by Obama Barack
When it came to Chrysler, though, our team was split. The smallest of the Big Three, Chrysler was also in the worst financial shape and—outside of its Jeep brand—had what looked to be an unsalvageable product line. Given our limited resources and the perilous state of auto sales more generally, some on the team argued that we’d have a better chance of saving GM if we let Chrysler go. Others insisted that we shouldn’t underestimate the potential economic shock of allowing an iconic American company to collapse. Either way, the task force let me know, the situation at Chrysler was deteriorating fast enough that I needed to make my decision right away.
At this point, my assistant Katie poked her head into the Oval Office, telling me I needed to get to the Situation Room for a meeting with my national security team. Figuring I should probably take more than a half hour to decide the fate of the American auto industry, I asked Rahm to reconvene the task force along with my three senior advisors—Valerie, Pete, and Axe—in the Roosevelt Room later that afternoon so I could hear from both sides (more process!). At that meeting, I listened to Gene Sperling make a pitch for saving Chrysler and Christy Romer and Austan Goolsbee explain why continued support of the company likely amounted to throwing good money after bad. Rahm and Axe, ever sensitive to the politics of the situation, pointed out that the country opposed—by a stunning two-to-one margin—any further auto bailouts. Even in Michigan, support barely reached a majority.
Rattner noted that Fiat had recently expressed an interest in buying a significant stake in Chrysler and that its CEO, Sergio Marchionne, had taken over that faltering company in 2004 and, impressively, made it profitable within a year and a half. The discussions with Fiat, however, were still tentative, and nobody could guarantee that any intervention would be enough to get Chrysler back on track. A 51–49 decision, Rattner called it—with a strong likelihood that the odds of success would seem bleaker once the company went into bankruptcy and we had a better look under the hood.
I was thumbing through the charts, scrutinizing numbers, occasionally glancing up at the portraits of Teddy and FDR hanging on the wall, when it came time for Gibbs to speak. He had previously worked on U.S. senator Debbie Stabenow’s campaign, in Michigan, and he now pointed to a map in the slide deck that showed every Chrysler plant across the Midwest.
“Mr. President,” he said, “I’m not an economist, and I don’t know how to run a car company. But I do know we’ve spent the last three months trying to prevent a second Great Depression. And the thing is, in a lot of these towns that depression has already arrived. We cut Chrysler off now and we might as well be signing a death warrant for every spot you see on the map. Each one has thousands of workers counting on us. The kind of people you met on the campaign trail…losing their healthcare, their pensions, too old to start over. I don’t know how you walk away from them. I don’t think that’s why you ran for president.”
I stared at the points on the map, more than twenty in all, spread across Michigan, Indiana, and Ohio, my mind wandering back to my earliest days as an organizer in Chicago, when I’d meet with laid-off steelworkers in cold union halls or church basements to discuss their community concerns. I could remember their bodies heavy under winter coats, their hands chapped and callused, their faces—white, Black, brown—betraying the quiet desperation of men who’d lost their purpose. I hadn’t been able to help them much then; their plants had already closed by the time I’d arrived, and people like me had no leverage over the distant executives who’d made those decisions. I’d entered politics with the notion that I might someday be able to offer something more meaningful to those workers and their families.
And now here I was. I turned to Rattner and Bloom and told them to get Chrysler on the phone. If, with our help, the company could negotiate a deal with Fiat, I said, and deliver a realistic, hardheaded business plan to emerge from a structured bankruptcy within a reasonable time frame, we owed those workers and their communities that chance.
It was getting close to dinnertime and I still had several calls to make in the Oval. I was about to adjourn the meeting when I noticed Brian Deese tentatively raising his hand. The youngest member of the task force, he’d barely spoken during the discussion, but unbeknownst to me, he’d actually been the one to prepare the map and brief Gibbs on the human costs involved in letting Chrysler go under. (Years later, he’d tell me that he felt the arguments would carry more weight coming from a senior staff member.) Having seen his side prevail and feeling swept up in the moment, though, Deese started pointing out all the potential upsides of the decision I’d just made—including that a Chrysler-Fiat tandem could end up being the first U.S.-based operation to produce cars capable of getting forty miles to the gallon. Except in his nervousness, he said “the first U.S.-produced cars that can go forty miles an hour.”
The room was quiet for a moment, then broke into laughter. Realizing his mistake, Deese’s face, cherubic beneath his mustache and beard, turned bright red. I smiled and rose from my chair.
“You know, it just so happens my first car was a ’76 Fiat,” I said, gathering up the papers in front of me. “Bought it used, my freshman year of college. Red, five-speed stick. As I remember, it went over forty miles an hour…when it wasn’t in the shop. Worst car I ever owned.” I walked around the table, patted Deese on the arm, and turned back as I was heading out the door. “The people at Chrysler thank you,” I said, “for not making that particular argument until after I made my decision.”
