Bought and Paid For (19 page)

Much less has been made of Emanuel's impressive, and extensive, ties to Wall Street. They began with a stint in the early 1990s as an outside “political consultant” for Goldman Sachs, where he used his deep connections in the Chicago political community to help the firm secure municipal bond and other government contracts—nearly twenty years before he would become the second-most-powerful person in the country, he was already working to deepen the bonds between Wall Street and Washington.

During those years as a consultant for Goldman, he started to develop a network of friends on Wall Street, including a young senior executive named Jamie Dimon and, of course, his friend Tom Nides, who a few years later started working at Morgan Stanley. When Emanuel's deep ties to Goldman were first reported, he was in the Clinton White House. He quickly and vociferously attempted to quell speculation that former Goldman chairman and Clinton economic adviser Bob Rubin had gotten him the job. “Rubin had nothing to do with it,” he told me at the time.

Maybe so, but the Clinton White House was a Wall Street-friendly place, deregulating the markets; bailing out their friends at the banks when they felt it to be necessary, as they did during the Mexican peso crisis and the LTCM collapse; and passing laws that allowed them to grow and take enormous risk (e.g., by ending Glass-Steagall). With that, it was only fitting that Emanuel's next gig after the Clinton administration would be on Wall Street: In 1999, in the midst of the dot-com bubble, he worked for a quick couple of years at the investment bank Wasserstein Perella, where he earned an equally quick $16 million before entering politics once again as a member of the House.

People on Wall Street like to joke that Emanuel doesn't have much of that $16 million left because of his free-spending wife. But if so, he made up for the lack of personal cash in political pull. Once back in the House, Emanuel used his Wall Street connections again, this time to raise millions of dollars as head of the DCCC, where he and his fellow Wall Street travelers, like Tom Nides, helped deliver the most liberal congressional leadership in the modern era when Nevada senator Harry Reid became majority leader of the Senate and San Francisco congresswoman Nancy Pelosi became the first female Speaker of the House (and one of the most liberal ever).

Now ensconced at Obama's side in the White House, Emanuel was ready to deliver for his buddies on Wall Street. After the election Tom Nides's boss, John Mack, effectively retired from the day-to-day management of Morgan Stanley, stepping down as CEO (though he remained chairman), while Emanuel's good friend Nides was stepping up: He became Morgan's chief operating officer—one of just a handful of top executives reporting directly to the new CEO, James Gorman. In addition, Nides was appointed the new chairman of Wall Street's chief lobbying group, the Securities Industry and Financial Markets Association, also known as SIFMA. It was here that Nides began to plot Wall Street's comeback after the disastrous 2008, something he was relying on his friend in the White House to assist him with.

The billions in taxpayer-financed bailouts and the recession caused by the financial crisis weren't things that endeared Wall Street to Main Street. The country was angry, even if Obama didn't appear to be (his nickname inside the campaign was “No Drama Obama”). During the campaign and after the election, Obama had had numerous meetings with his Wall Street kitchen cabinet about the banking crisis that lingered through the end of the year.

Lurking in the background, of course, was Bob Rubin, always willing to lend his sage advice and perspective as a survivor of past crises, even if that same advice may have contributed to the current one.

Obama, by all accounts, listened intently. There would be new rules, no doubt, he said, and now that the Democrats were in charge of just about everything (having built bigger majorities in the House and Senate), Wall Street was bracing for some class warfare coming from the liberal politicians.

Tom Nides was one of those unofficial advisers as well, even if he was a former Hillary supporter. According to people who know him, after the 2008 election, Nides wasn't really worried about attacks coming from the Democrats—after all, the House leadership included Wall Street's favorite liberal, Representative Barney Frank, who had been helping the Street lighten regulation and finagle Congress for years. And then there was the Street's favorite Senator, Chuck Schumer of New York, who never passed up the chance to tax, spend, and regulate, unless it involved Wall Street: As the ranking member of the banking committee, awash in Wall Street campaign cash, Nides was betting that Schumer would never kill the golden goose.

Instead, Nides believed if Wall Street truly faced a threat, it was from the Republican Party, particularly the Republican members of the House. As he saw it,
they
were the renegades who had voted against the initial plan to bail out the banks, the Troubled Asset Relief Program, which caused the markets to tank more than six hundred points that afternoon, and
they
were the ones now being influenced more and more by the Tea Party—a nascent political movement that viewed Big Wall Street as the evil equivalent of Big Government.

Obama lived up to Wall Street's expectations and began assembling a senior staff that had little of the “hope” and even less of the “change” he had promised in his campaign. In fact, he began to assemble a group of regulatory bureaucrats who looked like they had been plucked right out of the good ol' Clinton days, which made Wall Street, and Nides, now its chief lobbyist, absolutely giddy.

