Obama looked out across the millionaires sitting around him. “Yes,” he answered, without a flicker of hesitation, according to a person familiar with the meeting.
During the campaign, Obama was never shy about his promise to undo the Bush tax policies. But it was easy to ignore his occasional lapses into populist rhetoric and focus on his intense intelligence and Ivy League education. Now, in the wake of the crisis, Wall Street’s politics are shifting rightward. “All the rich people I know took George Bush for granted,” says an analyst at a midtown hedge fund. “I’m a Democrat, but I agree with Rush Limbaugh on a lot of this stuff,” rails the wife of a former AIG executive.
The anger masks a deeper suspicion that Obama fundamentally doesn’t respect their place at the table. “I think he doesn’t have an appreciation for how hard it is to build these companies, the blood, sweat, and tears that goes into them,” says a senior executive from a failed Wall Street firm. “It’s just that he has no passion for it. He speaks dispassionately about the whole situation, except when he’s beating up on the Wall Street fat cats.”
The argument that Obama has in fact done a great deal to help Wall Street—to the tune of trillions of dollars—doesn’t have much truck with these critics. “If you really take a look at what Obama is promising, it’s frightening,” says Nicholas Cacciola, a 44-year-old executive at a financial-services firm. “He’s punishing you for doing better. He doesn’t want to have any wealth creation—it’s wealth distribution. Why are you being punished for making a lot of money?” As a Republican corporate lawyer puts it: “It’s the politics of envy, and that’s very dangerous.”
“Nobody likes having their taxes go up,” says Whitney Tilson, who runs the investment firm T2 Partners and was a member of Obama’s Tri-State Finance Committee. This was a view that was comically on display at the scores of anti-tax “tea parties” that took place across the country last week. “Rich Democrats don’t like having their taxes raised either … Naturally, when you try and take the bone away, even if they didn’t deserve that bone in the first place, nothing starts a fight more than raising taxes.”
The crisis seems to have exposed a generation gap on Wall Street. For a bit of perspective, I spoke with a Goldman veteran who had left years ago to run his own private-equity firm. He’s 55, which is old by Wall Street standards—at some firms, if you’re not upper management, you’re encouraged to get out, with your substantial nest egg, by 50. He had arrived on Wall Street in 1980, on the eve of the junk-bond mania, and watched how radically his peers changed the city. “When I started, people made a lot of money, but it was an order of magnitude less than what people made from 1995 to 2005. You know, some of my friends and I, we complained bitterly that we had bad luck that we started when we did. We said, ‘Gee, I wish we had graduated from school in 1990, not 1980.’ We thought we’d be making a hell of a lot more money. And now, the guys who graduated from school in 2005, arguably those guys won’t make very much money at all. So the truth is, when you hit Wall Street determines in large part whether or not you’re wealthy.”
To Wall Street people who have grown up in the bubble, the meaning of the crisis is only slowly sinking in. They can’t yet grasp the idea of a life lived on less. “Without exception, Wall Street guys have gotten accustomed to not being stuck in the city in August. So it becomes a right to have a summer home within an hour or two commute from Manhattan,” says the Goldman vet. “There’s a cost structure of going with your family on summer vacation that’s not optional. There’s a cost structure of spending $40,000 to send your kids to private school that is not optional. There’s a sense of entitlement, that you need that amount of money just to live, that’s not optional.”
“You can’t live in New York and have kids and send them to school on $75,000,” he continues. “And you have the Obama administration suggesting that. That was a very populist thing that Obama said. He’s being disingenuous. He knows that you can’t live in New York on $75,000.”
That was an argument I heard over and over: that the high cost of living like a wealthy person in New York necessitates high salaries. It was loopy logic, but expressed sincerely. “You could make the argument that $250,000 is a fair amount to make,” says the laid-off JPMorgan vice-president. “Well, what about the $125,000 that staffers on Capitol Hill make? They’re making high salaries for where they live, maybe we should cut their salary, too.”