When Barack Obama took office in January 2009, he had an unprecedented chance to do what no other recent president could: seize the nation’s financial reins from the corporate elite and return them to the American people. Progressives everywhere held out hope that their new leader would take advantage of the economic crisis he stepped into and enact bold policies that would evoke real financial reforms-putting Main Street in front of Wall Street, at last.
But that is not the way things turned out. Instead, America’s best chance for radical financial reform turned into Wall Street’s greatest victory. Obama filled his administration with allies of financial elites who were more interested in business as usual than in transformative change. As a consequence, Main Street remained mired in deep recession. Instead of being the instrument of economic renewal, Obama became the target of economic frustration.
Kuttner shares an unique, insider view of how the Obama administration not only missed its moment to turn our economy around, but deepened Wall Street’s risky grip on America’s future. Carefully constructing a one-year history of the problem, the players, and the outcome, Kuttner gives readers an unparalleled account of the president’s first year. More importantly, though, Kuttner shows how we could – with swift, decisive action – still enact real reforms.
This is a book not to be missed by anyone who wants to understand exactly how Wall Street won, and how Main Street can still fight back.
It is almost unfortunate that this book was published when it was – just before the latest Goldman Sachs scandal and the debate it has spawned. Fury over the “the hegemony of Wall Street” (Kuttner’s words) are rife, and populist anger appears to be driving the policy debate. What’s needed is a more measured (dare I say it, “academic”) approach to Wall Street regulation. Is Kuttner’s book the place to look for it?
From the introduction, it is clear that Kuttner is not about to present a biased, laudatory account of Obama’s first couple of years in office. Far from it, the author pulls no punches, and clearly views the Obama presidency thus far a disappointment:
“Obama was poised to create a new majority coalition, built on the premise that rapacious private finance had to be contained so that the rest of America could thrive.
“But history has a way of playing tricks, and this hopeful scenario in not the way Barack Obama’s first year unfolded.”
Continuity between administrations is far more common than outright change – or, at the very least, new administrations will eventually assimilate certain practices from their predecessors as they come to believe they are the best practices. For Kuttner, however, Obama has not maintained his promises to be an agent of, or for, change, and the continuities with Bill Clinton’s and George W. Bush’s administrations are troubling:
“Our story charts the stages of this business-as-usual political path – from Obama’s appointment of an economic team filled with Wall Street insiders and their allies, to the seamless continuation of Bush’s financial policies, to the systematic sidelining of fundamental financial reform”
Obama’s Economic Team
The author spends the first proper chapter (‘The Politics of Capture’) to the people who came to dominate Obama’s exonomic team and, by extension, his policies. Kuttner details the evolution and changes within Obama’s economic advisory team – from the campaign up until taking office, when his team had morphed to comprise the Democratic economic stalwarts – most connected, in some way, to Robert Rubin, and all connected to Wall Street. Indeed, Rubin – the “Kingmaker” of Democratic economics – is particularly singled out as a considerable, negative influence (something Jacob Weisberg has written recently about, here), and Kuttner argues (convincingly) that he “personifies the capture of much of the Democratic Party by Wall Street”. Not only did Rubin push appointments for his protégés and compatriots with the Obama administration, but he hedged his bets by also pushing them on the Clinton candidacy (Larry Summers, it seems, would have been hired by either administration, for the same position). The result of this is that, “instead of the team-of-rivals model that Obama had often invoked, Obama hired a team of Rubins.”
The “capture” by Wall Street, and the power and influence of those on Wall Street (particularly its eminence gris), are indicative of the troublesome state Obama is presented with:
“Obama felt he needed men like Rubin and Summers for tutelage, access, and validation. That itself speaks volumes about where power reposes in America.”
In this first chapter, Kuttner outlines the professional histories, and inherent conflicts of interests, of all the key players: Rubin, Larry Summers, Tim Geithner, Rahm Emanuel, and Ben Bernanke (not to mention the others who orbit such characters).
Each of these appointees came with significant baggage. For example, the multitude of scandals as President of Harvard University and his “checkered past” were “more than sufficient” to persuade Obama’s political team that Summers was “not an acceptable risk for Senate confirmation.” Unfortunately, this “did not give much pause to the premise that Obama should put Summers in charge of America’s economic policy,” and the centre for economic decision making was moved to the NEC, which Summers now heads. Even Tim Geithner, who is largely approved of in government and on Wall Street, was not untainted by scandal; this time for not paying certain taxes for four years running. As Kuttner writes,
“Of all people who should know better than to chisel on taxes owed, the Treasury Secretary – the nation’s top tax-collector – should be above reproach.”
