by Ron Suskind
The question of why Lynn was screaming and what Matt hated is a complex one. The Tea Party’s platform is populist, both conservative and libertarian, endorsing lower taxes, a reduction of national debt, and a reduction in government spending, along with individual rights and an “originalist” interpretation of the Constitution. But Lynn, like a lot of Tea Party activists, didn’t offer much in the way of an actual program or coherent policies. Tea Partiers are often against things that are themselves opposites, and against pretty much anything that Obama does.
But policy or ideology doesn’t really seem to be as much a driver of the party’s growth as its members are themselves, in “being the change that they seek,” to adapt Obama’s phrase. Lynn had already listed a host of experiences in her weekend of activism, from stunning deals on hotel rooms, to chance, seemingly miraculous encounters with like-minded people—“I felt like she was my sister”—to a moment when she thanked someone who’d said he had never been thanked so warmly before.
This sensation, of a world brimming with possibility, was precisely what waves of Obama supporters had felt as they lifted him to the presidency. A key item of collateral damage from an overcommitted and disorganized White House was the oversight of not creating ways to keep Obama’s populist grassroots organization involved in the current array of national debates. Inaction had created a vacuum. In this case, it was clear that populist energy—enlivened by the poor economy, the ravages of Wall Street, and the desire to confront an uncertain future with activism—had settled on the right.
On the evening of the Lehman anniversary, Carmine Visone booked the corner table on the patio at Bice. His table.
In the year since he’d stepped back from the window of his Lehman office, he had restored a bit of balance to his life. He wasn’t sure what was next. He knew that, a year later, blaming Wall Street was not so simple. Santelli’s screed, which had launched the Tea Party, struck Carmine, a lifelong Republican, in a place deep, where his angry, bricklayer father had permanent residence.
“Listen, guy, that house you got, you couldn’t afford it. The car you got, the five of them you got, you knew you couldn’t afford that.”
After a year of hearing Wall Street blamed for every ill in America, Carmine channeled his dad on the issue of personal responsibility. It was something of an anniversary present to everyone who found themselves overextended and deep in debt, at the end of Wall Street’s thirty-year credit supercycle.
“I submit to you, sir, that not only did you get what you deserve, but you got more than you deserve, so be grateful for the free ride that you had, because you never paid for it. So I’m asking you to give back what you didn’t use, because you can’t pay for everything that you did use, because somebody else is paying for it.
“You never belonged in that house, you never belonged in that car, you never belonged in those shoes, and you never belonged in that restaurant, because you never earned it.
“So don’t blame me because I manufacture capital, okay? You, on a personal level, sir, have an obligation to manage your own fucking life, not me. The ocean doesn’t get condemned if someone drowns in it, okay? You went in the water, you went in over your head, you didn’t know how to swim, you ignored the signs, okay? Don’t blame me.
“That’s what the ocean does. The ocean floats people and the ocean drowns people, okay? Don’t blame the ocean. You did it to yourself. And you wanna know something, too? Somewhere deep down in your soul you knew that going in. And you were trying to get away with it. You know you didn’t earn it. No money down. No income verification. Okay? And you figured, ‘Well, I figure I can carry the monthly note. It doesn’t matter what I paid for it.’ You don’t look at the cost of these things; you look at the cost to carry these things. You’re banking on the continuation of your ability to carry. Again, you don’t even know what you paid for the car. Because you knew what the monthly note was. It didn’t matter if you paid $1 million more or less for that house, because all that was an extra $300 in your monthly payment, so you were paying inflated prices, but it didn’t matter to you, because the monthly payment was manageable. Until something happened, and all of a sudden the spigot was turned off and whatever it is that you were doing to create that personal income stream level, which, by the way was never ample . . . because you were banking on bonuses that you hadn’t earned yet, stock options going up. Today’s bills with tomorrow’s earnings.
“Not only did you spend money you didn’t have at the time, but you were spending money you never even got in the future. You were spending money that wasn’t even created yet. You wanna blame me for that? Where’s your responsibility? Your self-discipline? I have no sympathy. I have no sympathy because you never should have been there to begin with. You should have exercised restraint every step of the way. Just because the drug dealer is on the corner, you could have walked right past him. You bought the drugs. I didn’t sell you the drugs, you bought the drugs.”
14
Mad Men
The Obama presidency didn’t end in the fall of 2009, but it came close.
“The worst period of his presidency,” was the conclusion of Anita Dunn, reflecting on it more than a year later. “That horrific period in November . . . health care dragging on and on, economy is not looking good, horrible jobless recovery . . . that was a terrible time.” She added, “Everyone was in a terrible mood.”
This inefficacy had started to garner attention from the press. Lofty campaign rhetoric was now being contrasted with a stifling political stagnation. A mid-September poll had Obama’s approval rating at just 47 percent, the lowest of his young presidency.
Dunn, the outspoken White House communications director, had been brought in to the West Wing in May to help the president navigate the rocky first few months of his term. “It was a mess,” she said. Dunn quickly instigated a better scheduling system and fought, with futility, to heal the growing gender divide. It wasn’t the first time she’d been brought in to alleviate such a tense atmosphere.
