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Wall Street's Obama Investment

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A remarkable passage of John Heilemann and Mark Halperin's Game Change has not drawn the attention it deserves. Near the end of the book, the authors discuss a series of conversations in September-October 2008 -- just after the demise of Lehman Brothers -- between Barack Obama and the financial counselors of the Bush administration: Bernanke, Paulson, and others. The talks were initiated by Obama. Once the contact was there, he did not let go.

Here is the relevant paragraph of Game Change (pp. 380-81):

Obama was talking regularly with Fed chair Ben Bernanke and daily, sometimes more often, with Paulson. The treasury secretary was astonished by the candidate's level of engagement. On one occasion, Obama kept his plane on the tarmac for a half hour after the final event of his day, with a long flight ahead of him, so he could finish a conversation with Paulson. On another, Obama called Paulson late at night at home and spent two hours discussing the intricate details of regulatory reform. As much as the substantiveness of the discussions struck Paulson, so did their sobriety and maturity. I'll be there publicly for you at any time, Obama told him. I'm going to be president, and I don't want to inherit a financial system that's collapsed.

Obama has been true to his word. He has been there for them publicly at any time. He has supported their story of the collapse (a story without villains, and almost without actors) and accepted their recommendations on the proper limits of the remedy.

The phone call with Paulson on the tarmac is only an incident, of course; but it leads directly to the climax of Game Change: the bipartisan White House summit called by John McCain -- an emergency meeting on the economy, at which McCain's dismal performance marked the end of his hopes for victory in November. Heilemann and Halperin strengthen the lights and shadows by remarking a contrast between McCain's apathetic demeanor and the perfect command exhibited on this occasion by Barack Obama. He had prepared in an obvious way, arranging with Democratic lawmakers to speak for the party -- something McCain neglected to do with Republicans. But we now know that Obama did more than perform well; he took over the meeting. It was he who eventually said (as if from the chair): "Can I hear from Senator McCain?"

Obama's self-possession and exquisite timing -- not consistent traits of his political character -- had a traceable source. He had been schooled for anything that might come at the White House by his conversations with Bernanke, Paulson and the rest. As for President Bush, his attitude toward McCain appears to have been a mixture of bafflement and irritation; it seems likely, on the evidence offered by Heilemann and Halperin, that he wanted Obama to be his successor. But that is another and perhaps a smaller story.

One explanation of the Obama-Paulson talks is suggested by Thomas Ferguson's "investment theory of party competition." Indeed, that theory unassisted will account for much of what we have seen in the new president's fiscal and economic policies. Big money tends to buy the winning candidate, and the buyers get what they paid for. The banks and the investment houses convincingly supported Obama over McCain, and in the process spent more money than has ever gone to a single candidate. It is only because the Republicans are covetous of taking Wall Street back from Obama that they have stayed clear of the usual target of populism, the conduct and mores of Wall Street itself.

There can be no doubt that Obama believed the story Paulson recounted to him. But he also wanted Paulson to know that he believed it: that was the meaning of the follow-up calls. How then could he have refused Paulson's probable idea -- seconded by Lawrence Summers -- of the only person qualified to succeed him as secretary of the treasury?

Once Obama had shown his nerve at that White House meeting and measured the upshot by the size of the victory in November, it was natural for him to feel gratitude toward those who had done so much and so recently to make it possible. And yet -- this is the insight afforded by Heilemann and Halperin -- long before the reasons for gratitude were apparent, the reforming candidate who spoke with such passion against inequality had bestowed on the great houses of Wall Street his implicit trust and reliance.

And how did they see him? Above all, as a less unstable character than McCain. That was the common view; and what student of human nature will deny its truth? Yet in the weeks before the election, Barack Obama took care to supply his powerful supporters with additional assurance.

The influence of money is seldom a matter of money alone. When Obama first spoke to Paulson in the depth of the crisis of 2008, something besides talk was passing between them. Such pacts, which begin in confidence, are sealed by affection. The new president in 2009, when he looked back on the averted catastrophe and asked for a second trillion to put in the pipeline, may have looked more coolly at the role the bankers played; he may even have thought as Housman did of an army of mercenaries:

They stood, and earth's foundations stay;

What God abandoned, these defended,
And saved the sum of things for pay.

But not all his thoughts are likely have been so unsentimental. The connection between a politician and the financial interests that secure him are deeper than mere utility or selfish purpose.

When Obama says of Lloyd Blankfein and Jamie Dimon, "I know both those guys; they are very savvy businessmen" -- with artless pride in the fact that he moves in their circles -- we are a long way from John Kennedy during the steel crisis of 1962, after U.S. Steel announced an across-the-board price increase: "My father always told me that all businessmen were sons-of-bitches, but I never believed it till now." No, Barack Obama would never say such a thing because he would never think such a thing. It is not that he is in their pocket. They are in his heart.