Bought and Paid For Page 5
But while each of the men in the room was looking for something new, they also wanted something old. While Volcker may have somehow come to believe Obama had the personal history to possibly upend the status quo—namely his background in “progressive” politics as a community organizer—everyone else in the room showed up because Gallogly’s pitch was pretty simple: In the end, Barack Obama really was someone Wall Streeters felt they could work with, despite all the noise they might have heard about Obama’s far-left views and his associations with some of Chicago’s more unsavory characters, like criminally convicted businessman, real estate developer, and Democratic Party fund-raiser Tony Rezko.
In 1995, Rezko became literally one of the first three people to ever make a campaign contribution to Obama, and he would help to raise millions over the years for him, particularly when Obama was in the Illinois state senate, where he could influence legislation involving real estate. Their association didn’t end there; Obama and Rezko became close friends, so much so that Rezko hired Obama to do some legal work for him in the 1990s.
Obama’s association with Rezko was in many ways emblematic of his dealings with business in general (and more specifically with Wall Street). As with his relationships with Jeremiah Wright and William Ayers, who helped Obama solidify his left-wing political credentials in Chicago, Obama’s relationship with Rezko gave him access to amazing amounts of campaign cash over the years, though it would also raise questions about his judgment. During the Democratic primaries, Hillary Clinton mocked Obama’s reference to Rezko, calling the land developer a “slum lord.” In 2008 Rezko would end up being convicted on sixteen charges: six counts of wire fraud, six of mail fraud, two of corrupt solicitation, and two of money laundering for offering campaign contributions in exchange for state contracts.
Being someone who spent years as an Illinois state senator before representing the state in the U.S. Senate, Obama had been surrounded by the notoriously corrupt world of Illinois politics: Disgraced and soon-to-be-impeached governor Rod Blagojevich was caught on tape attempting to sell his appointment to fill Obama’s now-vacant Senate seat. But Obama also made very productive use of his time in Chicago, forging deep connections not just with real estate developers and powerful albeit controversial local political players like Wright and Ayers but also with key business leaders, which would put him in good stead later in his career. What’s more, he built relationships with others who would themselves create a web of Wall Street ties—like Valerie Jarrett, a real estate lawyer who ran a firm that specialized in profiting off its strong relationships with Chicago-based developers, and of course a certain ambitious young man named Rahm Emanuel.
Like Gallogly, Warren Spector had long been involved in Democratic Party politics, though he knew very little about Obama’s ties to the likes of Wright, Ayers, or Rezko, he would later say. And like some of Obama’s other supporters, Spector said he really didn’t care. The more he got to know Obama, the more he judged him as his own man, someone who was smart, educated about Wall Street in a way that went beyond simply asking for campaign contributions. He seemed to really appreciate what bankers did—the financial innovations, as in mortgage bonds, that people like Spector produced had a direct social benefit by expanding loans and housing to more and more people.
As the executives milled around the room with wineglasses in their hands, Obama immediately spotted Spector and walked over to him. “Glad you could make it, Warren,” Obama said. “Good to see you, too,” Spector responded. Spector might have been impressed with Obama, but he wasn’t quite sold on Obama’s being the next president because he was still leaning toward supporting his rival, Hillary Clinton.
That was about to change. After a couple of glasses of wine, the group sat down and each man formally introduced himself to the candidate. Most, like Dick Fuld and Larry Fink, did so matter-of-factly, and Obama gave them both friendly hellos. Those who had not already met Obama expected a night of policy analysis from the wonkish candidate, not exactly the most exciting way to end a hard day at the office.
But Spector immediately livened up what had begun as a dull affair. Inside Bear Stearns, Warren Spector was not known for his sense of humor, and the strain of the firm’s recent problems was clearly weighing on him. The failing Bear Stearns hedge funds had been big financial news. Some pundits were saying they were harbingers of a broader decline of Wall Street because many of the biggest firms, most notably Bear itself, had invested in the same toxic housing bond investments that were found in Bear’s hedge funds.
As a result, Bear’s stock was getting crushed, and with that the rumors had begun swirling that Spector’s boss, Jimmy Cayne, a right-wing conservative (the political opposite of Spector), was getting ready to fire him over the problems that had begun with the losses of the Bear hedge funds, which were clearly under his watch. Spector’s problems with Cayne had been brewing for years. Just three years earlier, Cayne had publicly chastised Spector for his public support of Democratic presidential candidate John Kerry. (Cayne, despite his personal political views, thinks it’s bad business to overtly support any political party—unless, of course, there’s business to be gotten.) Since then the two had barely spoken and with the hedge funds disaster, their relationship turned even more toxic.
Yet tonight Spector was unusually glib, as if he knew the end of his career at Bear was approaching and with it a great weight was coming off his chest. He would soon be a free man, free to start his own hedge fund; free to start his own film production company (called Tashtego Films); and free possibly to be part of history—the election of President Barack Obama, the nation’s first black president and, most important (although by no means unprecedented), a progressive who could work with Wall Street.
