In other words, they’re not spending money on job creation. The reason, according to Zakaria: “Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business.”
Put Jeffrey Immelt in that category. Immelt, GE’s CEO, has helped his company feast off of the subsidies of Obamanomics, such as, according to the Wall Street Journal, “electric-grid modernization, renewable-energy generation and health-care technology upgrades.” Immelt did this in much the same way the Wall Street CEOs did: through politics. He’s a registered Republican, but he publicly embraced Obama, sat on some of his advisory boards, and supported his policies, such as the $800 stimulus package that gave GE tremendous benefits (the stimulus plan subsidized GE clean-energy projects) but left the rest of the nation with serious debt and rising unemployment.
Immelt touted his status as a registered Republican when he stated publicly and infamously among his Republican friends his support of the president, saying, “We are all Democrats now.” His friends tell me that the reasons Immelt supported Obama came down to the fact that he liked the president on a personal level and believed he was the moderate that he sold himself as on the campaign trail. At CNBC, where I worked for several years, Immelt called a meeting of top talent to discuss coverage of Obama’s economic agenda and whether the heavy criticism by on-air commentators (like me) was fair to the new president.
But in mid-2010, Jeffrey Immelt felt a little like Larry Fink: used and abused by a president who talked moderate before the election and acted leftist after. At a meeting with Italian executives in Rome, Immelt lashed out at Obama’s “overregulation” of the economy, said the business mood in the United States was “terrible,” and accused the president of being antibusiness.
When Immelt’s handlers back in New York heard the remarks, they quickly backtracked, calling the quotes, which first appeared in the Financial Times, as taken out of context. But people who know Immelt tell me they pretty accurately describe his soured mood.
Why the change of heart? GE may have benefited from a few government handouts, but with the economy weak, the conglomerate’s many businesses reflect the Obama-induced economic malaise caused by putting ideology, in the form of socializing health care and imposing higher taxes on entrepreneurs, before the economic well-being of the American people.
More than that, it appears that Immelt (along with Ivan Seidenberg, chairman of the Business Roundtable and CEO of Verizon) has come to the realization that for all the benefits offered by Obamanomics to Big Business, the well-being of the country might just be more important.
As I write this, the Obama administration, worried about losing support from big business and Wall Street, has begun a charm offensive to repair the damage of months of class warfare. They are telling business leaders that the president really isn’t antibusiness, that, according to a senior executive at one major New York City-based company, he believes the business community “is really part of the solution, not the problem.”
As absurd as all of that might sound to the average reader who knows just a little about what this president stands for, I believe the charm offensive will work. Because in the end, Jamie Dimon, Jeff Immelt, and the rest of the big-business titans will come to realize that the benefits of being bought and paid for far outweigh those of opposing the system that has served these so-called capitalists so well over the years.
One indication of its effectiveness came on the eve of the Senate’s passage of financial reform, when the SEC announced that it had settled its high-profile case against Goldman Sachs.
Goldman executives had been convinced that the SEC had brought the case to showcase allegations of Wall Street sleaze in order to drum up public support for financial reform, and that once the reform bill was passed the commission would back down and settle for a relative pittance.
They were right. The SEC’s fine was a modest $550 million; to put that into context, it’s far less than the market value Goldman gained when its stock soared on news of the deal. Goldman, meanwhile, had to neither admit nor deny wrongdoing (it was, however, forced to admit that it could have done a better job disclosing the bad stuff about the transaction to its clients) nor settle more serious securities fraud charges. Instead, the charge levied by the SEC was brought down several notches to “negligence.”
Moreover, CEO Lloyd Blankfein, whose job was thought to be on the line when the case was first filed, is safe, at least for the moment.
As one Wall Street executive told me, “all those campaign contributions Goldman made to Obama finally paid off.”
So what happens now? I hope I’ve convinced you that the deep and twisted ties between Wall Street and Washington have, over the last few decades, resulted in a financial system that, in the ultimate irony, is among the least free markets in America today—a banking system where unbelievable amounts of risk are taken, often by people barely out of college, in the comforting knowledge that the U.S. government has always been there in the past and will be again.
I also hope I’ve convinced you that this deep and almost unholy bond between America’s most powerful industry and its center of government power has reached a level we’ve never seen before in the election and subsequent presidency of Barack Obama.
Under Obama, as I’ve tried to show, mere months after nearly destroying our financial system, the men and women responsible were rolling in profits that were essentially guaranteed by the American taxpayer.
Nor is that the end of the story. At the same time, the endless handouts that have been thrown Wall Street’s way, combined with the Obama administration’s other domestic policies, have caused our national debt to skyrocket to a level not seen since World War II. If this sounds like so much abstract jargon, the sort of thing economists blather about at academic meetings, it’s not. Because sooner or later our creditors will demand to know how we’re going to pay them back. The second largest creditor of the United States of America is communist China. And when they come calling for their money, or begin demanding even higher levels of interest to buy our debt, well, let’s just say it could make the Great Depression and our own great recession look like mild economic hiccups.
