Published on Monday, July 4, 2011 by New York Magazine
Obama's Original Sin
The president's failure to demand a reckoning from the moneyed interests who brought the economy down has cursed his first term, and could prevent a second.
by Frank Rich
After 9/11, Rudy Giuliani went on Saturday Night Live to give New Yorkers permission to laugh again. But Mayor Bloomberg never did tell us when we could resume conspicuous consumption after the crash of 2008. And so, as we stumble through the second year of the official "recovery," it's been an improvisational return to high-end carousing in
A case in point was the late-May celebration of the centennial rededication of the New York Public Library. Surely no civic institution could be a more unimpeachable beard for a blowout. The dress code—no black tie—was egalitarian. The Abyssinian Baptist Church Gospel Choir, the New York City Gay Men's Chorus, and that cute chorus from P.S. 22 in Staten Island—Glee diversity on steroids—were in the house along with some 900 invited guests, marquee names included (Toni Morrison, Jonathan Franzen). Bloomberg delivered a pre-dinner benediction from an altarlike perch on the main reading room's balcony. "Free and open access to information may be the single most important component of any democratic society," he said.
But it was impossible to banish toxic trace memories of the financial meltdown. Some two weeks earlier, the mayor had restricted the "free and open access" he now extolled. His fiscal 2012 budget called for slashing $40 million from the library system, a cut that would have mandated four-day weeks and the shutdown of a dozen branches.
There was also the awkward matter of the gala's "corporate chair," Brian Moynihan, the CEO of Bank of America. In the pageantry preceding Bloomberg's remarks, the slightly flushed Moynihan, looking like a nervous ring bearer in a stately wedding ceremony, was among those singled out by the announcer while marching down the reading room's long center aisle in a processional of library trustees. No doubt he earned this honor by ponying up to give more New Yorkers more books. But free and open access to the unexpurgated books of his own bank—and of its gutted acquisitions, Merrill Lynch and Countrywide Financial—would be a far more valuable gift to our democratic society. Just a week before the library fête, the Huffington Post reported that B of A was stonewalling the Department of Housing and Urban Development's investigation into fresh charges of defrauding taxpayers. Down in
Nyerges, at least, would pry loose a settlement of $5,772 in early June. We could use him in
On that Monday night, the Republican Schwarzman was a political outlier in the crowd, which was dominated by
What haunts the Obama administration is what still haunts the country
After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora's fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama's watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department's ballyhooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes. You almost have to feel sorry for the era's designated Goldman scapegoat, 32-year-old flunky "Fabulous Fab" Fabrice Tourre, who may yet take the fall for everyone else. It's as if the Watergate investigation were halted after the cops nabbed the nudniks who did the break-in.
Even now, on the heels of Bank of America's reluctant $8.5 billion settlement with investors who held its mortgage-backed securities, the Obama administration may be handing it and its peers new get-out-of-jail-free cards. With the Department of Justice's blessing, the Iowa attorney general, Tom Miller, is pushing the 49 other states to sign on to a national financial settlement ending their investigations of the biggest mortgage lenders. What some call a settlement others may find a cover-up. Time reported in April that the lawyer negotiating with Miller for Moynihan's Bank of America just happened to be a contributor to his 2010
Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative, since the actual rule-writing was delegated to understaffed agencies now under siege by banking lobbyists and their well-greased congressional overlords. The administration's much-hyped Consumer Financial Protection Bureau is being sabotaged by Washington Republicans intent on blocking any White House nominee, whether Elizabeth Warren or some malleable hack, to lead it. "We can't let special interests win this fight," said Obama when he proposed the agency in October 2009. Well, he missed his moment to fight for both it and
Rather than purge the crash's crimes, Wall Street's leaders are sticking to their alibi
The fallout has left Obama in the worst imaginable political bind. No good deed he's done for Wall Street has gone unpunished. He is vilified as an anti-capitalist zealot not just by Republican foes but even by some former backers. What has he done to deserve it? All anyone can point to is his December 2009 60 Minutes swipe at "fat-cat bankers on Wall Street"—an inept and anomalous Ed Schultz seizure that he retracted just weeks later by praising Dimon and Lloyd Blankfein as "very savvy businessmen."
