A lot of people are talking about Frank Rich’s explosive new article in New York magazine. I think it is a remarkable thing, the latest and maybe the most comprehensive in an increasingly lengthy series of articles and investigations into the Obama administration’s failure to properly investigate the causes of the financial crisis.
By now this is not quite a mainstream media drumbeat, but it’s coming close: between the reporting of Louise Story and Gretchen Morgenson at the New York Times to the recent not-terribly-laudatory piece on New York Southern District U.S. Attorney Preet Bharara by the New Yorker’s George Packer, to Eliot Spitzer’s bitter commentary on the subject on CNN, to my own bleatings, and now this Rich broadside, it seems quite clear that the Obama administration’s failure to clean up Wall Street is becoming a matter of some fascination with the few investigative journalists who are not covering the Casey Anthony case.
Rich’s thesis is that this issue is becoming important not just to reporters, but to voters, and that Obama may soon pay for his failures at the polls:
Obama can win reelection without carrying 10021 or Greenwich in any case. The bigger political problem is that a far larger share of the American electorate views him as a tool of the very fat-cat elite that despises him.
In making this point, Rich uses language that seems unusually savage for him:
For all the lurid fantasies of the birthers, the dirty secret of Obama’s background is that the values of Harvard, not of Kenya or Indonesia or Bill Ayers, have most colored his governing style. He falls hard for the best and the brightest white guys.
Yikes! That last line is truly brutal and I imagine will not be forgotten inside the White House, which once must have viewed Rich as one of Obama’s great supporters in the punditry world. A lot of journalists, myself included, were once enthralled by Obama, and saw his election as a rare uplifting moment in our electoral history, with the candidate himself performing with tremendous grace and class as he helped slay the country’s racial demons. Some of us even thought that Obama might be that rare, once-in-a-generation-type political talent who could help the country rise above itself, an MLK or a Roosevelt.
I say might. Because throughout 2008, it was hard to shake the feeling that this was a politician whose legacy could still go either way. There were an awful lot of troubling signs on the horizon in Obama’s campaign, not the least of which being the enthusiastic support he was receiving from Wall Street.
Obama in part ran a very slightly economically populist campaign, but the tens of millions pouring into his campaign coffers from the very rich (and specifically from hedge funds) told all of us that we probably shouldn’t expect those promises to come off. For a piece I wrote that summer, I asked people in Washington why Wall Street would be throwing money at a guy who was out there on the stump pledging to reach into their pockets:
Sadly, the answer to that question increasingly appears to be that Obama is, well, full of shit. He has made no bones about his plans to raise income by soaking the rich, promising to roll back the Bush tax cuts for people making over $250,000, increase the top tax rate on capital gains to 25 percent and raise the top rate on qualified dividends. He has also pledged to deliver a real stomach punch to hedge-fund managers, raising the tax rate on most of their income from 15 percent to 35 percent.
These populist pledges sound good, but many business moguls appear to be betting that the tax policies, like Obama himself, are only that: something that sounds good. “I think we don’t want to make too much of his promises on taxes,” says Robert Pollin, professor of economics at the University of Massachusetts. “Not all of these things will happen.” Noting the overwhelming amount of Wall Street money pouring into Obama’s campaign, even elitist fuckwad David Brooks was recently moved to write, “Once the Republicans are vanquished, I wouldn’t hold your breath waiting for that capital-gains tax hike.”
Disgustingly, Brooks turned out to be right, and the narrative of the Obama presidency did end up turning sour, on that front anyway. All of these articles are now chronicling how and why that happened.
The gist of this blistering Rich piece is that Obama came to office at a time of unprecedented hardship and public discontent, and made a mistake in deciding not to ride that anger and take an axe to those guilty of destroying the economy. Rich isn’t saying that Obama needed to put a guillotine on Maiden Lane; he’s saying that Obama’s big problem was that his failure to clean up Wall Street coincided with a similarly inexplicable failure to address the unemployment problem:
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.
Rich goes on to argue, very convincingly, that Obama decided to pass on the unemployment issue because he accepted the advice of Bob Rubin acolytes like Tim Geithner, who urged the president to move instead toward the Tea Party and take up the “austerity” mantle:
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… It’s his fault, no one else’s, that he seems diffident about the unemployed. Each time there’s a jolt in the jobless numbers, he and his surrogates compound that profile by farcically reshuffling the same clichés, from “stuck in a ditch” to “headwinds” (first used by Geithner in March 2009—retire it already!) to “bumps in the road.” It’s true the administration has caught few breaks and the headwinds have been strong, but voters have long since tuned out this monotonous apologia. The White House’s repeated argument that the stimulus saved as many as 3 million jobs, accurate though it may be, is another nonstarter when 14 million Americans are looking for work.
Rich in this way describes the central failure of the Obama presidency. Obama entered the White House in the middle of a great economic crisis, and his Geithner/Rubin solution was to spend mind-boggling amounts bailing out Wall Street, while extracting no conditions or reforms in exchange, and punishing no one. Then, by abandoning jobs programs and taking up the Tea Party’s “austerity” model, he essentially asked ordinary Americans to foot the bill for this no-strings-attached rescue program.
Rich thinks that this is going to hurt him with voters next fall, and he may be right. It could also be that Americans don’t particularly care about Obama’s failure to deal with Wall Street (or, more specifically, to clean up his completely broken and corrupted regulatory apparatus), and the administration’s political calculus is that that apathy and unfamiliarity with the root causes of the crisis will be such that there’s no real downside to continuing to take mountains of financial-sector cash while slow-rolling the cleanup.
If that’s what the Obama administration is thinking, I can certainly see the logic there. They may well be right that to solve the problem of getting re-elected in 2012, the president’s best bet is to take care of the Citigroups and JP Morgans on his Pioneer list, blow Romney or Bachmann away on the spending front, and then non-act and non-police his way straight into a second term.
But the problem is that doing that leaves the whole running-the-country matter unresolved. He might win re-election, but by taking this course of non-action, he’s risking another 2008-style crash, which Rich correctly points out would render the results of next year’s election irrelevant:
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 America than the second term of his administration will be at stake.
More and more, I hear that Obama’s hands-off-Wall-Street policy is a matter of concern within what used to be his own circle – Beltway professionals, intellectuals, lobbyists, academics, etc. Pretty clearly, that concern is bleeding into the mainstream press now. It’ll be interesting to see if Rich is right about it bleeding into the voter pool next.