In our media saturated society, the way a picture of the truth often emerges is that some brave soul flings one in the face of the elites, and causes a stir. People notice, decide that the brave soul can be relied on to be a faithful vehicle of even more information to the public, and tell what they know. So it was with Seymour Hersh. And now we have Matt Taibbi, who made a big stir earlier this year with his picture of Goldman Sachs as a vampire squid, and who now has come up with a more refined and more complete picture of exactly how Wall Street managed to seize control of the Obama presidency.
The key figure - quelle surprise – is Bob Rubin.
(Note: yes, I know there is a recommended diary about this right now, but I think I have a little something to add. And lots of comm enters were complaining last night that it really did not amount to a diary.)
It is a great delight to read Taibbi as he smacks Rubin around. I won’t give you the satisfaction of reading some of the better smacks here, so you’ll be incentivized to go read the complete article. Let’s just get down to business.
There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation. The team Obama put in place to run his economic policy after his inauguration was dominated by people who boasted connections to at least one of these four institutions — so much so that the White House now looks like a backstage party for an episode of Bob Rubin, This Is Your Life!
Taibbi then goes through an entire list of all the Rubin clones Obama has surrounded himself with, accompanied, of course, by Taibbi’s colorful explanation of who each clone is. Here, you get only the list; if you want the color, go read Taibbi.
- Timothy Geithner, Treasury Secretary, Rubin’s understudy when Rubin was TS.
- Larry Summers, director of the National Economic Council, Rubin's protégé at Treasury when Rubin was TS.
- Mark Patterson, Geithner’s chide of staff, was a full-time lobbyist for Goldman Sachs.
- Lewis Alexander, Geithner's "counselor", former chief economist of Citigroup
- Lael Brainard, another Geithner "counselor", worked under Rubin at the National Economic Council
- Jason Furman, deputy to Summers, worked for Rubin in the Clinton White House and was a directors of Rubin's Hamilton Project.
- Diana Farrell, another deputy to Summers, worked for Rubin at Goldman Sachs.
- Michael Froman, Obama's international finance adviser at NEC and deputy national security adviser at the National Security Council. Taibbi notes, "The twin posts give Froman a direct line to the president, putting him in a position to coordinate Obama's international economic policy during a crisis." More on Froman, below.
- David Lipton, like Froman, on NEC and NSC, worked for Rubin at Treasury and Citigroup
- Jacob Lew, deputy director at the State Department for International Finance, worked with Rubin at Citi.
- Gary Gensler, director of the Commodity Futures Trading Commission, former Goldman banker, and worked under Rubin in the Clinton White House.
- Peter Orszag, director of the Office of Management and Budget, first director of Rubin's Hamilton Project.
(WARNING: ORIGINAL CONTENT IMMEDIATELY AHEAD.) Though not connected to Rubin in Taibbi’s story, Obama’s Chief of Staff, Rahm Emanuel, collected $18 million working less than three years at Wall Street outfit Wasserstein-Perella. I don’t think, after googling the firm, that anyone has adequately explained just what Wasserstein-Perella is. (I was writing about this stuff back in the late 1980s, so I know.) Bruce Wasserstein was one of the top leveraged buyout bandits of the 1980s, when America’s industrial companies were literally asset stripped and ripped apart. The amount of human misery Bruce Wasserstein caused with his "financial engineering" in former industrial towns from Akron to Zanesville is simply beyond imagination, but not exaggeration. After making a few billion ripping apart our country’s industrial base and looting pension funds, Wasserstein became head of Lazard Freres, the secretive but extremely powerful international private banking firm that was long a fiefdom of Felix Rohatyn, the ass-hat who "saved" New York City in the 1970s.
