Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies (31 page)

“We need a President who will look out for the interests of hardworking families, not just their big campaign donors and corporate allies,” candidate Barack Obama insisted in the halcyon days of his campaign. Still waiting. He promised Hope, but his Wall Street friends and backers got the Change—billions and billions of dollars worth of change.

THE SUBPRIME GANG

Former Fannie Mae corruptocrats Jim Johnson and Franklin Raines may not have official positions with the administration, but other subprime crisis-connected beneficiaries do.

Louis Caldera, director of the White House Military Office, earned a hefty six-figure sum for serving on various corporate boards, including $227,155 in board fees and deferred compensation from IndyMac Bancorp, the California-based savings and loan company that collapsed in 2008; Indy Mac was seized by the federal government and investigated by the FBI for subprime loan fraud.
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(Fun fact: Caldera was responsible for freaking out New York City residents in late April 2009 after approving a “mission” to allow low-flying planes that resembled Air Force One to zoom past the Statue of Liberty for an aerial photo op.
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City officials were not warned. Hundreds of New Yorkers, under the quite reasonable impression that it was a terrorist attack, panicked, and several were hurt in the rush to evacuate their buildings.)

Obama’s close hometown crony, campaign finance chief, and senior adviser Penny Pritzker was head of Superior Bank of Chicago, a subprime specialist that went bust in 2001, leaving more than 1,400 people stripped of their savings after bank officials falsified profit reports.

Pritzker’s lawyer at O’Melveny & Myers, Tom Donilon, is now deputy national security adviser. He earned just shy of $4 million representing her and other high-profile meltdown clients including, yep, Citigroup and Goldman Sachs.
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In April 2009, the White House tapped former Fannie Mae executive Donald Remy to be the Army’s top lawyer. He submitted a bio that stated that he had “worked as a senior vice president for a ‘major U.S. company’ for an unspecified number of years.” The employer was Fannie Mae. He worked there from 2000 to 2006, during the height of the government-sponsored mortgage giant’s accounting scandals. Remy wasn’t just any low man on the totem pole. Among his job titles at Fannie, according to
Congressional Quarterly
: Vice president and deputy general counsel for litigation; senior vice president and deputy general counsel; senior vice president and chief compliance officer; and senior vice president, housing and community development. When questioned by Republicans in the Senate about these rather glaring omissions on his bio, Remy protested: “My time at Fannie Mae was a time period where I am personally proud of all the work that I did.” Omissions speak louder than words.
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Austin Goolsbee, named head of Obama’s Economic Advisory Board, was a champion of extending credit to the uncreditworthy. In a 2007 op-ed for the
New York Times
, he derided those who called subprime mortgages “irresponsible.” He preferred to describe them as “innovations in the mortgage market” to expand the pool of homebuyers.
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Now this wrong-headed academic who espoused government policies that fed the housing feeding frenzy is in charge of fixing the loose-credit mess he advocated.

Goolsbee, by the way, is the fifteenth wealthiest member of the Obama administration, with assets valued at between $1,146,000 to $2,715,000. He also pulled in a University of Chicago salary of $465,000 and additional wages and honoraria worth $93,000, according to the
Washingtonian
. If you’ve got the right connections, being wrong pays.

RAHM - BO THE RICH

White House Chief of Staff Rahm Emanuel’s most famous dictum is this: “Rule one: Never allow a crisis to go to waste.... They are opportunities to do big things.”
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Emanuel certainly didn’t let the housing crisis go to waste. During the Clinton years, he was appointed to the Freddie Mac board of directors at a time when its oversight manager called the quasi-governmental agency “so pliant” that it enabled rampant book-cooking. Freddie Mac’s stock skyrocketed; its CEOs helped themselves to massive bonuses. Emanuel’s hometown paper, the
Chicago Tribune
, exposed how Emanuel’s “profitable stint” during this corruption-plagued period entailed almost no work:

The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board’s working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.

On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.

The accounting scandal wasn’t the only one that brewed during Emanuel’s tenure.

During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.

The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by Armando Falcon Jr., head of a federal oversight agency for Freddie Mac. The scandal forced Freddie Mac to restate $5 billion in earnings and pay $585 million in fines and legal settlements.
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Freddie lost tens of billions of dollars and cost billions more after both major parties in Washington engineered a gargantuan Fannie /Freddie bailout. The former ballet dancer-turned-Chicago pol, meanwhile, pirouetted off the Freddie stage—and then cashed-in again. The
Tribune
reported that he sold more of his Freddie Mac stock for an easy $100,001 to $250,000.
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Displaying their continued disregard for their own transparency pledges, White House officials refused to fulfill the newspaper’s request for public documents related to Emanuel’s tenure as a Freddie Mac director.

The revolving money machine brought Emanuel a combined $51,000-plus in campaign contributions from Fannie Mae and Freddie Mac when he ran for the House.
Chicago Sun-Times
columnist Lynn Sweet pointed out that as a member of the same House subcommittee that has oversight of Fannie/Freddie, Emanuel (with outstanding options for 2,500 shares of Freddie) had a major conflict of interest. When Emanuel responded that he put the shares in a trust and would recuse himself from voting on any issues related to Freddie Mac, Sweet shot back: “Emanuel’s trust is supposed to be blind, not stupid.”
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Emanuel’s savvy ability to flit in and out of the government-corporate revolving door paid huge dividends.
Washingtonian
magazine lists him as the fifth wealthiest member of the Obama administration, with assets between $5,023,000 and $13,170,000 in 2007.