I don’t think it’s unjustifiable, that it’s patriotism run amok, to fairly call the twentieth century the “American century.” In the last one hundred years, America has become the most powerful nation in the world because of its tradition of free-market capitalism. The world’s media and entertainment industries and technology industries owe their success to America’s embrace of the free market, non-welfare state capitalism that our founders put in place, with a Constitution deliberately designed to limit the powers of government and to give individual ingenuity, invention, creativity, and hard work free rein.
But when I think about what lies in store for this country, I look at a world in fear, where investors would rather buy gold for $1,200 an ounce than invest in growth industries as sophisticated investors get nervous about Barack Obama’s extraordinary and rapid expansion of the U.S. debt.
And I’ve come to realize that unless something changes (and soon), unless ordinary American taxpayers—ordinary American voters—act to turn around this unprecedented expansion of government that is turning what used to be the world’s bastion of capitalism into a welfare state, the twenty-first century will not be an American century.
Far from it.
It will likely be remembered as the era when, after centuries of extraordinary growth, innovation, and success—in a country whose worst moment was slavery, a stain on our history that we overcame to an extraordinary degree by electing Barack Obama president—it all came crashing down in a tidal wave of debt, debt, and more debt that was sold to China and the public by the government’s hand-in-glove partners in crime on Wall Street.
But if all you watch and read is the so-called mainstream media, which is actually far to the left of the majority of t
his country (and I should know; I’ve spent my entire career in media in one of the most liberal cities in America, New York), you may never know any of this to be true.
In these pages, I’ve tried to lay out just how much damage has already been done, just how much Wall Street got for its investment when it bought candidate Obama, and just how much worse it’s going to get unless and until ordinary Americans wake up and realize how close we are to destroying so many of the values and institutions that have made this country great.
ACKNOWLEDGMENTS
I could not have written this book without the support of friends, family, and sources, most of whom don’t want to be named. In writing Bought and Paid For, I also relied on numerous articles from various publications, which I have cited both directly and in my notes when appropriate. Having been ripped off myself, I hope I’ve given these writers their due.
I want to begin by thanking my assistant, Maxwell Meyers, who worked long and hard to crash this book out. Despite a full-time job as a TV producer, Max made sure deadlines were met, facts were checked, and my writing was clear. Thanks for a great effort. My editor and co-agent Ethan Friedman made my copy a hell of a lot better within some difficult time constraints. Ethan did something else: He believed in this concept from the beginning, as did my other co-agent, Steve Hanselman, the people at LevelFiveMedia, including Julia Serebrinsky, and the people at Sentinel, most of all Adrian Zackheim and his team, including Brooke Carey, Will Weisser, Amanda Pritzker, Nick Owen, Alex Gigante, Tricia Conley, Jillian Gray, Hilary Roberts, Joe Perez, Roman Genn, Amy Hill, Alissa Amell, Spring Hoteling, and Fabiana Van Arsdell.
I’d like to thank my wife, Virginia Juliano, for giving me the advice and support to do two things in 2010 that took my career in a somewhat different, albeit more fulfilling, direction. One was to do a book about the confluence and corruption of Big Business and Big Government, which is what Bought and Paid For is all about, and two was to join the Fox Business Network and work with people who both understand and appreciate what I do on a daily basis, namely Roger Ailes, Kevin Magee, David Jones, and Ray Hennessey, the people in the Fox public relations department—Brian Lewis, Caley Cronin, Stephanie Kelly, and Irena Briganti—and my friends and colleagues Judge Andrew Napolitano and Neil Cavuto.
I’d also like to thank my brother, Dr. James Gasparino. As many people know, one of the main characters in this book, Goldman Sachs CEO Lloyd Blankfein, once compared what he does in the business of buying and selling stocks and bonds to “God’s work.” Blankfein should spend a few minutes watching my brother save lives in an inner city hospital to understand the true meaning of that term.
Paul Carlucci, the publisher of the New York Post and head of News America Marketing, has been a mentor to me for some time, and I would like thank him for his sage advice, along with my agent, Wayne Kabak, who helped me get to where I want to be.
Speaking about the New York Post, I have many friends there who have supported me in my career, including the editor Col Allan and the people on the editorial page: Mark Cunningham, Eve Kessler, Adam Brodsky, and Bob McManus.
Tina Brown and Ed Felsenthal of the Daily Beast and Stuart Whatley of the Huffington Post have also been friends, supporters, and editors of my columns, and I’d like to thank them as well. Kevin Goldman, Susan Krakower, and Jonathan Wald also deserve to be thanked for their support and guidance as well as Chris Ruddy of Newmax and Mike Flynn of Big Government (part of Andrew Breitbart’s Web empire) for taking an interest in my work.
APPENDIX I
Key People
William “Bill” Ayers: A University of Chicago professor and former member of the Weather Underground, a sixties radical antiwar group that planted bombs in federal buildings in protest of U.S. foreign policy. Years later, Ayers hosted Obama at an informal gathering at his house to raise money for Obama’s first run for public office.