Obama can win reelection without carrying 10021 or
He stocked his administration with brilliant personnel linked to the bubble
The economic narrative of his presidency has been bookended by well-heeled appointees with tax issues. First came his Treasury secretary, Timothy Geithner, introduced to the public as a repeat tax delinquent, just too important to attend to the fine print that troubles mere mortals. This January, when Obama at long last created a jobs council, he appointed Jeffrey Immelt, CEO of G.E., to lead it. The Times did the due diligence the White House didn't and found that G.E. paid essentially no
The roots of Obama's capture by the corporate axis of influence inexorably trace back to his own personal Zelig, the former Clinton Treasury secretary and Harvard Corporation stalwart Robert Rubin. In The Audacity of Hope, published in late 2006, Obama called Rubin, then busily cheerleading the excessive risk at Citigroup, "one of the more thoughtful and unassuming people I know." Two years later, when Citi cratered and threatened to take the economy with it, Rubin demonstrated his unassuming thoughtfulness by denying that he had anything to do with the toxic investments that cost taxpayers a $45 billion bailout and 52,000 Citi employees their jobs.
In his unseemly revolving-door career, Rubin not once but twice sped the Citi apocalypse—first in government, where he and his eventual successor as Treasury secretary, Larry Summers, championed the deregulatory policies that facilitated the consolidation of too-big-to-fail banks, and then in his $15 million-a-year role as Citi's "guru," where, by his own later account, he had no idea what was in the worthless paper the bank peddled to greedy dupes. You'd think Obama would have dumped him faster than he did the Reverend Wright, but that's misreading him. Obama is preternaturally secure on thorny matters of race—as his magnificent speech on the subject made clear—and could distance himself from his preacher with no ambivalence. It's "unassuming" braininess that's his blind spot.
And so a parade of Rubin acolytes entered the White House, led by Geithner, a nearly lifelong civil servant so identified with the financial Establishment that even Mayor Bloomberg mistakenly introduced him as a Goldman alumnus at a public event in
Obama had taken office at a true populist moment that demanded more than this. People were gagging over their looted 401(k)s and underwater homes, the AIG bonuses, and the bailouts. Howard Dean rage has never been Obama's style—hope-and-change was an elegant oratorical substitute—and had he given full voice to the public mood, he would have been pilloried as an "angry black man." But Obama didn't have to play Huey Long. He could have pursued a sober but determined execution of justice and an explicit, major jobs initiative—of which there have been exactly none, the too-small stimulus included, to the present day.
By failing to address that populist anger, Obama gave his enemies the opening to co-opt it and turn it against him. Which the tea party did, dishonestly but brilliantly, misrepresenting Obama's health-care-reform crusade as yet another attempt by the elites to screw the taxpayer. (The Democrats haplessly reinforced the charge with marathon behind-the-scenes negotiations with insurance and pharmaceutical-industry operatives.) Once the health-care law was signed, the president still slighted the unemployment crisis. A once-hoped-for WPA-style public-works program, unloved by Geithner, had been downsized in the original stimulus, and now a tardy, halfhearted stab at a $50 billion transportation-infrastructure jobs bill produced a dandy Obama speech but nothing else.
Obama soon retreated into the tea-party mantra of fiscal austerity. Short-term spending cuts when spending is needed to create jobs make no sense economically. But they also make no sense politically. The deficit has never been a top voter priority, no matter how loudly the right claims it is. At Obama's inaugural,
Geithner has pushed deficit reduction as a priority since before the inauguration, the
In early June, the unemployment rate—7.8 percent when Obama took office and as high as 10.1 percent during his tenure—ticked upward to 9.1 percent. That cued a ubiquitous press refrain that no president since FDR has been reelected with an unemployment rate higher than 7.2 percent (as it stood when Reagan overcame a recession to win in 1984). Later that month, a plurality in a Bloomberg survey said the economy was worse now than when Obama took office.
