Bought and Paid For (5 page)

As a local politician, he had earned some name recognition, and he gained even more as a U.S. Senate candidate from Illinois, when (on his way to a landslide victory) he gave a rousing speech at the 2004 Democratic National Convention.

In that speech, he couldn't help but express his fondness for Big Government. He waxed eloquent about how the government-run Federal Housing Administration program did so much good because it allowed his grandfather to buy a home after he returned from World War II. Of course, he failed to mention the role of other government agencies, Fannie Mae and Freddie Mac, in creating the housing bubble that, within four short years, would become a housing crash. He talked about how government had helped a child from Chicago's South Side learn how to read. He added that the American people “don't expect government to solve all their problems. But they sense, deep in their bones, that with just a slight change in priorities, we can make sure that every child in America has a decent shot at life, and that the doors of opportunity remain open to all.”

Even so, from what they knew of him, the bankers felt that in this ambitious, charismatic young man they might have found their guy. The chatter among top Democratic fund-raisers on Wall Street was that Obama understood their importance and would do little to dismantle their power and influence over the nation's economy. Despite his lack of experience in the big leagues, his time as a community organizer had taught the young Barack Obama about power—namely, how one's relationships with influential people can make a difference. As reported by the
National
Review
's
Byron York, one of Obama's defining experiences as a community organizer came after suffering a setback in his effort to get asbestos removed from a housing project. York quotes an old friend of Obama's summing up the future president's reaction: “He said, ‘I need to go there [Harvard Law School] to find out more about power. How do powerful people think? What kind of networks do they have? How do they connect to each other?' ”

Another story, this time in
New York
magazine, quoted a law school friend of Obama's, Julius Genachowski, as saying, “Other states vote; New York [i.e., Wall Street] invests.” It was a lesson the young candidate would take to heart. The same story contains an anecdote that illustrates just how much Obama had learned about how to sway Wall Streeters: In trying to persuade investment banker Robert Wolf to support him over Hillary Clinton, Obama arranged for a two-hour private dinner with Wolf on the night that George W. Bush was announcing his plan for the surge in Iraq.

But before the Wall Street elite would endorse Obama, they needed to see what sort of mettle he had. The man largely responsible for convincing the bankers to meet with Obama was Mark Gallogly, a veteran investment banker. Gallogly is one of those Wall Street executives who rarely appear in the
Wall Street Journal
, nor even the Wall Street gossip rags, but are powerful in their own right. Gallogly grew up in a heavily Irish-Italian section of Providence, Rhode Island, and had been a lifelong Democrat. He had had a thirty-year career on Wall Street, the last sixteen as one of the top executives at the private-equity firm Blackstone, before starting his own private-equity firm that specialized in media deals.

If the public face of Blackstone was the firm's eccentric founding partner Steve Schwarzman (maybe best known for throwing a lavish, celebrity-filled birthday party for himself just weeks before Blackstone became the first private-equity firm to go public, pegging Schwarzman's net worth at close to $6 billion), Gallogly was known as the silent partner who made the trains run on time.

In so doing, he came to know just about everybody on Wall Street, and it didn't hurt matters that during his years at Blackstone he had also become increasingly active in Democratic Party politics.

A new generation of Wall Street leaders had begun filling the executive suites. They were men more like Jamie Dimon, a committed supporter of Democratic causes, than the old-line Republicans who used to control Wall Street. They all considered themselves to be capitalists, but they also believed they were progressives and were willing to use their money and clout to spread a left-of-center political agenda.

Gallogly was cut from the same cloth, and he was all too eager to introduce the junior senator from Illinois to the most powerful men in the world. He did so simply by telling them, “There's someone I'd like you to meet.”

With his fine features, neatly combed silver hair, and piercing blue eyes, Gallogly looked like a politician himself. But he was content to make his money as a banker while staying in the political background and quietly campaigning for others who looked poised to advance the Democrats' agenda (and not incidentally, his interests and those of Wall Street). And in Obama he saw the complete package.

As far as Gallogly was concerned, the man running for president wasn't the Barack Obama that many on the right were now warning about as his campaign began to gain momentum in 2007. He wasn't the guy who had sat idly by in the pews of Trinity United Church of Christ on the South Side of Chicago listening to the fiery Reverend Jeremiah Wright delivering anti-American and anticapitalist rants. Or the Barack Obama who associated with the socialist terrorist William Ayers (Ayers was a member of the Weather Underground, a terrorist group that bombed government buildings in the 1960s) on Chicago education reform.

Gallogly had first met Obama in 2004 at a dinner with other senators after Obama was elected to the Senate, and the two had hit it off immediately. Gallogly found Obama to be an incredibly moderate person in terms of temperament and policy. He wasn't anticapitalist, Gallogly believed; he just wanted to spread the wealth. He wasn't anti-American; he just wanted an open dialogue so the country could get beyond the struggles of the past.

More than that, he appeared truly smart.

