How Obama let Wall Street off the hook

Confidence Men:

Wall Street, Washington, and the Education of a President

The release of Confidence Men, Ron Suskind’s shattering portrayal of the Obama administration’s failure to reform Wall Street after the financial crisis of 2008, has drawn savage repudiations from the book’s dramatis personae.

Most were well-trained enough to follow the Washington form of the “non-denial denial,” wherein affected outrage is liberally substituted for specific charges of misrepresentation. The sole exception was former White House Communications Director Anita Dunn, who insisted that she never told Suskind that the White House was a hostile workplace for women. Suskind replied by releasing audio recordings of his conversation with Dunn to theWashington Post and explaining to Democracy Now! that he actually allowed Dunn to rework the entire passage in which she was quoted. Advantage: Suskind. The real mystery is why someone who ran Barack Obama’s media shop did not instinctively issue a gauzy, nonspecific statement in the first place.

Confidence Men does not tell us anything fundamentally new about the Obama administration; it is not, in that sense, a book like David Halberstam’s The Best and the Brightest, which compelled a basic rethinking of the Kennedy regime. The insight that the White House is intellectually uncommitted to anything save the preservation of the status quo ante, and therefore outmatched in permanence by social forces that are badly discredited—indeed despised—in the broader society, is scarcely a surprise to anyone who has been paying close attention. What makes Suskind’s account so devastating is his vast access to Washington and Wall Street insiders—including interviews, emails, and documents—and his ability to organize this mass of detail into a narrative that many, if not most, people already suspect to be true.

The book plays off the notion of “confidence” and its many interpretations. In 2008, the United States experienced a general lack of confidence of all social classes in the existing political and economic leadership. Obama and his Democrats were elected to restore confidence—but soon discovered that “confidence” had different meanings depending on which side of the wealth gap one sat. For working people it meant, at least, reining in the tycoons who created the crisis and using some of their ill-gotten wealth to help the bottom 99 percent. For the tycoons it meant: “First do no harm,” the slogan of Obama’s chief economic adviser Lawrence Summers, implying that the premier concern of policy was to nurse finance back to its previous state of rollicking good times.

The irreconcilability of these strategies is given good expression by Larry Fink, inventor of mortgage-backed securities and CEO of BlackRock: “Wall Street’s confidence is buying back your shares; that does not add a job. Wall Street’s confidence is doing a merger; that destroys jobs.” Suskind reveals, incidentally, that this clever fellow was offered to succeed Summers and potentially even Treasury Secretary Timothy Geithner. Fink turned it down because he was busy doing multibillion dollar deals at his day job.

Suskind’s profile covers the first two years of the Obama presidency, with some long (and longing) looks back into the campaign days. The first, decisive year is one of extreme confusion, lack of intellectual commitment, and astonishing disorganization. The crucial example that Suskind adduces is Geithner’s now-infamous “slow-walking” of Obama’s directive to prepare a plan to “resolve” (that is, break up) Citigroup, one of the world’s largest and most dysfunctional banks. Geithner simply didn’t do it, and Obama failed to fire his ostensible underling when informed of the insubordination.

Yet the public controversy over the “slow-walking”—which Geithner denies despite Suskind’s convincing evidence—obscures the full picture of the events; for what Suskind shows is that the request for a Citigroup resolution plan was already a retreat from a proposal by Christina Romer and (surprisingly) Summers for a much broader bank restructuring, following the example of Sweden in the 1990s. This was opposed by Geithner, defending the powers-that-be, and Chief of Staff Rahm Emanuel, whose nastiness amounts to a kind of overcompensation for his all-consuming fear of confronting any powerful constituency. At the height of the Oval Office debate, Obama huffily departs to “get a haircut and have dinner with my family,” leaving Emanuel in charge to basically decide the question.

Hence as early as March 2009, Obama Mission Control was rehearsing in its internal relations the pattern that would become a public spectacle in the health care “debate” of 2010. First, a preemptive “compromise” before the battle is even joined. Next, a period of weird listlessness and inaction, allowing the opponent to gain the upper hand. Finally, recognition of the fiasco, prompting a fresh capitulation, which becomes the point of departure for another cycle.

Unlike many books that place a heavy emphasis on “insider” accounts, such as the tiresome “palace histories” of Bob Woodward, Suskind’s work is enlivened by his fresh writing style and sense of pacing—and most importantly, his perceptible anger at the human toll taken by the economic crisis and Washington’s failure to impose any reforms. Suskind’s remarkable access results in a book filled with jaw-dropping quotes, such as the following from Summers: “One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way that they’re supposed to be treated.” Imagine the kind of person who could have said this in 2009!

The book is not without problems. It excludes virtually any aspect of policy not strictly connected to domestic economic policy; that is, there is scarcely any discussion of foreign affairs, civil liberties, immigration, etc. This is by design, but it means that a very large part of the administration’s activity is not treated. Suskind’s presentations of complicated financial issues are not particularly clear, and the Economics of Contempt blog credibly accuses him of badly mangling some of them—although that reviewer’s claim that the book is, as a result, worthless seems completely hyperbolic. The final chapter, almost entirely given over to long quotes from Obama, is as excruciatingly boring as Obama ever is these days.

Perhaps the major criticism one could levy at Suskind is that, in spite of all the evidence he himself collects, he is weirdly unwilling to take a really uncompromising look at the man at the center of it all. Suskind indicts Obama with being at worst an incompetent manager—a mere modern variant on the old canard that the king himself is good, but surrounded by “bad advisers” who take advantage of his goodness.

It’s true that Obama’s advisers were fractious—but he deliberately chose a fractious team, modeled on the first cabinet of his alleged hero, Abraham Lincoln. Yet this was empty imitation. Lincoln possessed a vision of the republic that was to him inviolable and worth any sacrifice, giving him the imperiousness required to master his administration. Obama is, by way of contrast, almost allergic to ideas, at least to the extent that they demand policies that diverge from the geodesic line of least resistance. “His job as he now defines it,” in the apt observation of David Bromwich, “is to stand at the convergence of forces and help things to go the way they are going.”

Read Confidence Men to get the full, shocking story of the White House’s failure to reform Wall Street—and use its revelations to build an independent movement for social change.

 

Issue #73

September 2010

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Image and reality in the Bolivia of Evo Morales
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