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Mon May 7, 2012
New Republic: Why Obama Can't Win On Wall Street
Originally published on Mon May 7, 2012 8:08 am
Noam Scheiber is a senior editor at The New Republic.
Any honest discussion of Obama and populism arrives pretty quickly at two conclusions. The first is that Obama has become a more populist politician than anyone detected early in his presidency. The second is that, even so, there's probably never been a less populist president who's stirred up so much vitriol on Wall Street.
The obvious question is why, and this Times magazine piece on Obama's fundraising hints at the best explanation yet:
"For the next hour, the [Wall Street] donors relayed to Messina what their friends had been saying. They felt unfairly demonized for being wealthy. They felt scapegoated for the recession. It was a few weeks into the Occupy Wall Street movement, with mass protests against the 1 percent springing up all around the country, and they blamed the president and his party for the public's nasty mood...
One of the guests raised his hand; he knew how to solve the problem. The president had won plaudits for his speech on race during the last campaign, the guest noted. It was a soaring address that acknowledged white resentment and urged national unity. What if Obama gave a similarly healing speech about class and inequality? What if he urged an end to attacks on the rich?"
The source of the problem between Obama and Wall Street is, in a word, naivete. Back in 2008, the article notes, Obama's Wall Street backers considered him "a reflection of their imagined best selves: brainy, self-made, above the mewlings and histrionics of partisan politics." Obama, like them, believed deeply in empirical evidence and rational argument. If elected, they assumed, he'd make decisions the way they did: purely on the merits.
Now, to a remarkable extent for a president, Obama has actually done this. Though he's made his share of mistakes, his decisions have generally been well-considered and insulated from crass politics — believe me, it wasn't opportunism that led him into the health care morass. But, of course, the presidency is a thoroughly political institution. There's no way to succeed at it by purging politics from your calculus — without hatching the occasional Volcker Rule or Buffett Rule or Ja Rule. (Okay, maybe not the last one...) In fact, I'd argue that most of Obama's stumbles have come from too little attention to politics — from not picking a fight with the banks and the GOP much earlier in his presidency, and for not escalating once he did. Obama's spurned Wall Street lovers are outraged by his occasional fulminations against high finance. But measured against the historical record, or the anger of the average American, they've been strikingly mild.
Why do so few Wall Streeters see this? As I say, naivete. As sophisticated as they are about financial markets, they have a remarkably crude sense of the constraints a president faces, and the extent to which a president — even the most earnest and well-intentioned — can wriggle out of them. A lot of these donors — especially the hedge fund managers — were new to politics. Obama was the first politician they fell for. The source of the attraction was that he didn't seem to observe the laws of politics.
I personally encountered this while writing my recent book. I'd talk to a financier who'd supported Obama and had recently sent the administration a perfectly compelling proposal for fixing the banks or solving the housing crisis. The person would fume that the White House refused to consider the idea because it would cost trillions of dollars and was a nonstarter in Congress. When I'd point out that these were valid concerns, the response was inevitably along the lines of: He can get it done if he just makes his case to Congress or the country.
Now, I happen to believe the president could have been bolder in his first term. But, like most people reasonably acquainted with politics, I understand that the White House has to make realistic assessments of what's possible. I was disappointed but hardly shocked when Obama played it safe. My Wall Street sources, on the other hand, were often completely disillusioned. As if the refusal to put out a trillion-dollar housing plan unmasked Obama as a fraud.
In a way, the most bitter Wall Streeters reminded me a lot of the young liberals who flocked to Obama in 2008 but have since fallen out of love too. Many had previously steered clear of politics because they considered it a cynical exercise. In Obama, they thought they'd finally found an antidote to the cynicism. But when it turned out Obama had to play the game like any other pol — even if, I'd argue, he plays it with more integrity than most — they felt utterly betrayed. No one likes to wake up one morning and discover they're a dupe. Not least the masters of the universe.
P.S. Alec MacGillis had this corroborating nugget in his piece on why the hedge fund set soured on Obama:
Their idol is Chris Christie, the tough guy across the river. Former Official A recently met with a major hedge fund executive who was "waxing poetic" about the New Jersey governor. "It's the great man theory of history," the former official says. "They believed Obama was a great man, and — lo and behold — Washington is a complicated place, and they blame it all on him, and now they believe it's going to be a former prosecutor who's going to solve all their dreams."
As I say, incredibly sophisticated about financial markets, shockingly unsophisticated about politics.