* * *
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IT’S OFTEN SAID that a president gets too much credit when the economy is doing well, and too much blame when it slumps. In normal times, that’s true. All kinds of factors—from a decision by the Fed (over which a president by law has no authority) to raise or lower interest rates, to the vicissitudes of the business cycle, to bad weather delaying construction projects or a sudden spike in commodity prices brought on by some conflict on the other side of the world—are likely to have a bigger impact on the day-to-day economy than anything the president does. Even major White House initiatives, like a big tax cut or a regulatory overhaul, don’t tend to produce any sort of measurable influence on GDP growth or unemployment rates for months or even years.
As a result, most presidents labor without knowing the economic impact of their actions. Voters can’t gauge it either. There’s an inherent unfairness to this, I suppose: Depending on accidents of timing, a president can be punished or rewarded at the polls for things entirely beyond his or her control. At the same time, this also offers an administration a certain margin for error, allowing leaders to set policy while feeling secure in the knowledge that not everything depends on them getting things right.
In 2009, however, the situation was different. In the first hundred days of my administration, no margin for error existed. Every move we made counted. Every American was paying attention. Had we restarted the financial system? Had we ended the recession? Put people back to work? Kept people in their homes? Our scorecard was posted daily for everyone to see, with each new fragment of economic data, each news report or anecdote becoming an opportunity for judgment. My team and I carried that knowledge with us the minute we woke up, and it stayed with us until we went to bed.
Sometimes I think it was only the sheer busyness of those months that kept us from succumbing to the overall stress. After the GM and Chrysler decisions, the main pillars of our strategy were basically in place, which meant we could turn our focus to implementation. The Auto Task Force negotiated a change in GM management, brokered Fiat’s stake in Chrysler, and helped put together a plausible plan for the structured bankruptcies and reorganization of both car companies. The housing team, meanwhile, hammered together the framework for the HAMP and HARP programs. The Recovery Act’s tax cuts and grants to states began to flow, with Joe Biden, together with his able chief of staff Ron Klain, in charge of overseeing the billions of dollars in infrastructure projects with an eye toward
minimizing waste or fraud. And Tim and his still-skeletal staff at Treasury, along with the Fed, continued to put out fires across the financial system.
The pace was relentless. When I met with my economic team for our regular morning briefing, the faces of those arrayed in a horseshoe of chairs and couches around the Oval told a tale of exhaustion. Later, I would hear secondhand accounts of how folks had sometimes yelled at one another during staff meetings, the result of legitimate policy disputes, bureaucratic turf battles, anonymous leaks to the press, the absence of weekends, or too many late-night meals of pizza or chili from the Navy Mess on the ground floor of the West Wing. None of this tension spilled into real rancor or kept the work from getting done. Whether due to professionalism, or respect for the presidency, or awareness of what failure might mean for the country, or a solidarity forged from being a collective target for the escalating attacks from all quarters, everyone more or less held it together as we waited for some sign, any sign, that our plans for ending the crisis were in fact going to work.
And finally, in late April, it came. Tim dropped by the Oval one day to tell me that the Federal Reserve, which had remained tight-lipped throughout its review of the banks, had at long last given Treasury a preliminary look at the stress-test results.
“So?” I said, trying to read Tim’s expression. “How does it look?”
“Well, the numbers are still subject to some revisions…”
I threw up my hands in mock exasperation.
“Better than expected, Mr. President,” Tim said.
“Meaning?”
“Meaning we may have turned the corner.”
Of the nineteen systemically significant institutions subjected to the stress test, the Fed had given nine a clean bill of health, determining that they wouldn’t need to raise more capital. Five other banks required more capital to meet the Fed’s benchmark but nonetheless appeared sturdy enough to raise it from private sources. This left five institutions (including Bank of America, Citigroup, and GMAC, the financing arm of General Motors) that were likely to need additional government support. According to the Fed, the collective shortfall looked to be no more than $75 billion—an amount that our remaining TARP funds could comfortably cover if required.
“Never a doubt,” I said, deadpan, when Tim was finished briefing me.
It was the first smile I’d seen on his face in weeks.
If Tim felt vindicated by the results of the stress test, he didn’t let it show. (He did admit several years later that hearing Larry Summers utter the words “You were right” was pretty satisfying.) As it was, we kept the early information within our tight circle; the last thing we needed was premature celebration. But when the Fed released its final report two weeks later, its conclusions hadn’t changed, and despite some continued skepticism from political commentators, the audience that mattered—the financial markets—found the audit rigorous and credible, inspiring a new rush of confidence. Investors began pumping cash back into financial institutions almost as fast as they’d pulled it out. Corporations found they could borrow again to finance their day-to-day operations. Just as fear had compounded the very real losses the banks had suffered from the subprime lending binge, the stress test—along with massive assurances from the U.S. government—had jolted markets back into rational territory. By June, the ten troubled financial institutions had raised over $66 billion in private capital, leaving only a $9 billion shortfall. The Fed’s emergency liquidity fund was able to cut its investment in the financial system by more than two-thirds. And the country’s nine largest banks had paid back the U.S. Treasury, returning the $67 billion in TARP funds they’d received—with interest.
