Obama could be forgiven for expecting greater reciprocity from the bankers—something more than the equivalent of a Hallmark card and a box of penny candy. He had, after all, done more than saved their lives directly by continuing the bailout policies formulated by Paulson and Geithner. He and his team could credibly claim to have kept the world economy from falling off a cliff. Yet with the unemployment rate still near double digits, Obama had (and still has) received scant credit from the public for what was arguably his signal accomplishment. At the same time, the one thing that almost every slice of the electorate would have applauded wildly—the sight of the president landing a few haymakers on Wall Street’s collective jaw—was an opportunity that the president had largely forsworn.
The issue that most sorely tested Obama’s restraint was that of Wall Street bonuses. Emanuel and Axelrod had reams of data showing that this was by far the hottest of populist hot buttons—and one that could inflict collateral damage on the White House. One day in the winter of 2009, Emanuel was meeting with a senior Goldman executive and offered some Rahmian advice. “You don’t fucking get it!” he said. “You’re making $600,000 a year and you think you’re a fucking saint—because you were making $50 million before. But as far as the guy across the street thinks, you’re still a fucking pig! Reduce it to zero and he’ll love you!”
Oh, how history might have been different if that dude, and the rest of his chums, had only listened. Instead, last October, news broke that Goldman was planning to award $23 billion in bonuses to its executives at year’s end. Suddenly, a story that had been simmering all year hit the boiling point—and it indeed proved to be a problem for Team Obama. By December, Axelrod’s polling gurus were seeing clear signs in their numbers that the president was perceived as being too close to the Wall Street greedheads.
That month, Obama appeared on 60 Minutes and proclaimed, “I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street.” Railing against “massive profits and obscene bonuses” and demanding, “We want our money back,” he unveiled in January a tax on the 50 biggest banks that would raise $90 billion over ten years to cover bailout losses. And, finally, he rolled out the Volcker Rule.
A Private-Equity Executive: “They’re not accustomed to being engaged in politics this way … Their skin isn’t toughened. They actually take it personally. This is a profession with a lot of smart people, but who aren’t necessarily terribly introspective.”
For much of Wall Street, this triple blow constituted the final rupture with Obama. Unpleasant as the policies were in the view of the financiers (Dimon: “Using tax policy to punish people is a bad idea”), what seemed to upset them even more was the shift to a more hostile tone (Dimon: “The incessant broad-based vilification of the banking industry isn’t fair, and it is damaging”). To Wall Street, what was going on was crystal clear: Obama had succumbed entirely to the dictates of his political handlers.
“For all the criticisms about Clinton being political, the fact is that in the economic arena, his decisions were driven predominantly by the policy considerations,” says a Wall Street graybeard who knows both 42 and 44. “During the first year, Obama was a lot like that; he withstood a lot of political pressure to nationalize the banks and so on. But this red-hot vituperativeness signals that something has changed.”
It’s fair to point out that Obama’s rhetoric hasn’t always been either red-hot or icy-cold toward the bankers: Recall his comments that he didn’t “begrudge” Blankfein and Dimon their titanic bonuses; that he “know[s] both those guys, they are very savvy businessmen.” It’s worth noting, too, that there are those around Obama who think that the outrage he does express is genuine. According to Alter’s book, “Obama … told a friend that the angriest he got as president in  was when he heard Blankfein say that Goldman was never in danger of collapse.”
What’s not in dispute is that the feelings of rupture are mutual. “[Obama] thinks the Wall Street guys are just disconnected from reality,” says a White House official. “He still takes the meetings with them, but his attitude now is like, ‘Whatever.’ ”
Tim Geithner, too, finds himself in the odd position of battling with an industry toward which he’s never felt an ounce of antipathy; in private, he now half-mockingly refers to the megabank CEOs as “the warlords.” A Washington Mandarin to his core, Geither has been ineffective at winning over either Wall Street or Main Street. His experience during his tenure has provided him a wrenching political education, but one not unlike Obama’s—which, in a way, has only strengthened the bond between them.