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.