Rahm Emanuel, Obama’s pitbull Chief of Staff, is not held in high regard, basically accused of being a lapdog of Wall Street and a divisive character whose “operating style was viciously partisan”, and yet still someone the media seem to have conveyed acceptability and a ‘quaintness’ onto through his association with Obama (the epitome of a media-darling president, whether you believe it deserved or not).
Two Cheers for Muddling Through
Kuttner frequently provides historical perspective and comparisons with key events and presidential activism (specifically: Lincoln, FDR, JFK and LBJ), explaining that a president must harness popular movements to push policy and reform. Where before presidents have been able to draw on activist populations and movements, Obama is faced with a different political and social environment:
“Today,… there is a gross political imbalance in which elites are mobilized and ordinary people are frightened and sullen, but mostly passive.”
The author’s belief in Obama’s ability to face the problems ahead, and at least attempt to solve them, is still in place, although he is perfectly aware that it will not be an easy fight. However, in keeping with the historical comparisons and analogies, the author explains how it is “depressing… when one contrasts the boldness of Roosevelt with the timidity of Obama”. Effectively, Kuttner paints a portrait of a meek president, whose economic team ensure continuity with the old system, and thwart efforts of reform, regulation, and therefore progress.
Kuttner comes across as most disappointed by the continuity between the Bush and Obama administrations. After detailing the players involved, Kuttner goes on to describe the “continuity and collusion” in the system. The author describes the economic policy Obama inherited from the Bush administration as setting “the government on a path of propping up rather than cleaning out zombie banks or the system that bred them.” In another historical comparison, Kuttner explains how,
“in stark contrast with Roosevelt, who made a clean break with the old political and financial regime, Obama and his economic aides chose instead to work in concert with the Wall Street elite.”
The policy of favouring Wall Street over Main Street (to use the electoral parlance), is also continuing: “The Bush administration made the fateful decision to give primary reflief to banks, not to homeowners. Obama continued the basic policy.”
Even when more abuses were unearthed, “Obama seldom criticised the banks except on occasions when he needed a quick dose of symbolic populism”. The administration gave every indication of being more interested in restoring confidence in a broken, failed system, than in reforming said system into one that might actually work for the benefit of (almost) all.
One thing that strikes me is Kuttner’s almost pathological opposition to Wall Street denizens. While there is certainly plenty to dislike and distrust them for of late, it has not always been the case that administrations who worked with or employed former members of the Street made policies that disadvantaged the public and rewarded the financial elite. For example, Joe Kennedy was appointed SEC by FDR in 1934 mainly because of his expertise and experiences on Wall Street – he was believed to be the perfect person to reform things, as he knew exactly how the financial system was being abused in favour of elites.
“To succeed, Obama, who has reinvented himself more than once, will need to drastically revise his view of how to bring about durable change.”
Kuttner’s prose are fluid and accessible, making A Presidency in Peril a book that could be easily digested by political scholars and also casual politics or economics enthusiasts. The author is able to explain the complexities of derivatives, sub-prime mortgages and other financial systems and devices, in clear and concise language, in many ways demystifying what lies at the core of the problem. The single focus on the economy and Wall Street might not be broad enough for some (you might have to wait for Jonathan Alter’s upcoming book), but it allows for considerable attention to detail, offering a more rounded and complete picture of Obama’s first year economic policy.
Overall, this is an engaging, accessible, and interesting book on the Obama administration’s inability to bring about the financial changes and reforms the candidate promised (both in the primaries and the national election cycles). Regardless of whether or not you agree that Wall Street has a stranglehold on the political process (though it’s difficult not to believe this in the current environment), A Presidency in Peril will provide you with some excellent facts and analysis from an astute and intelligent liberal journalist and author. (On a personal note, it’s also nice that books on Obama are finally moving beyond the election campaign to look at his presidency.)
Also try: Robert Kuttner, The Squandering of America (2007) and Obama’s Challenge (2008); Jonathan Alter, The Promise (2010); Barack Obama, The Audacity of Hope (2006)