“This is one of the most competent, intelligent people I have ever met in public life,” Gallogly would later rave to his Wall Street friends. In conversations with them, Gallogly dismissed talk of Obama's being a socialist as “absurd” and gave little thought to Obama's connections with Reverend Wright. “That never really worried me,” he told people.

Maybe even more, in Obama, Gallogly probably saw someone who he thought would be good for both the country and
himself.
But like any good Wall Street veteran, Gallogly always did his homework before making a trade. Since at least 2006, Obama had been speaking sporadically with Wall Street executives, people like hedge fund manager Orin Kramer and Robert Wolf, a senior executive at UBS. Both were major Democratic fund-raisers, but what gave Obama his first dose of Wall Street cred was the endorsement of George Soros. The billionaire hedge fund manager, champion of far-left causes through political action committee MoveOn .org, had met Obama the way many of the Wall Street rich and powerful make acquaintances—through a neighbor who lived next door to his posh weekend home in the Long Island village of South Hampton.

That particular neighbor, Jacques Leviant, a successful investor in his own right, was asked to approach Soros by an old girlfriend, the Chicago socialite Sugar Rautbord, who was smitten with Obama's brand of politics, as were a number of other wealthy Chicago socialites, such as Penny Pritzker, heiress to the Hyatt fortune, whom Obama had wooed with promises to change the world.

Leviant himself was moderately conservative, though he has given to both Democrats and Republican candidates over the years. That said, he brokered the introduction to Soros, and pretty soon Soros, the financial industry's king of all liberals, was swooning over Obama as well.

Even so, in deciding whether to raise money for Obama's campaign, Gallogly did his own research. He talked to business leaders in Chicago, including Andy McKenna, who sits on the board of McDonald's and is a longtime Republican who sat on the boards of both the Chicago White Sox and the Chicago Cubs baseball teams. You couldn't have found a more establishment person than McKenna, and Gallogly discovered he wasn't the only one impressed with Obama. McKenna “raved” to him about how “sensible” the junior senator seemed to both him and to other members of the Chicago business community, how he wasn't that liberal despite his reputation for associating with left-wing loons like Reverend Wright and Bill Ayers, but most of all how he wasn't antibusiness. Obama seemed to understand one of the core values, maybe
the
core value, of capitalism: It's best to put people to work—the country as a whole will prosper and grow when as many of its citizens as possible are working, earning, and creating wealth.

At least that's what McKenna said, and what Gallogly came to believe, after dozens of private meetings with Obama. The man who found common ground with revolutionaries and socialists convinced them both he was at heart a capitalist.

With that Mark Gallogly soon became a force, albeit a largely invisible one, behind Wall Street's effort to elect Barack Obama. How truly close were the men? That's difficult to determine. Gallogly meets frequently with Obama and the two discuss public policy, but like any good Wall Street trader, he keeps most of the details of his meetings private. But despite the secrecy surrounding them, there's no doubt those meetings occur. Gallogly serves as a member of the President's Economic Recovery Advisory Board and, according to the
Washington Post
, has attended at least five meetings with the president; of course, it's impossible to tell if other meetings have occurred and been left unreported. It's a telling sign, by the way, that the Economic Recovery Advisory Board, designed, according to its Web site, “to [reflect] a diverse set of perspectives from across the country and various sectors of the economy,” is dominated by former or active members of the Wall Street establishment and/or members of the boards of directors of prominent Wall Street firms. What's more difficult for Gallogly to keep private is how much money he raised for Obama while Obama was running for office. By the time the 2008 presidential election was over, Gallogly would have raised somewhere between $200,000 and $500,000 for Obama, according to election records.

These are big numbers that Gallogly won't refute. He also won't refute his enormous wealth, amassed during his long years on Wall Street. So why would someone like Gallogly, who had become rich thanks to the (alleged) free market, be a Democrat, and support high taxes and increased governmental meddling in business? If you ask him, he'd give you the same answer that his colleagues and fellow Democrats Jamie Dimon and Larry Fink might give you. “I want to give something back,” he'd say, or, “Money isn't everything.”

But like these so-called enlightened capitalists, Gallogly understands just how good Big Government policies have been for Wall Street, and for him personally. More than that he understands that Wall Street is hardly the bastion of the “free market” it's made out to be.

What Gallogly and every Wall Street CEO knows is that the housing bubble, which showered countless billions of dollars on Wall Street, was sparked primarily by the policies of Big Government—beginning in large part with President Clinton's Department of Housing and Urban Development, which was charged with increasing homeownership from its then-current level of around 60 percent of the population to 70 percent. It accomplished this largely by prodding the government mortgage companies, Fannie Mae and Freddie Mac, as well as private banks, to make risky “subprime” loans to those who would otherwise not be eligible for a mortgage. These loans, named for their relatively high risk of default because they were made to riskier borrowers, were packaged by Wall Street firms into mortgage bonds that became the biggest moneymaking business on the Street, a process known as “securitization.”