When it was Spector’s turn to talk, he announced himself to the group as “Warren Spector, the current scourge of Wall Street.” Everyone laughed, including Obama, who had undoubtedly read in the financial papers about the problems at Bear Stearns.
Spector certainly broke the ice that night, and then, as the conversation began, Obama did much of the talking. Gallogly immediately knew he was hitting a home run as candidate Obama expounded on his vision about the future of America, one unburdened by the politics of the past and one in which the financial sector and capitalism flourished, according to people who were there and who were immediately impressed by Obama’s rhetoric.
But in reality, the pose Obama assumed at this meeting downplayed his alter ego, what some would say is the real Barack Obama, the ultraliberal politician and community activist who lobbied on behalf of the far-left housing advocacy group known as the Association of Community Organizations for Reform Now, better known simply as ACORN.
ACORN billed itself as the largest community action group in the country, with 350,000 active members who lead marches, protests, and voter registration drives in advancing its far-left agenda. And it’s no stranger to the community activist turned president; Obama worked closely with ACORN during his days as a community organizer, and his campaign paid an ACORN affiliate more than $800,000 for its get-out-the-vote efforts.
It was ironic that Obama would be glad-handing some of the same bankers who had been targets of many of ACORN’s protests, including claims that the big banks were at the center of a plot to redline inner-city neighborhoods and that they refused to lend to minority communities out of sheer racism.
Less ironic but more scary is ACORN’s own record of abuse. The organization would make the news for numerous alleged criminal activities, including encouraging prostitutes to evade the law and, much more sinister, possible voting fraud. (Examples that would be amusing if they weren’t so scary and scurrilous include a voter application form for “Mickey Mouse” submitted by ACORN in Orlando, Florida, and registration forms sent in by ACORN in Las Vegas that included the names of the entire starting lineup of the Dallas Cowboys.)
But none of that mattered to the high-powered executives in the room. Obama was demonstrating the skill t
hat, even more than his vaunted oratorical ability, has served him most usefully throughout his political career: a chameleon-like quality that allows him to be all things to all people (not unlike the previous Democratic president, Bill Clinton).
Earlier in 2007, the closely watched rankings of the National Journal ranked Obama the most liberal U.S. senator in the entire Congress, based on his votes to expand government health-care benefits, as well as other spending initiatives. In fact, he was ranked as more liberal than Hillary Clinton, who was ranked sixteenth despite her long-standing desire to create government-run health care. But unlike Hillary, Obama had a reasoned, calm demeanor that appealed to the bankers, who still remembered the bruising national drama of the Clinton years.
Obama had voted against George W. Bush’s successful “surge” of troops in Iraq, which would finally turn the corner on bringing peace to that troubled land and limiting Al Qaeda’s operations, and he had repeatedly voted yes on questions of massive government entitlements—yet at this meeting he wasn’t asked a single question about either of these issues, according to people who were there.
Obama once considered Reverend Wright his spiritual mentor, despite Wright’s espousal of so-called Liberation theology in his church in Chicago, the Trinity United Church of Christ. Liberation theology interprets the Bible through the prism of Marxism, yet no one asked how it could possibly be squared with the candidate’s newfound faith in capitalism. Nor did anyone ask how a candidate vying for the presidency of the United States could admire a man who said such things as “God damn America” or “[T]he Jewish vote, . . . that’s controlling [Obama]” or, concerning the September 11, 2001, terrorist attacks, “America’s chickens are coming home to roost.” (Obama was eventually forced to disavow Wright and these statements, but only after intense media pressure.)
Instead of the ultraliberal activist, the man at the meeting was Obama the moderate, the one who impressed Gallogly, Andrew McKenna (the chairman of McDonald’s), and now just about everyone at Johnny’s Half Shell as a centrist politician. And unlike most politicians he was also quite entertaining.
In addition to discussing his “post-partisan” philosophy, Obama cracked a few jokes. To the stodgy bankers in the room he was simply cool. As Greg Fleming would later recall, Obama never once spoke about massive new programs like government-sponsored health care, higher taxes, or even income redistribution, all of which would become hallmarks of his administration’s agenda just a couple of years later. Instead Obama spoke about “helping the less fortunate” (which when adroitly phrased sounds like simple social concern, a basic sense of morals and ethics, not a call for an outright welfare state), about “getting health-care costs under control,” and about “the need for a strong financial sector,” according to people in the room.
They also listened to the captivating junior senator from Illinois explain why he should be president and proclaim his respect for the principles this country was built on, including the virtue of hard work and, despite his leftist background, the business community. If Obama displayed any hint of his radical past, no one seemed to notice, nor did anyone care. He had won them over, impressed them as a man of the future, open to ideas and to wise advice.
That night and over the next two years, Big Business and Wall Street, the alleged epicenter of capitalism and bastion of free markets, would fall head over heels for maybe the most liberal presidential candidate since FDR. Wall Street bankers and firms would help Obama raise over $100 million for his campaign (see the front of this book for a partial list of the amounts raised just by some of the firms and people mentioned here—the numbers are eye popping).Their man would use the huge monetary edge Wall Street provided to decisively outadvertise and outspend his opponent, naval war hero and senator John McCain, and become the forty-fourth president of the United States.