Rubin was gone, a casualty of the financial crisis, but after Obama announced Rubinite Tim Geithner's selection as Treasury secretary, the market rose to close over four hundred points higher from its low—this on the news that the country's finances would be run by a man who not only had missed the entire financial crisis, allowed Fannie and Freddie to implode, and permitted AIG to go on an unparalleled risk-taking spree, but who had been a key voice in favor of bailing out the financial system in 2008. Wall Street had other reasons to rejoice. Larry Summers, fresh from getting booted out as president of Harvard University after implying that women were bad at science and math, and even fresher from leaving the hedge fund where he had made millions doing almost nothing, would become the new president's chief economic adviser. Banks and traders from other big firms found high-ranking jobs as well: Gary Gensler, Rubin's old pal from Goldman Sachs and later at Treasury, snuck back in to government as head of the Commodity Futures Trading Commission, which regulates one of the core businesses that helped get Wall Street in trouble, the use (and abuse) of derivatives.

The only sour note amid the general euphoria sweeping the Street over team Obama was that somehow the Crazy Old Man, Paul Volcker, had made his way into the administration as a senior economic adviser. The former Fed chairman was as anti-Wall Street as ever, and top executives were warned that he wanted to once and for all rein in the excesses that had produced the 2008 financial collapse. They were also told not to fear: The president planned to keep Volcker around like a crazy uncle, for window dressing, and nothing more.

With Geithner, Summers, and lesser-known names like former Citigroup banker Michael Froman (a law school buddy of the president), and Phil Murphy, former Goldman Asia region chief and finance chair of the National Democratic Committee, in place (Froman as a deputy assistant to the president and Murphy as ambassador to Germany), Nides and Wall Street
knew
they had an administration they could work with. “Could you imagine who John McCain might have picked for the Treasury?” was a standard joke among the Wall Street hierarchy as they thought back to the presidential campaign and wondered what a McCain presidency might have looked like if, say, the financial crisis had come to a head after the election rather than before. In fact, Nides and the rest of Wall Street had barely gotten to know McCain during the campaign, except through the filter of Hank Paulson, who had briefed the Arizona senator on the financial collapse. And that was hardly a briefing: What was reported back to the heads of the big firms was that while Paulson was busy saving their collective asses, McCain was busy chewing out Paulson's ass. Hank Paulson, then the Treasury secretary and the former CEO of Goldman Sachs, is an imposing man, about six feet three inches tall, hunched over even as he normally stands, with steely blue eyes and a voice that's more like a rasp. He played football at Dart-mouth, and while he could be exceedingly polite and accommodating to clients (he was a longtime investment banker) he's also known for his mean streak when challenged, as McCain had done to him in the fall of 2008 on a nearly daily basis.

Inside the Goldman boardroom or even at Treasury, such a confrontation would constitute fighting words for Paulson, who is known for frequent outbursts and cutting off people who he believes are wasting his time. According to Wall Street executives who spoke to Paulson, the former Treasury secretary believed firmly that McCain was wasting his time, as was his running mate, Sarah Palin, who called him from time to time as well.

But Paulson's temper was no match for McCain, who truly appeared disdainful of the former investment banker now leading the bailout of his old firm and the rest of the Street. It's what seemed to separate Obama from McCain; at least, that's what Paulson's remarks about his meetings with McCain and Obama conveyed to Wall Street. Obama treated Paulson and the rest of the Wall Street elite with respect during his meetings and telephone calls around the time of the crisis, as if they were partners and would rise out of the crisis together.

McCain, on the other hand, barely spoke to the Wall Street elite, unless, of course, he was pissed about the bailouts and what they did to his campaign. It was clear, at least to most of Wall Street's ruling figures, that McCain seemed to think Wall Street wasn't a partner but the enemy, the reason why the country was sinking into a near depression, and the reason why after running neck-and-neck with Obama for so long, his own campaign was now losing ground and would ultimately fail.

So Paulson, as he told his friends on the Street, just took the abuse. He didn't like being screamed at by McCain, but he wasn't about to pick a fight with a senator who had survived a couple of jet crashes, years as a North Vietnamese prisoner of war, and thirty years of politics. Especially not when, as he and the rest of the Street hoped, after November, McCain would go back to being the crazy senator he'd always been and Wall Street would breathe a collective sigh of relief that grew louder with each and every appointment by the new president-elect.

In the late fall of 2008, the heads of the big firms, of course, had seen better days. They were beaten and bruised, though bailed out. John Mack seemed barely alive, in a state of exhaustion after working nonstop for weeks and having barely saved Morgan Stanley, something that would not have happened were it not for a combination of government bailout money and the sale of a chunk of the company to a Japanese bank. Ditto for Goldman; it was a bitter pill for Blankfein to swallow, but with the bailout money from the feds and a cash infusion of around $5 billion from Warren Buffett, as well as the side benefits of the AIG bailout, which will be explained in more detail later, Goldman escaped almost certain death, as had Citigroup, Bank of America, and JPMorgan Chase. Jamie Dimon's prowess at risk management had kept JPMorgan from immediate implosion, though he, like the rest of them, recognized that without the federal government standing in the way, his firm could have gone down the tubes as well.

But at least they now had Obama, they all reminded themselves during their fancy lunches at San Pietro and expensive dinners at the Four Seasons in the days and weeks after the election, a man not much different from themselves, a man whom they could do business with.

Nides himself was giddy with excitement. Morgan Stanley was known for its blue-blood Republican ties, but he had convinced Mack, a former Bush fund-raiser, to jump to the other side. After a year of fund-raisers for Obama, Morgan Stanley was now clearly part of Obama country, and Nides one of the president's closest allies. And the payback would be grand.