And for those young ‘uns who weren’t around when all this shit happened, Back in May 1975,. New York City was about to default on about $6 billion of its debt. Rohatyn was brought in to form and run "Big MAC," the Municipal Assistance Corporation, which can be seen as a model for the present $27 trillion bailout of the financial system. MAC tried to re-package about $2.3 billion of New York City’s short-term debt, as new, long-term debt, backed by the State of New York. That included at least $125 million of the state’s employee pension fund being invested in MAC bonds by State Comptroller Arthur Levitt – even after the state employee labor unions had gone to court arguing that they shouldn’t be forced to put their funds at risk against their will, and won. So Leviit "loaned" the pension fund money to the state instead, which then bought another $125 million of MAC bonds. Three years later, Leviit was made Chairman of the American Stock Exchange (AMEX). Was that his reward for playing ball with Rohatyn? Who knows? Of course, this is the same Levitt who became director of the Securities and Exchange Comission in 1992. In any event, social and public services funding in New York City was cut by one quarter to one third in almost all departments.
Just a few months ago, Forbes magazine noted in an article with glowing praise of Rohaytn:
What saved New York City was getting banks, pension funds and unions to cooperate--a model that could be used to fix the mess in our economy today
Remember what Benanke said last week about entitlements, publicly, in front of the Senate Banking Committee? See, the game really has not changed that much in over three decades. That’s the culture in which Rahm made his millions.
Back to Taibbi:
The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."
But how did this happen? How did the man we thought was "a genuine outsider," who "was finally breaking into an exclusive club," who filled us with hope "that walls were being torn down, that things were, for lack of a better or more specific term, changing," how did Barack Obama allow himself to become a mere puppet of Wall Street?
Taibbi’s got the explanation, and it leaves you wondering how all the details stayed submerged until now.
Leading the search for the president's new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama's biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).
Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama's economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin's son. At the time, Jamie's dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.
Now here's where it gets really interesting. It's three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O'Doul's portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama's economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama's transition team that same month.
So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin's messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that's just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi.
Taibbi goes through the details – and I mean, details - of how the financial reform legislations being considered in Congress is being sabotaged by Wall Street. The most outrageous part is the blanket authority being given to the President to "resolve" another failure of a Too Big Too Fail institution by spending whatever level of funds to do anything he wants, without giving Congress or anyone else a single detail. Shades of Hank Paulson’s mad power grab! But remember, you’re dealing with the zombie banks of Wall Street here, so don’t be surprised this is a zombie idea. This "resolution authority" is so outrageous, junior Democrats on the House Banking Committee openly revolted.
Here’s what Taibbi concludes the resolution authority will do:
Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn't lend to a company permanently backstopped by the federal government?). It would also formalize the government's role in the global economy and turn the presidential-appointment process into an important part of every big firm's business strategy. "If this passes, the very first thing these companies are going to do in the future is ask themselves, 'How do we make sure that one of our executives becomes assistant Treasury secretary?'" says Sherman.
There are some people here who have come to loathe Taibbi because of his brutal attacks on President Obama’s financial and economic policies. They might want to shut up at this point, and listen to what Simon Johnson reports about the Goldman Sachs US Financial Services Conference this past Tuesday (December 8). One of the speakers was James Dimon, chairman of JP Morgan Chase, whose name was recently floated as a replacement for Geithner has the head of Treasury.
Speaking at the Jamie Dimon presented JP Morgan Chase’s third quarter results (year-to-date). His slides are informative, but if you want to pick up the nuances in his message, listen to the audio webcast (you have to register, but it’s free; here are back-up/alternative links).
Mr. Dimon insists, at minute 23, that we should "get rid of the concept of Too Big To Fail", and he suggests that a new Resolution Authority – giving government more power to shut down or take over big banks – would make this possible. (Emphasis mine.)
Get rid of the concept of Too Big To Fail? These bankster assholes simply do not hear us peasants screaming outside their walls. They don't even consider what might happen when a bunch of us conclude that all the screaming isn't doing any good. Here’s another report from Johnson:
Feudal Lords Of Finance
In some influential circles, these questions are now asked: What’s wrong with high levels of inequality in general, and with having very rich bankers in particular. After all, human societies have survived the presence of extremely wealthy individuals in the past – in fact, some now argue, the presence of such a "new aristocracy" can finance growth and spur innovation.
Look at that list of top economic policy makers in the Obama administration again. I’ll let Taibbi’s conclude:
The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place. . . .
There's no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America's racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads.