Bought and Paid For (8 page)

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.

B
arack 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.”

And as reported by
New York
magazine's John Heilemann, Obama rewarded these generous contributions to his campaign by letting some of these bigwigs, including Dimon and UBS's Robert Wolf, into his inner circle. It's worth noting that UBS is under investigation for tax fraud and is one of the biggest purveyors of subprime loans and debt.

The sheer scale of Wall Street's profits, beginning with the Bush bailouts and continuing with policies advocated by the Obama administration, is mind-boggling: Take just one firm alone, Goldman Sachs. Just over a year after the entire financial system nearly collapsed, Goldman reported profits in excess of
$13.4 billion
for 2009
.
Nor is Goldman alone in reaping the benefits of having put Obama into office. The other major firms reported gigantic profits as well. In the first quarter of 2010, Goldman, JPMorgan Chase, and Bank of America
all
reported that their trading activities didn't lose money on one single trading day—an extraordinary achievement made possible only by the generous support of the American government and taxpayers.

Once again, the irony of Wall Street's love affair with Obama is that the conventional wisdom (as put forth in the mainstream media) about the Street's relationship with the president is so different. If you read the
New York Times
, you would think that Obama was leading the anti-Wall Street charge that has now targeted Goldman Sachs, which is fighting securities fraud charges brought by the SEC (whose chairman, Mary Schapiro, was appointed by Obama). Or that Obama's landmark victory was a rejection both of the mindless greed of bankers that led to the market crash and of eight years of Republican rule—a rejection, that is, of everything from the war in Iraq to the business-friendly environment of the Bush administration, which in the media's portrayal allowed Wall Street to run wild, sowing the seeds of a banking system collapse that could be stopped only by the unprecedented expenditure of hundreds of billions of dollars in bailout money.

During the 2008 presidential campaign, as I pointed out, Wall Street, like the majority of voters, fell in love with Barack Obama and overwhelmingly supported him over John McCain, a politically moderate Republican (with a very immoderate temper) who vowed he would cut taxes rather than raise them, as Obama promised. But paying a few more bucks in taxes never really bothered the men who run the big Wall Street firms. What they look for in a president, or for that matter any elected official, is someone they can work with; someone with an appreciation of what they do and who can help them in times of need. The bankers at the big firms may grouse that Obama has used banker bashing as a political weapon as the 2010 midterm elections approach and Wall Street's unpopularity with the public grows, but according to a senior executive at Goldman Sachs (the target of much of the abuse) and others, he's doing it not out of conviction but out of convenience, because he needs to show a legislative victory in the financial reform bill, and attacking Wall Street is the best way to drum up popular support for the initiative, which he has now signed into law. As a senior executive at Goldman recently told me, “Obama couldn't give a shit about all this anti-Wall Street stuff. He needs to bash us to get his bullshit financial reform through Congress.” (The notion of financial reform being “bullshit” is something we'll discuss later in this book, but suffice to say, Wall Street is already finding ways to dance around the legislation.)

If you think the facts behind the financial collapse are complicated, the story of why the financial services firms went out of their way to support Obama is really quite simple. Simply put, in Obama they saw an ally, someone who would support them while in McCain they saw someone who at best was noncommittal to thier agenda. The former POW and famously cantankerous senator never had much of a relationship with Wall Street for two reasons: First, he was a senator from Arizona, not exactly a financial services mecca, and for the most part, he couldn't stand being in the same room with guys who compared trading bonds for a living with warfare. As a man who had survived the brutality of war in the most literal sense, he found their talk unbearable.