obama in his last campaign, are remaining on the sidelines for now.”
This is—excuse me—a bit rich. Wall Street’s refusal to pony up for Obama’s second term is an example of ingratitude mixed with ineptitude on the grandest scale imaginable. Obama’s words practically constitute a Candygram compared with what many in the media—to say nothing of “real people”—were saying and doing when they found out that these “fat cats,” who had cost them their jobs and their homes, would be rewarded with billions in taxpayer dollars. Recall that at one of Obama’s early press conferences on the financial crisis, a nearly hysterical Ed Henry (of CNN) demanded to know why the president waited “days to come out and express that outrage…. Why did it take so long?” The issue in question was the bonuses AIG executives awarded themselves after receiving billions in bailout funds. Recall also that unlike the European Community, which instituted strict compensation limits on its bankers, the Obama administration declined to place any limits, even for companies saved by the taxpayer-funded TARP program. In 2008, the year of the big bailout, one trader—Andrew Hall of the Phibro energy trading unit, which TARP participant Citigroup sold to Occidental Petroleum—took home $100 million. The years 2009 and 2010 turned out to be record breakers on Wall Street, as total compensation and benefits at the top New York banks, investment banks, hedge funds, money-management firms and securities exchanges hit $128 billion and $135 billion, respectively, according to the Wall Street Journal.
Such decisions were consistent with the administration’s position, as Paul Krugman put it, to “protect the interests of creditors, no matter the cost.” During the fight over the financial reform bill, the administration consistently took the positions for which the banks were lobbying. Obama and his team were eager to weaken the “Volcker Rule,” which sought to prevent “large, systemically important banking institutions [from] undertaking proprietary activities that represent particularly high risks and serious conflicts of interest,” e.g., Goldman Sachs betting against the collateralized debt obligations it had just sold its customers. At the same time that banks were given massive loans at or near 0 percent from the Fed, they could turn around and lend to consumers at a 100 percent profit. The administration sided with the banks in keeping the Consumer Financial Protection Agency inside the Federal Reserve, where its independence might be easily compromised. Finally, nothing was done to address the central problem: allowing banking institutions to become so large as to be “too big to fail.” The banks that caused the 2008 crisis have significantly increased their share of global assets since they almost brought down the entire economy.
And yet we learn from the Times’s “DealBook” that the folks at Treasury are spending a great deal of quality time with these bankers, even as they seek to defenestrate those reforms that somehow survived. “In February, Treasury officials met with finance industry executives and lobbyists from about three dozen banks, asset management companies and trade groups.” Goldman alone scored four meetings. Consumer groups, meanwhile, “made few appearances on the agenda, except on the calendar of Elizabeth Warren,” whom Obama is declining to appoint to run the new consumer bureau, owing to the objections of bankers and the lackeys in both parties whose campaigns they fund. The above represents a small fraction of the beneficence bestowed on bankers by the Obama administration, and yet from the perspective of Wall Street’s many multimillionaires there is the biggest gift of all: the costly extension of the Bush-era tax cuts to those making more than $250,000, whose benefits will be enjoyed primarily by the multimillionaires who can be found complaining about the “socialist” in the White House.
Just why Obama felt compelled to take this particular friendly tack at a moment of nationwide outrage remains a matter of dispute. Perhaps he believed, with his ex–chief of staff, the liberal-hating Rahm Emanuel, that any attempt to confront Wall Street—or any powerful Washington lobby—would have resulted in the failure to secure any legislation at all. What is missing from these calculations, of course, is the presence of a president who uses the bully pulpit to transform the terms of debate. Obama supporters might recall voting in 2008 for an eloquent candidate who, upon receiving his party’s presidential nomination, mercilessly mocked “that old, discredited Republican philosophy—give more and more to those with the most and hope that prosperity trickles down to everyone else.”
Whatever. Instead of whining, Wall Street fat cats should be sending the president roses, champagne and a political “Get Well” card. With unemployment rising above 9 percent again and the average unemployed person looking for work for more than nine months, it’s hard even to explain an ingrate like hedge-fund manager Anthony Scaramucci. An ex-Obama donor, Scaramucci told the Times that he planned to support Mitt Romney because “I think the country right now needs more practical, less partisan people.” Got that? Vote for the guy whose party wants to see the government default on its financial obligations, destroy Medicare and ignore global warming on the grounds of “pragmatism.”
George Orwell wouldn’t have dared…