During the campaign, Dunn was the first female appointed to a serious campaign post. As a senior adviser and communications director, she was shocked to find that in spite of Obama’s popularity with female voters, his campaign had more to do with frat house antics than third-wave feminism. Upon being shown a new campaign ad in production, Dunn watched with a quizzical look on her face.
“There isn’t a single woman in this ad,” she evenly observed. “I was dumbfounded. It wasn’t like they were being deliberately sexist. It’s just there was no one offering a female perspective.”
That was then. The ad was ultimately reshot, and more women were brought into senior campaign roles. But now in the White House, Dunn’s concern grew as she saw similar gender issues, this time with even higher stakes and tensions, and plenty of women now in senior roles.
“The president has a real woman problem” was the assessment of another high-ranking female official. “The idea of the boys’ club being just Larry and Rahm isn’t really fair. He [Obama] was just as responsible himself.”
The problem at hand was manifold. The schism going back to the campaign manifested itself in two distinct ways. On the one hand was the perception that Obama was a guy’s guy, especially in his leisure time. Those coveted moments, not just on the basketball court but between meetings, were times when the president was at his most comfortable.
The second, more aggrieving divide lay in the fact that many women felt that the men, namely Summers and Emanuel, didn’t play by the rules. The group of women even coined a term for these transgressions: “policy fouls.” That Summers and Emanuel circumvented traditional policy routes and often left other key players out of the loop would alone have been cause for frustration. But when this was coupled with Obama’s guy-to-guy attitude and the testosterone aggression that accompanied these “fouls,” women in the White House found themselves increasingly frustrated and feeling worthless.
“I felt like a piece of meat,” Christina
Romer said of one meeting that she had been deliberately boxed out of by Larry.
But the White House was relying heavily on the disconnect between perception and reality. The public face of the administration was as gender-progressive as any in history. Obama had surrounded himself with smart, assertive women in positions of traditional power. The team, a veritable murderers’ row of women of private-sector and academic authority, was greeted with praise from feminist groups for its glass-ceiling-shattering diversity.
By the summer, however, the reality had grown dire. The cabal of men, which in addition to Emanuel and Summers included Orszag, Axelrod, and Gibbs (the latter two were considered to be “untouchable”), had mitigated the authority of the highest-ranking women officials as a result of their close personal connections with the president. As 2009 wore on, everyone had become cognizant of the internal schism, with Geithner privately concluding, “The perception is that women have real power, yet they all feel like shit.”
That characterization, echoed by multiple senior officials, was painful and also unacceptable. The woman would do almost anything for the president, and carried on with few complaints. “But looking back,” recalled Anita Dunn, when asked about it nearly two years later, “this place would be in court for a hostile workplace . . . Because it actually fit all of the classic legal requirements for a genuinely hostile workplace to women.”
At the time, though, they went through the available channels, trying to have their complaints heard. Along with Valerie Jarrett’s office, the destination of choice was Pete Rouse’s closet-like garret in the West Wing. One after another, the women came in. Rouse is an expert manager with a welcoming disposition. Each one arrived with the same plea: Do something.
Barney Frank got up early on Thursday, September 24. It was a big day. He’d started the week with hearings on key elements of financial reform. Instead of voting the whole package out of his committee at once, the plan was to get key witnesses to stand and deliver on specific areas and then vote each part—derivatives regulation, the proposed Consumer Financial Product Agency, resolution authority, systemic oversight—one by one.
Today was special: he was helping someone with their coming out.
After the president’s Lehman anniversary speech ten days earlier, as other dignitaries schmoozed or tried to squeeze in a Manhattan lunch before boarding Air Force One, Barney Frank got to work. He had grabbed a cab north to Rockefeller Center for a secret meeting in Paul Volcker’s office.
Frank knew that Volcker was aggrieved. He’d been left out of meetings by Summers. His President’s Economic Recovery Advisory Board hadn’t even had its first meeting until mid-May, and was already being ridiculed as an afterthought or, even more cynically, a place for Obama to stick all his second-tier donors and campaign advisers who hadn’t “made the cut.”
But it was more than just access. Frank had spent plenty of time with Geithner and knew that his position on regulating the financial sector was bank-friendly. That was why there had been so little opposition from the banking lobby. The lobby had lost a bit of clout, but it also could live, and maybe live well, with what the administration was proposing. If Frank was going to get something tougher out of his committee, he’d need some leverage. That was why he was sitting with Big Paul. They talked for a few minutes about Volcker’s views. These were convincing, and far more activist—more interventionist—than the administration’s. Would he consider coming before Frank’s committee to speak his mind? Volcker laughed. Both he and Frank knew that the old Fed chairman was too important to Obama’s credibility to be fired as head of the PERAB, especially for saying what most progressives, and plenty of old-time Wall Streeters, thought Obama himself should have been saying. So why not see if he could dare the president to be a bit more courageous in taking on the banks?