Ben Bernanke: Chairman of the Federal Reserve since February 2006 and the architect of the U.S. government’s unprecedented bailouts of the private banking system. Bernanke was reappointed by President Obama in 2009 and has been alternately credited with saving the banking system and criticized for responding too slowly to the credit crisis. Either way, he is considered the most powerful Fed chairman since the institution’s inception. In 2009 Time magazine named him man of the year.
Lloyd Blankfein: Goldman Sachs’s chairman and chief executive officer since June 2006 and a director since April 2003. Prior to taking the helm at Goldman, Blankfein had been the company’s president and chief operating officer since January 2004. While other firms melted down following their forays into risky subprime loans, under Blankfein’s leadership Goldman largely dodged the crisis. Like many of his Goldman colleagues, Blankfein has contributed to Democratic candidates for much of his professional life. But unlike many of his colleagues, Blankfein grew up in government housing in Brooklyn, an experience that undoubtedly shaped his political ideology.
George W. Bush: Forty-third president of the United States. Bush’s administration saw not only the terrorist attacks of September 11 but also the subsequent twin tech and housing bubbles that inflated and ultimately destroyed the economy. In the waning days of his presidency, Bush signed off on an unprecedented bailout of the financial system. Though his policies were unpopular at the time, his successor, Barack Obama, has left many of them in place.
James “Jimmy” Cayne: Former Bear Stearns chairman and CEO. Cayne joined Bear in 1969 as a retail broker, rising through the ranks to become one of the wealthiest CEOs on Wall Street. Though he is a staunch Republican, his firm was the chief beneficiary of the government housing policies, which fueled Bear’s enormous mortgage business. Some question Cayne’s financial knowledge, but few question his smarts. Under Cayne’s leadership, Bear’s stock jumped from $16 a share to a high of $172. Backed by a government bailout, JPMorgan Chase ultimately purchased the company for $10 a share in 2008; Cayne lost most of his vast fortune.
Robert Citron: Longtime treasurer of Orange County who was at the center of the county’s bankruptcy, the largest municipal bankruptcy ever, in 1994. A popular Democrat in a largely Republican district, Citron was responsible for investing Orange County’s tax revenue. But instead of following a conservative investment strategy, Citron rolled the dice and invested in risky derivatives at the urging of Michael Stamenson and others, a move that would have fateful results.
William Jefferson “Bill” Clinton: Forty-second president of the United States. Clinton presided over a period of unprecedented economic prosperity by following a somewhat conservative approach of reducing deficits and cutting government spending. But at the heart of his economic plan was the expansion of homeownership, a move that would ultimately lay the foundation for America’s credit crisis.
Gary Cohn: Goldman Sachs’s president since 2006 and sole chief operating officer since April 2009. Cohn had a front-row seat to both the extreme highs and the lows that Goldman witnessed in the later part of the last decade. Cohn played a crucial role in devising a scheme to help the Greek government disguise its true debt levels, a transaction that ultimately unraveled as the country’s finances deteriorated.
John Cornyn: Republican senator from Texas. Cornyn counts JPMorgan Chase among his largest campaign contributors. When Obama ratcheted up his anti-Wall Street rhetoric, Cornyn supported less stringent financial reform in an effort to court Wall Street and its massive campaign dollars.
Andrew Cuomo: New York attorney general. At the time of this writing in spring 2010, Cuomo has decided to run for the same office his father once held: governor of New York State. As New York’s AG, Cuomo has rightfully earned praise for his relentless war on Wall Street’s abusive practices. But his role as housing secretary in the Clinton administration, where he pushed for an increase in the nation’s rate of homeownership, has earned him an equal amount of scorn from critics.
Jamie Dimon: Chairman and CEO of JPMorgan Chase since December 2005. Dimon joined JPMorgan when it purchase
d Bank One, where he had been chairman and chief executive officer since March 2000. Although Dimon did not contribute directly to Obama’s presidential campaign, he has been a powerhouse for the Democratic Party and supported Obama when he ran for Senate in 2004. Since 1989, Dimon and his wife have donated over half a million dollars to Democratic candidates and causes. Although he has said his firm didn’t need the money, JPMorgan Chase received $25 billion in bailout funds.
Chris Dodd: Longest-serving senator in the history of Connecticut. Dodd sits atop the powerful Senate Banking Committee and is one of the most influential Democrats in Congress. The financial collapse occurred under his watch, but that didn’t stop Wall Street from funneling him a ton of cash. Since 2005 he has received just over $1.2 million in campaign contributions from the securities industry.
Rahm Emanuel: Obama’s chief of staff and top enforcer. Emanuel’s ties to Wall Street run deep. A former member of the House of Representatives from Illinois, Emanuel briefly worked at Goldman Sachs and in 1999 managed Wasserstein Perella’s Chicago office, earning $16 million for just two years of work. When Emanuel returned to public life, he relied more than ever on his Wall Street friends for fund-raising; in 2008 Emanuel received more money from the financial services industry than any other House member.
Larry Fink: Chairman, chief executive officer, and founder of money-management firm BlackRock. Fink is considered a pioneer in the mortgage-backed securities market, an industry whose growth depended on government-assisted housing programs. Fink was an early supporter of Obama’s candidacy and in the last several years has personally contributed only to candidates from the Democratic Party.
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