To some in the White House, the sight of the financial world turning hard against Geithner is curious, even baffling. What the Obamans thought they were getting in him was Wall Street’s guy. “They don’t get it,” says one name-brand Democratic banker. “Geithner was a $500,000-a-year guy. He was the regulator. People knew him, liked him fine, but he was never a member of the club.”
A longtime Geithner ally in Washington comes to a different conclusion. “A lot of the pushback he’s getting from Wall Street is about their lack of self-awareness about how the world has changed, how they’re not the Masters of the Universe anymore,” this person argues. “They feel marginalized and put-upon by the administration’s rhetoric about the greedy bankers. They are way behind the curve about where the public is and how much pressure the administration is feeling. They don’t like what the new environment means for how they run their business. They see their taxes going up and their compensation going down. And what they don’t do is go to the New York Times and say, ‘My feelings are hurt. I don’t like what the new president is saying about our character and our competence.’ What they say is, ‘These guys are incompetent, we need a real policy, the Treasury secretary has got an unsteady hand—he’s not up to the job.’ They’re thinking one thing and saying something quite different.”
There may be more than a smidgen of truth in all of that. Yet what’s equally true is that the private-sector worries about the plans being cooked up by Geithner and Summers extend into countless corporate suites, start-ups, and small businesses far beyond Wall Street—and that until recently, the administration was comically clueless about it. When I was at the White House recently, I jokingly asked a senior Obama official if the team was having fun turning the country into a socialist state. “What are you talking about?” this official replied. “Business loves what we’re doing!”
Back in New York the following day, I related that story to a CEO pal of mine who is a big Obama backer. “What are they, smoking crack down there?” he replied. “Find me one CEO who likes what they’re doing. Seriously, find me one!”
It’s fair to point out that a lot of CEOs are, you know, Republicans. But even the Democrats among them tend to be queasy about the Obama agenda. Their qualms revolve around both the stimulus and the budget. Among those in the fiscal-rectitude crowd, the argument is that Summers failed to deliver on his pledge that the package would be “timely, targeted, and temporary”—that it ended up being both too poky and too porky. (Only $185 billion, after all, will be spent within the next year.) But others chime in on the side of the many economists who contend that, given the likely shortfall in output this year, $787 billion, though a mighty big number, ain’t gonna be big enough. This is not just lefties talking, by the way: Forty-three percent of the dismal scientists surveyed recently by The Wall Street Journal said that another $500 billion package will be required.
If the stimulus provokes concern in the private sector, the budget causes nothing short of a total freak-out. The size of it ($3.6 trillion in fiscal year 2010) and the oceans of red ink it threatens to unleash give deficit hawks the heebie-jeebies. The redistributionist tilt it brings to the tax code wigs out the wealthy, the modestly wealthy, and the wannabe wealthy. The oxen it gores (e.g., agricultural subsidies) offend entrenched industrial wards of the state.
Beyond those particulars, the sheer ambition and audacity of the thing—health-care reform, cap-and-trade, and much more—raises suspicions that the Obamans are attempting to capitalize on the crisis instead of solving it. That they’re taking on too much too fast and winding up, as Obama backer Warren Buffett put it, with “muddled messages.” That they’re diverting their energies, failing to put all their wood behind the arrowhead that should be aimed at one challenge that counts above all and before everything: fixing the financial system. “I heard [Obama budget director] Peter Orszag on TV saying health care is the biggest problem affecting the economy,” says one Democratic CEO. “No, it’s not. Right now, of the top ten things they should be focused on, it’s like, No. 11; the first ten are the banks.”
Obama has a reasonable answer to this charge. “There are some who’ve argued that we can’t do all these things at once and that we should instead just focus on Wall Street and banking,” he told a group of reporters recently. “I think that would be a mistake. I think that extraordinary times call for extraordinary measures. So even as we’re working on financial stabilization, reregulating Wall Street, we’re going to keep on pressing to get the investments that will ultimately lead to long-term economic growth.”