Which was what he did at 9:30 this morning, in front of Frank’s committee. Specifically, he contradicted the testimony of Frank’s star witness from the day before, Tim Geithner, who, selling the administration’s plan, had said that certain “systemically important” institutions should receive more intense oversight by the Fed.
No, that’s a bad idea, said Volcker. “Whether they say it or not, that carries the connotation in the market that they’re too big to fail,” creating the problem of “moral hazard.”
And it wasn’t just a single point that Volcker refuted. In a carefully crafted three-thousand-word written statement, which he read aloud, Volcker dismantled much of the regulatory framework put forward by the administration:
“The approach proposed by the Treasury is to designate in advance financial institutions ‘whose size, leverage, and interconnection could pose a threat to financial stability if it failed’ . . . the clear implication of such designation, whether officially acknowledged or not, will be that such in whole or in part, will be sheltered by access to a Federal safety net in time of crisis; they will be broadly understood to be ‘too big to fail,’ ” he said. “Think of the practical difficulties of such designation. Can we really anticipate which institutions will be systemically significant amid the uncertainties in future crises and the complex interrelationships of markets? Was Long-Term Capital Management, a hedge fund, systemically significant in 1998? Was Bear Stearns, but not Lehman? How about General Electric’s huge financial affiliate, or the large affiliates of other substantial commercial firms? What about foreign institutions operating in the United States?”
His recommendation was to restore some version of the Glass-Steagall law, putting commercial banks back in their special category, where they stuck to more traditional banking activities in exchange for the federal guarantee. This would mean they could no longer have hedge funds or private-equity funds beneath their roof, and they would have to stop proprietary trading—that is, trading their own accounts alongside those of their clients.
“The point is not only the substantial risks inherent in capital market activities,” he added, in an extraordinary passage. “There are deep-seated, almost unmanageable, conflicts of interest with normal banking relationships—individuals, businesses, investment management clients seeking credit, underwriting, and unbiased advisory services. I also think we have learned enough about the challenges and distractions for management posed by the risks and complexities of highly diversified activities.”
In other words, much of what was now called the financial services business was rife with illegal, or quasi-legal, activity. Let’s have at least one realm, commercial banks, that are federally insured and not part of that chicanery, rather than federally backing the largest or most audacious actors by terming them “systemically important.”
The practical and political effect of all this was an open dispute between the Treasury secretary and the president’s most prominent outside economic adviser, the head of his Economic Recovery Advisory Board.
By the time Volcker was in his car to the airport, media requests for interviews were already flooding in. And he was just warming up. He made a note to unearth a quote from the father of modern economics, Adam Smith, who’d wrestled with these same “too big to fail” problems in the eighteenth century: “He said something to the effect of ‘I don’t know what to do about the problem, except to just keep banks small’—I’ve got to get that citation.” Volcker expressed admiration for Adair Turner, Britain’s bank regulatory chief, and his recent statement about the latest breakthroughs in financial engineering, that it was crucial for a society “to recognize that [when] there is some profitable activity so unlikely to have social benefit that we should be voluntarily willing to walk away from it.
“You know, he wrote an essay about the origins of the crisis that ran a hundred and twenty-six pages, critical of what he called the quasi-religious dogma of finance—quite a wordsmith!”
It was Volcker on a tear. At Reagan National Airport, his assistant, Tony Dowd, a retired, fiftyish investment banker, had to run to the ticket desk to get their boarding passes for the 12:30 Delta Shuttle. Volc
ker was oblivious, ambling forward, saying, “Obama is smart, but smart is not enough. Leadership is another thing entirely, about knowing your mind enough to make real decisions, ones that last.” Minutes later, Dowd was running down the breezeway. “Oh, God, I thought I’d lost you,” he said, panting. Volcker barely gave him a look. “Over here, here’s where we go,” Volcker grumbled. After passing through security, he was back on the president, some idea percolating, which hit its boiling point as he reached the gate. “He seems to feel he has all he needs in the clever Mr. Summers. Together they’re both so very confident.” He flopped into a chair; still fifteen minutes to boarding. Then he hit it, seeing the president plainly: “He’s self-confident, too self-confident.”
At that moment, Elizabeth Warren was emerging from her testimony before the Senate Banking Committee on issues concerning TARP and its mismanagement. Volcker was, in a way, joining Warren in a new flavor of celebrity—“regulatory dissident”—that Warren had begun working up back in mid-April, when she appeared on Jon Stewart’s show. In eight minutes she laid out such a clear, elegant sketch of how Roosevelt-era regulations had been dismantled, unleashing demons, that Stewart basically canceled the rest of the show and just had her talk. She went on for nineteen minutes in all, with periodic breaks, describing changes similar to the ones Volcker recommended. “I know your husband’s backstage,” Stewart cooed, as the show wrapped up. “I still want to make out with you.”
Volcker visited Obama a half dozen times to make his case for tough-love reforms and to argue with Summers. Warren, whose 2007 idea for a Consumer Financial Product Agency was now a central plank of Obama’s reform proposal, had not yet been granted such privileges.
Elizabeth Warren speed-walked from Senator Chris Dodd’s hearing room to a perch near the great atrium in the Russell Senate Office Building.