In a supreme irony, perhaps the critical turning point of the campaign occurred in the fall of 2008 at the height of the financial crisis, when the very banks that were funding Obama were in danger of going under; it was at that time that Obama’s calm and steadfast demeanor set him apart from his competitor in the eyes of many voters.
In fact, betting on Barack Obama may have been the best investment Wall Street made in 2008, or indeed ever. For much of the campaign, McCain and his running mate, Sarah Palin, were either ahead or running neck and neck with Obama and Joe Biden, yet the Wall Street money kept pouring in to Obama.
Undeterred by the financial crisis and the subsequent bailouts, Wall Street sent checks totaling nearly $15 million to Obama, compared with around $9 million to McCain—this during a year in which many of the firms barely broke even despite billions of dollars in government bailouts.
Goldman Sachs would eventually rank as Obama’s second-largest contributor. And it wasn’t alone. Citigroup lost close to $19 billion in 2008, yet donations from its bankers and traders put the firm sixth among Obama’s top contributors. Jamie Dimon was on the Federal Reserve Board, and according to his press office, he refrained from direct contribution, but one of his seconds-in-command, JPMorgan Chase chief financial officer Mike Cavanagh, didn’t. He held one large fund-raiser outside JPMorgan headquarters for then-candidate Obama that helped raise nearly $100,000 for the campaign. Meanwhile over at Morgan Stanley, John Mack switched his support to Obama at the prodding of one of his top executives, a man named Tom Nides, who had held various jobs inside the Democratic Party over the years between stints on Wall Street. Nides became one of Obama’s biggest supporters on the Street, holding a number of fund-raisers actually inside Morgan Stanley headquarters.
Nides would eventually be offered various jobs in the Obama administration but chose to stay at Morgan as one of its highest-ranking executives. He also chose to run Wall Street’s primary lobbying organization, and with that, Morgan Stanley became one of Obama’s favorite bankers, handling various deals for the administration, including the sale of its ownership positions following the government bailouts and takeovers of banking giant Citigroup and General Motors.
But Nides and Morgan Stanley were hardly the only beneficiaries of Obama’s new economic agenda. In truth, the entire Street benefited because, in the end, it was Wall Street’s money that helped a former community organizer, the disciple of a preacher who once proclaimed, “God damn America,” defeat his moderate Republican opponent (who had spent seven long years as a prisoner of war) and become president of the United States.
2
THE LEFT SIDE OF WALL STREET
Barack Obama assembled an amazingly effective coalition to win his historic presidential election in 2008: Moderate suburbanites, young people, and minorities combined to give him a 53 percent share of the vote over John McCain, who had won the GOP nomination. But a key piece of the Obama coalition that received far less notice from the mainstream media and had a far greater impact on the election result was Wall Street—or to be more precise, the heads of the major Wall Street firms. These were people like Lloyd Blankfein and Gary Cohn, who run Goldman Sachs; Larry Fink, head of the world’s largest money manager, BlackRock; and Wall Street’s current rock star, Jamie Dimon—who united to provide one of the most liberal politicians in generations unprecedented access to the Wall Street piggy bank, even as the financial collapse in late 2008 put their very survival in jeopardy.
It was that access to Wall Street’s cash that gave Obama’s campaign early traction; according to the Center for Responsible Politics, Goldman Sachs, Citigroup, JPMorgan Chase, UBS, and Morgan Stanley all ranked among the top twenty U.S. corporations that bundled donations to the candidate. To be sure, Obama famously raised the majority of his campaign cash from “individuals,” that is, average people who were so inspired by his personal story and his plans for America that they gave whatever they could to the campaign. The Obama campaign bragged that it had more than 250,000 individual donors, a presidential campaign record, with many of these coming from people decidedly different from typical Wall Streeters, who generally bundle
scores of $2,300 checks (the maximum amount a single donor can contribute to a candidate) during fund-raisers.
But Wall Street’s support for Obama was important—vitally important—not just for his successful presidential run but for his campaign against Hillary Clinton for the nomination. That’s because Wall Streeters like Gallogly and the crew at Johnny’s Half Shell provided the seed capital for the Obama campaign. As attorney and political strategist Jack Burkman explains, if it weren’t for that early and continued Wall Street support, who would have paid for those massive rallies where Obama raised $200 each from ten thousand or more adoring fans?
“People tend to associate Republicans with Wall Street, but the truth is, it’s the Democrats that are in bed with the Street,” says Burkman, who advises mainly Republican candidates. “And that’s certainly true with Obama. He’s been in bed [with them] from the beginning. And that was crucial to his victory. Obama raised a lot of money from individuals, but it was the Street’s initial support that was crucial to his success. Without Wall Street’s initial support, he doesn’t have credibility. That’s why Hillary was so freaked out when Obama started to woo Wall Street. It gave him the money to hold those megarallies that galvanized his support. It got the ball rolling and allowed Obama to access more people and raise more money. None of that would have happened without Wall Street’s support. No doubt about it. Without Wall Street, Obama would not be in power today.”