In the depths of the financial crisis last year, people like Morgan Stanley’s John Mack, BlackRock’s Larry Fink, Greg Fleming (then of Merrill Lynch), JP Morgan’s Jamie Dimon and Goldman Sachs’ Lloyd Blankfein were telling everyone that candidate Barack Obama was a “moderate,” and moderation was what this country needed.
What a difference a year makes. They won’t admit it in public — but in private conversations, the top guys on Wall Street are feeling burned.
The guy who seemed like such a steady voice — vowing to curb runaway spending and restoring order to the banking system and the economy as a whole — is instead so driven to achieve his big-government policy goals that he and his policy people are ignoring their own economic advisers on the severe economic costs that his agenda will cause.
I’m told that Treasury Secretary Tim Geithner and chief economic adviser Lawrence Summers have both complained to senior Wall Street execs that they have almost no say in major policy decisions. Obama economic counselor Paul Volcker, the former Fed chairman, is barely consulted at all on just about anything — not even issues involving the banking system, of which he is among the world’s leading authorities.
At most, the economic people and their staffs get asked to do cost analyses of Obama’s initiatives for the White House political people — who then ignore their advice.
It’s almost the opposite approach, the Wall Street crowd complains, from the last Democratic president, Bill Clinton, whose main first-term achieve- ment — deficit reduction — was crafted by his chief economic adviser, Robert Rubin.
Like Obama, Clinton and Rubin promised to raise taxes on the “rich,” and they did. But Clinton didn’t raise taxes to embark on a wild-eyed redistribution of wealth and massive programs. In the early Clinton years, Rubin convinced the president that he needed to avoid the grim consequences of runaway spending — and after the Republicans took Congress in ’94, it was no longer an option.
Of course, the Clinton tax hikes came at a cost — before the tech boom ignited the economy in 1995, growth was mediocre at best. But government spending remained under control, and lower interest rates followed, as did an economic recovery.
Obama, according to Wall Street people who regularly deal with his economic and budget officials, is acting as if he has a blank check to do what he wants, while ignoring the longterm costs of his policies.
As one CEO of a major financial firm told me: “The economic guys say that when they explain the costs of programs, the policy guys simply thank them for their time and then ignore what they say.”
In other words, the economic people feel that they have almost no say in this administration’s policy decisions.
Wall Street should have seen it coming. Obama was among the most liberal politicians in the country, despite his campaign rhetoric — and his record in Illinois and the Senate showed it. He has spoken glowingly over the years of the need to redistribute wealth, a measure that always leads to taxes on small businesses, the economy’s main economic engine.
The execs who had such hopes for the president are now wondering fearfully just how radical he really is.
It’s almost comical watching the Street’s top players squirm when they hear “class warfare” rhetoric coming from the White House, and it forces them to act in ways they’d never imagined. In addition to recently giving phony speeches about the sins of large compensation packages that they had no problem taking just a few years ago, many Wall Street CEOs are so terrified of being outed as greedy capitalists that they no longer use the corporate credit cards to charge business lunches at their favorite New York restaurants.
The funniest story I’ve heard lately came from a former Wall Street executive and longtime Democrat who anxiously recounted a recent conversation with Obama.
The executive said he told the president that he’s at a disadvantage because he’s relatively inexperienced in economic matters during a time of economic crisis. “That’s why I have Valerie,” came Obama’s reply.
“Valerie” is senior adviser Valerie Jarrett — a Chicago real-estate attorney and one of Obama’s closest friends, who has deep ties to the Windy City’s Democratic political machine.
Now you know why Wall Street is so nervous.
CNBC on-air editor Charles Gasparino’s new book about the Wall Street meltdown, “The Sell out,” is due out Nov. 3.