You might opine that such extreme opinions reflect a certain insensitivity to the prevailing political climate—to the fact that millions of people on the left, on the right, and in the middle would like to see Obama throttle the bankers with his bare hands. Do the moneymen not get this? Or do they not care? “It’s both,” says one of the city’s most politically savvy private-equity players. “The analogy is to a doctor who’s giving a shot. The fact that the child is screaming doesn’t mean he’s not doing the right thing. Financial markets are in fact essential to the healthy operation of our economy. So for a lot of these guys, the fact that people are screaming doesn’t mean they’re doing something wrong.”
For Obama, Wall Street’s cluelessness is a source of intense frustration—“He’s like, ‘What the fuck, you guys?’ ” says a White House official—and its ire toward him one of the cruelest paradoxes of his presidency. Rather than bowing to bailout rage or indulging the yearning for what Geithner calls “Old Testament justice,” Obama believes, justifiably, that he has taken a moderate approach to dealing with the financial system. On arriving in office, he chose to shore up the banks, not nationalize them. The regulations he has advocated aren’t punitive or radical. Despite the occasional burst of opprobrium, his stance has been one he summed up pithily at a meeting with the heads of the largest banks: “My administration is the only thing between you and the pitchforks.”
Yet now Obama stands accused by Wall Street of leading the pitchfork brigade, even as the soldiers in that battalion assail him for being in Wall Street’s pocket. Having labored to strike a delicate balance, he has managed to incur the wrath of both hoi polloi and the lords of finance. The political perils of this dynamic are obvious enough. And though the passage of regulatory reform may help assuage the anger of the masses, his relationship with Wall Street will be harder to mend—if mendable it proves to be.
Obama and Wall Street’s first date, as it were, took place on December 4, 2006, in a midtown conference room belonging to George Soros. The Illinois senator was still deciding whether he would run for president, and was testing the waters with a handful of the city’s heaviest fund-raisers. In one sense, Obama’s performance was underwhelming, seriously lacking polish. But in another, this worked to his advantage. “He was allergic to sound bites and canned responses,” recalls Orin Kramer, a prominent hedge-fund manager and Democratic buckraker. “On a human level, I think that’s a quality people found extremely attractive.”
Though history will rightly note the role of the web in the fund-raising machine that Obama built during his campaign, in the early days Wall Street was more important, providing not just millions of dollars but start-up credibility. By Election Day, according to the Center for Responsive Politics, three of the top seven institutions in terms of bundled donations to Obama were New York megabanks: Goldman Sachs, Citigroup, and JPMorgan Chase, with UBS AG and Morgan Stanley a little further down in the top twenty.
In the course of collecting checks from the bankers, Obama began consulting several of them as informal advisers, notably Jamie Dimon, the CEO of JPMorgan Chase, and Robert Wolf, the CEO of UBS Group Americas. Over the September weekend when Lehman Brothers’ fate was decided in a marathon meeting at the New York Fed—run by Geithner, who was its president, Treasury Secretary Hank Paulson, and Fed chairman Ben Bernanke—it was Wolf who kept Obama informed, ducking out of the sessions to call the candidate on his cell phone.
Obama’s deft handling of the financial crisis sealed his victory. But his close-range dealings with the players involved—including near-daily calls with Paulson, frequent talks with Bernanke, and conversations with a widening orbit of Wall Street players including former Treasury secretary and then–Citigroup poobah Robert Rubin—had to make him wonder if he’d won a booby prize. By the time Obama began his transition, the onset of a second Great Depression, complete with bank runs and widespread failures of financial institutions, seemed terrifyingly plausible. All of which meant that his most important domestic-side Cabinet selection would be his Treasury secretary.
Rarely in the annals of presidential transitions has a short list been shorter. Though Obama thought highly of Dimon and Wolf, the blowback from naming a Wall Street chief as Treasury secretary would have been atomic. And though the idea was floated of giving Volcker the job on an interim basis, picking an 81-year-old with a penchant for straying off-message (i.e., speaking his mind) and lame-duck status seemed a recipe for trouble. In Obama’s eyes, that left two options: Larry Summers or Geithner. Summers, a past occupant of the post who’d emerged as candidate Obama’s dominant economic adviser, badly wanted the job. But his confirmation would have been problematic thanks to his controversial tenure as president of Harvard and his part-time job at hedge fund D. E. Shaw and Co. And then there was his famously abrasive personality. “Fifty percent of the people Obama asked about Larry said no fucking way,” remembers an Obama adviser.