The ultimate indignity, though, was a Washington Post / ABC News poll showing Obama in a dead heat with Mitt Romney. Mitt Romney! If any belief unites our polarized nation, it's the conviction that Romney is the most transparent phony in either party, no matter how much he's now deaccessioning hair products. It's also been a Beltway truism that a Mormon can't win the Republican nomination, let alone a
It was on Monday, June 13, that the new state of play crystallized. That morning, Immelt unveiled his vacuous op-ed and rendezvoused with Obama in Durham, North Carolina, for a double-feature dog-and-pony show
That Monday morning was also when Romney unleashed a web video startling in its brazenness. Mockingly titled "Bump in the Road," it dispatched a diverse parade of unemployed Americans (or actors impersonating them) to a desert, where each in turn plaintively announced in close-up, "I'm an American, not a bump in the road." Though Romney (wisely) stayed offscreen, the ad cast him in the unlikely role of Tom Joad leading the downtrodden dust-bowl masses to salvation. Hours later, Romney aced that night's first major GOP presidential debate by again offering himself as an economic savior. His jobs plan? "Keep government in its place" and let "the energy and passion of the American people create a brighter future."
No one doubts that Romney is a shape-shifter par excellence, whether on abortion, health care, cap and trade, or the
The most significant workers he added to the payroll in Salt Lake City were sixteen lobbyists, at a cost of nearly $4 million, to solicit taxpayers' subsidies—"more federal cash than any previous U.S. Olympics," according to The Wall Street Journal. That's hard to square with Romney's current stand that jobs will bloom across the land if government stops giving any handouts (even to tornado victims, he said in the GOP debate) and lets the free market work its magic. As for his fifteen years in the corporate-buyout business, he was best known for the jobs Bain shredded at the once-profitable companies it took over and then demolished for parts.
It's a record Romney perennially tries to cover up. It may have cost him his Senate race against Ted Kennedy in 1994. In that campaign, Romney was stalked by a "Truth Squad" of striking workers from a
That Romney thinks he can pass himself off as the working stiff's savior and Obama as the second coming of the out-of-touch patrician George H.W. Bush of 1992 truly turns reality on its head. Obama's palling around with Rubinistas may be too much for his administration's or the American people's good, but Romney is a bona fide plutocrat whose financial backers include David Koch and whose idea of a joke was to tell a group of out-of-work Floridians on the campaign trail, "I'm also unemployed." Yet so far, Romney is getting away with it, and the Republican Establishment, smelling a savior, is happy to embrace and embroider his proletarian masquerade. Peggy Noonan recently anointed this well-connected son of a Detroit CEO and
There's not much Obama can do to alter the economy by 2012, given the debt-ceiling fight, the long campaign, and nihilistic Capitol Hill antagonists opposed to any government spending that might create jobs and, by extension, help Obama keep his own. But the central question before the nation couldn't be clearer
Some Obama fans think it's tactical genius that's holding him back—his fabled long ball. Americans are no longer as angry as they were in January 2009 so much as they are defeated, depressed, and jaded by the slow recovery and by four decades of raging inequality that tells them the deck is stacked no matter who's in Washington. Better, then, not to ruffle these still waters—or those easily rattled independents fetishized by political consultants—and instead scare seniors about imminent Medicare cutbacks and plot deep-think policy initiatives that (like health-care reform) might fix America over time. But the voters' placidity hardly augurs well for Democratic turnout in 2012. And it may not last. All that's required is one more economic panic to shatter the phony peace and whip the rage back to center stage, once again to the right's advantage.
"A nation cannot prosper long when it favors only the prosperous," Obama declared at his inauguration. What he said on that bright January morning is no less true or stirring now. For all his failings since, he is the only one who can make this case. There's nothing but his own passivity to stop him from doing so—and from shaking up the administration team that, well beyond the halfway-out-the-door Geithner and his Treasury Department, has showered too many favors on the prosperous. This will mean turning on his own cadre of the liberal elite. But it's essential if he is to call the bluff of a fake man-of-the-people like Romney. To differentiate himself from the discredited Establishment, he will have to mount the fight he has ducked for the past three years.
The alternative is a failure of historic proportions. Those who gamed the economy to near devastation—so much so that the nation turned to an untried young leader in desperation and in hope—would once again inherit the Earth. Unless and until there's a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in
© 2011 New York Magazine
Frank Rich is a staff writer for New York Magazine. He is the author of many books, including The Great Story Ever Sold: The Decline and Fall of Truth from 9/11 to Katrina.
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"The master class has always declared the wars; the subject class has always fought the battles. The master class has had all to gain and nothing to lose, while the subject class has had nothing to gain and everything to lose--especially their lives." Eugene Victor Debs