“According to congressional disclosures, Emanuel made $16.2 million in his 21/2 years as an investment banker at Wasserstein Perella, in between advising Bill Clinton and taking Rod Blagojevich’s vacant seat in the 5th District of Illinois—or roughly $740 an hour 24 hours a day, 365 days a year.”
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While Barack and Michelle Obama assailed greedy bankers and hedge fund managers and advised hopeful young followers to stay away from Wall Street, Emanuel happily absorbed hedge fund cash.
OpenSecrets.org
reported that Emanuel “was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry” with $1.5 million filling his campaign coffers.
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They only call them “ill-gotten gains” when the cash is going in somebody else’s pocket.

Emanuel cut his teeth in the mega-fund-raising business under the Daley machine in Chicago and then under the Clinton machine in Washington. Goldman Sachs kept Emanuel on a $3,000 monthly retainer while he worked as Clinton’s chief fundraiser, leading
Washington Examiner
reporter Timothy P. Carney to speculate about whether “Goldman may have been funneling money to Clinton’s campaign through the back door... and the front door. By March of 1992, the heart of that dramatic primary season, Goldman partners had sent $54,000 to the Clinton campaign.” The financial titans threw in another $50,000 to become the Clinton administration’s top funder. Emanuel received nearly $80,000 in cash from Goldman Sachs during his four terms in Congress
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—investments which have reaped untold rewards as Emanuel assumed a leading role championing the $700 billion TARP banking bailout law.

It’s all about nurturing past, present, and future lucrative relationships for Rahm-bo. Perhaps that explains why the fifth wealthiest member of Team Obama chooses to live rent-free in the Washington, D.C., home of close friend Democrat Congresswoman Rosa DeLauro of Connecticut. DeLauro’s husband, Stan Greenberg, owns a polling firm employed by an Emanuel campaign committee and by the Democratic Congressional Campaign Committee, which Emanuel headed in 2005 and 2006, the
Chicago Tribune
reported .
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In the aftermath of the spring 2010 BP oil spill, as the White House sought to publicly demonize the oil conglomerate, the
Los Angeles Times
also noted that Greenberg’s consulting firm had served as a chief BP adviser.
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Ethics watchdogs raised disclosure and tax liability red flags about the arrangement. But nothing came of the complaints. The revolving door grants immunity to Wall Street’s best-connected.

LOUIS THE VACUUM CLEANER

Ambassadorships have long been used as patronage rewards for deep-pocketed donors. Clinton did it. Bush did it. And before his first 100 days had passed, Obama embraced business-as-usual, too. In May 2009, the
UK Telegraph
broke the news that Obama would appoint one of his biggest campaign fundraisers for the post of U.S. ambassador to Britain .
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Louis Susman has no diplomatic experience. But he has beaucoup bucks. The Chicago lawyer and banker (who worked for Solomon Brothers and retired as a Citigroup vice chairman in February 2009) gallivants with the Kennedys and the Kerrys in Hyannisport and Nantucket. He has raised massive amounts for Democrats since the Carter era. He bundled between $200,000 and $500,000 for Team Obama and is known as “The Vacuum Cleaner” and “The Big Bundler” for his fundraising prowess .
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(Research indicates that no reporter has ever asked how many homes Susman owns.)

The
Washington Post’
s Al Kamen tallied up more ambassadorial candidates from the money pit: Entertainment mogul Charlie Rivkin—who headed up Obama’s California fundraising operations, raking in $500,000 for the campaign and another $300,000 for the inaugural—was the leading candidate for a post in France. Boston money man Alan Solomont, who also bundled the same amounts for the campaign and inaugural, was the leading candidate for the ambassadorship in Spain.

About one-third of all ambassadorships are political appointees. Barack the Change Agent told the press he would not abandon historical precedent and that it would be “disingenuous” to commit to anything less.
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GARY THE GOLDMAN SACHS GUY

Yes. Another one. It’s like another eight years of “failed Bush economic policies” all rolled into the first 100 days! In March 2009, the Senate Agriculture Committee approved Goldman Sachs partner Gary Gensler as head of the Commodity Futures Trading Commission—despite heated grilling over his role, as Reuters described it, “as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. The financial instruments have been blamed for amplifying global financial turmoil.”
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Gensler said sorry—which worked for Tim Geithner, so why not?
Washingtonian
magazine named Gensler the wealthiest member of the Obama administration, worth an estimated $15,533,000 to $61,745,000.
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In announcing his nomination, Obama said Gensler “brings a wealth of expertise from both the public and private sectors to this position.”
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Well, he was right about the wealth.

JIMMY THE MUNI BOND MAN

Chicago investment banker James Reynolds raised more than $200,000 for the Obama campaign while chief executive of Loop Capital Markets. The municipal bond specialist was a longtime friend of Obama—feting the rising star in his Hyde Park home and convincing friends and associates to open up their wallets more than a decade ago. In 2003,
USA Today
reported, Reynolds was caught on FBI wiretaps arranging what prosecutors called a “sham” consulting contract with a gal pal of a Philadelphia mayoral adviser. After the conversations, Reynolds snagged $300,000 in no-bid city contracts for Loop Capital Markets.
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City officials went to jail over the scam. Reynolds skated. The Obama campaign’s only statement?

“Jim Reynolds has admitted that he made mistakes, but he has not been charged with any wrongdoing.”
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