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Why Leon Cooperman Is So Upset

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Andrew Ross Sorkin in Tuesday's New York Times chats up the suddenly irrepressible Leon Cooperman of Omega Advisors, who last week sent an email around blasting President Obama and "his minions" for the increasing volume of what he believes is "class warfare" rhetoric, and has been talking about it ever since. Sorkin's stance toward Cooperman is not exactly confrontational. Cooperman comes off as a teddy bear, telling Sorkin that "99.9%" of his email after the letter was positive (which, in this amped-up Internet world is a little hard to believe; Santa Claus doesn't get such uniformly positive mail unless he has a very private email address), to wrap himself in his rags-to-riches story and, most importantly, to suggest that Cooperman on a raft of issues appears mildly liberal: He criticizes Republicans in Congress, urges a 10 percent surcharge on incomes over $500,000, wants a new Works Progress Administration, a freezing of entitlements and free four-year education for veterans of Iraq and Afghanistan. He's not totally down on Occupy Wall Street either -- despite their rhetoric that makes Obama's seem offhand -- and he's signed Warren Buffett and Bill Gates' Giving Pledge. He's so reasonable.

Cooperman reels off so many positions that Sorkin feels compelled to note that the hedge funder is not running for office. Cooperman is, however, a supporter of Mitt Romney's candidacy, which Sorkin doesn't mention. Given all this, what is Cooperman's beef? He feels insulted that the president has suggested that the wealthy are somehow "bad," and that they pay no taxes, which is an exaggeration, but hell, I lack the sensitivity of the rich. (Obama is certainly no Theodore Roosevelt of "malefactors of great wealth" fame or Franklin Roosevelt, who referred to Wall Streeters as "moneychangers" and worse.) Cooperman elevates the rhetoric swirling around raising taxes for the wealthy to help reduce the deficit to a kind of Marxist Götterdämmerung in utero. In his letter, he writes: "Whether this [so-called class-warfare rhetoric] reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them. It is a gulf that is at once counterproductive and freighted with dangerous historical precedents. And it is an approach to governing that owes more to desperate demagoguery than your administration should feel comfortable with." I particularly like "the downtrodden and those best positioned to help them."

So Cooperman doesn't mind paying more taxes, and he believes the poor can best be helped by the rich. At least he thinks the rich should help the poor -- but does everyone? So why is he upset? Because the rhetoric separates him from "the downtrodden." It engages in a "villainizing of the American Dream." It's an affront to his own considerable good works and to his own meager beginnings. In short, he takes it personally. He's hurt.

What Cooperman doesn't do in either his letter or his Sorkin chat is deal with any of the substantive issues. He never mentions that great bugaboo of OWS: inequality. He does say to Sorkin that he's no big fan of Wall Street (despite 25 years at Goldman, Sachs & Co.) and he thinks "they screwed up. They did some things they shouldn't have." But he must fully realize that politically the differences between hedge funds and Wall Street are vanishingly small, although in finance, real. And despite that admission, Cooperman offers no particular remedies on how to fix it, and seems not to realize that to the great mass of Americans, deepening inequality and a steadily expanding financial sector (including hedge funds) seem to be connected. He does not deal with the critique that finance, including Wall Street, has been fueled by risky and opaque trading operations over the last few decades that for many insiders is mostly upside, with very little downside; and that too many businesses in finance seem to produce too little real economic gain and vast amounts of personal profits. In fact, this is where the moral critique lies buried: that too much highly speculative trading, whether on Wall Street or in hedge funds, is parasitic on the "real" economy, feeding off implicit government subsidies (because of too-big-to-fail) or simply representing a drain of socially productive resources to personal ends.

Now each of these is an argument, not a fact, and on too many occasions they are allowed to simply float out there as incontrovertible. (I've wrestled with some of them; they're not easily resolved.) But what strikes one most about Cooperman's letter is how it reflects the same approach the financial-lobbying and public-relations squads have taken since 2008. Engage privately, not publicly. Don't bother to offer a sophisticated defense (thus leaving the suspicion that there is no defense); instead, leave the field to those who believe finance is too big, too risky, too socially unproductive, and that its practitioners are dangerously compensated, and wait to be saved politically. In short, neither Cooperman, Goldman, any of the lobbyists, not to say their political patrons, have made positive arguments for why the nation needs a vast, complex, global financial industry with giant, highly capitalized banks and highly speculative hedge funds. (Neither has the administration, which has left them pretty much intact.) There are exceptions. J.P. Morgan Chase's Jamie Dimon has made sporadic attempts to defend the big banks, but they come out less as articulated positions and more as fits of anger. Private equity has also mounted a defense of its practices, particularly after it was attacked in Germany as locusts. But this defense (which ex-buyout maven Romney will presumably have to offer) is not consistently made at anywhere near the decibel level of the attacks. And most of the defenses begin and end where Cooperman lands: personal affront and a resort to Horatio Alger and the wonders of American entrepreneurialism.

Perhaps there is no defense. If that's the case, then Cooperman is arguing for the merits of a Hobbesian world where the fittest, many from below, struggle, survive and prosper in a kind of zero-sum war of all against all. It's natural; it's the way it is. And Obama is just insulting those who worked so hard to clamber up Mount 1%. In the end, it's hard to imagine that Cooperman's letter will convince anyone on either side to change positions. To do that, he would have to work a lot harder.

Robert Teitelman is editor in chief of The Deal magazine.