Almost nine months after the fall of Lehman Brothers, the panic appeared to be over.
* * *
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MORE THAN A DECADE has passed since those perilous days at the start of my presidency, and although the details are hazy for most Americans, my administration’s handling of the financial crisis still generates fierce debate. Viewed narrowly, it’s hard to argue with the results of our actions. Not only did the U.S. banking sector stabilize far sooner than any of its European counterparts; the financial system and the overall economy returned to growth faster than those of just about any other nation in history after such a significant shock. If I had predicted on the day of my swearing in that within a year the U.S. financial system would have stabilized, almost all TARP funds would be fully repaid (having actually made rather than cost taxpayers money), and the economy would have begun what would become the longest stretch of continuous growth and job creation in U.S. history, the majority of pundits and experts would have questioned my mental fitness—or assumed I was smoking something stronger than tobacco.
For many thoughtful critics, though, the fact that I had engineered a return to pre-crisis normalcy is precisely the problem—a missed opportunity, if not a flat-out betrayal. According to this view, the financial crisis offered me a once-in-a-generation chance to reset the standards for normalcy, remaking not just the financial system but the American economy overall. If only I had broken up the big banks and sent some white-collar culprits to jail; if only I had put an end to outsized pay packages and Wall Street’s heads-I-win, tails-you-lose culture, then maybe today we’d have a more equitable system that served the interests of working families rather than a handful of billionaires.
I understand such frustrations. In many ways, I share them. To this day, I survey reports of America’s escalating inequality, its reduced upward mobility and still-stagnant wages, with all the consequent anger and distortions such trends stir in our democracy, and I wonder whether I should have been bolder in those early months, willing to exact more economic pain in the short term in pursuit of a permanently altered and more just economic order.
The thought nags at me. And yet even if it were possible for me to go back in time and get a do-over, I can’t say that I would make different choices. In the abstract, all the various alternatives and missed opportunities that the critics offer up sound plausible, simple plot points in a morality tale. But when you dig into the details, each of the options they propose—whether nationalization of the banks, or stretching the definitions of criminal statutes to prosecute banking executives, or simply letting a portion of the banking system collapse so as to avoid moral hazard—would have required a violence to the social order, a wrenching of political and economic norms, that almost certainly would have made things worse. Not worse for the wealthy and powerful, who always have a way of landing on their feet. Worse for the very folks I’d be purporting to save. Best-case scenario, the economy would have taken longer to recover, with more unemployment, more foreclosures, more business closures. Worst-case scenario, we might have tipped into a full-scale depression.
Someone with a more revolutionary soul might respond that all this would have been worth it, that you have to break eggs to make an omelet. But as willing as I had always been to disrupt my own life in pursuit of an idea, I wasn’t willing to take those same risks with the well-being of millions of people. In that sense, my first hundred days in office revealed a basic strand of my political character. I was a reformer, conservative in temperament if not in vision. Whether I was demonstrating wisdom or weakness would be for others to judge.
And anyway, such ruminations came later. In the summer of 2009, the race had only just started. Once the economy was stabilized, I knew I’d have more time to push through the structural changes—in taxes, education, energy, healthcare, labor law, and immigration—that I had campaigned on, changes that would make the system fundamentally more fair and expand opportunity for ordinary Americans. Already, Tim and his team were preparing options for a comprehensive Wall Street reform package that I would later present to Congress.
In the meantime, I tried to remind myself that we had steered the nation away from disaster, that our work was already providing some form of relie
f. Expanded unemployment insurance payments were keeping families across the country afloat. Tax cuts for small businesses were allowing a few more workers to stay on the payroll. Teachers were in classrooms, and cops were on the beat. An auto factory that had threatened to close was still open, while a mortgage refinancing was keeping someone out there from losing a home.
The absence of catastrophe, the preservation of normalcy, wouldn’t attract attention. Most of the people impacted wouldn’t even know how our policies had touched their lives. But every so often, while reading in the Treaty Room late at night, I’d come across a letter in my purple folder that began with something like this:
Dear President Obama,
I’m sure you’ll never read this, but I thought you might want to know that a program you started has been a real lifesaver…
I’d set down the letter after reading it and pull out a note card to write the person a brief response. I imagined them getting the official envelope from the White House and opening it up with a look of puzzlement, then a smile. They’d show it to their family, maybe even take it to work. Eventually the letter would fall into a drawer somewhere, forgotten under the accumulation of the new joys and pains that make up a life. That was okay. I couldn’t expect people to understand how much their voices actually meant to me—how they had sustained my spirit and beat back whispering doubts on those late, solitary nights.
CHAPTER 13
BEFORE I WAS INAUGURATED, Denis McDonough, my senior campaign foreign policy staffer and soon-to-be head of strategic communications for the National Security Council, insisted that I carve out thirty minutes for what he considered a top-tier priority.
