THE BLOG
11/23/2014 08:06 pm ET Updated Jan 23, 2015

Wall Street Leading Washington Yet Again: What Was Obama Thinking?

If you want to understand what makes Elizabeth Warren so special in American politics, consider her nervy leadership of the campaign to block President Obama's foolish nomination of one Antonio Weiss to be the top Treasury official in charge of the domestic financial system, including enforcement of the Dodd-Frank Act.

For most of his Wall Street career, Weiss has epitomized everything that reeks about financial abuses. As chief of international mergers and acquisitions for Lazard, Weiss orchestrated what are delicately known as "corporate inversions," in which a domestic corporation moves its nominal headquarters offshore, to avoid its U.S. taxes. It's hard to improve on Sen. Warren's description of this play, in her Huffington Post blog of last Wednesday:

Basically, a bunch of companies have decided that all the regular tax loopholes they get to exploit aren't enough, so they have begun taking advantage of an even bigger loophole that allows them to maintain their operations in America but claim foreign citizenship and cut their U.S. taxes even more. No one is fooled by the bland words "corporate inversion." These companies renounce their American citizenship and turn their backs on this country simply to boost their profits.

And that's only the beginning. Many of the other deals orchestrated by Weiss resulted in operating companies being bought and sold by giant conglomerates, where the "savings" and "increased efficiency" came mainly from tax breaks and reduced worker compensation.
Weiss, who was paid $15.4 million by Lazard over the past 23 months, will receive another $21.2 million as an early retirement payment if he is confirmed for the Treasury job.

But that may not happen. With Warren's courageous public declaration, other leading senators have announced their opposition, including Dick Durban of Illinois, who is number two in the Senate leadership structure and very close to Obama. And more will follow.

On the Republican side, Sen. Chuck Grassley of Iowa, a senior member of the Senate Finance Committee, which will vet Weiss, said last week, "This nomination shows the continued hypocrisy of the Obama administration in this area," referring to the Administration's declared opposition to tax-evading corporate inversions. Grassley added, "Ironically, this nominee might be especially well-equipped to advise the Obama administration on inversion policy."

So what's going on here?

In the past few weeks, Obama has demonstrated that he can challenge powerful interests when a little courage seems politically opportune. He has embraced net neutrality, over the opposition of the most powerful companies in the telecom and cable industries and that of his own Federal Commission Chairman, Tom Wheeler.

He had also issued used his executive powers to spare four to five million undocumented U.S. residents from deportation, a move that enraged Republicans, heartened Hispanics, and enabled the president to sound almost like the Obama of 2007 and 2008 who raised such hopes among progressives.

On these issues, you could say that Obama is looking to the next generation of voters, or looking to his legacy; or that these two moves were astute politics. Younger Americans overwhelmingly favor net neutrality, and his executive moves to suspend deportation handily split the Republicans.

However, when it comes to coddling Wall Street, President Obama manages to clumsily out-flank Republicans -- to the right. As Warren reminds us, for Obama this is business as usual (or if you like, it's business -- as usual.)

One top Treasury and financial official after another comes from Wall Street -- a record that would make even a Republican blush. As Warren wrote:

Starting with former Citigroup CEO Robert Rubin, three of the last four Treasury secretaries under Democratic presidents held high-paying jobs at Citigroup either before or after serving at Treasury -- and the fourth was offered, but declined, Citigroup's CEO position. Directors of the National Economic Council and Office of Management and Budget, the current Vice Chairman of the Federal Reserve and the U.S. trade representative, also pulled in millions from Citigroup.

Scores of lesser officials, from heads of regulatory officials to sub-cabinet officers at cabinet agencies, came from other top Wall Street banks and investment banks.

In contrast to its occasional populist moves like those on net neutrality and deportations, when it comes to letting Wall Street have its way with the rest of us the administration is basically on auto-pilot. The bankers rule. The idea of naming Weiss just bubbled up from the usual suspects, and there was no real counterweight inside the Obama White House.

If the last election teaches anything, it shows that Democrats need to demonstrate that they are on the side of regular working Americans. When Democrats are the party of Wall Street, it allows the Tea Parties to tap the resentment against Washington and Wall Street that ordinary working Americans rightly feel.

Imagine the confirmation hearing. On one side, the Finance Committee's progressive Democrats will be challenging Weiss and embarrassing Obama. On the other side, Republicans will have a rare chance to identify against Wall Street.

President Obama doesn't need this. He doesn't need to divide his party, and he doesn't need one more emblem of his coziness with the bankers.

Last year, when Obama sought to name his former top economic adviser, Larry Summers, to chair the Federal Reserve, he similarly divided Democrats. Obama let Summers twist slowly in the wind for several weeks as opposition built, embarrassing himself, his party, and Summers, before Summers finally withdrew.

This time, Obama would do well to abbreviate rather than prolong the agony and invite Weiss to withdraw sooner rather than later. The White House should pull the plug, and fast. Weiss can decide that he needs to spend more time with his family.

Elizabeth Warren's bold leadership opposing the Weiss nomination is one more reminder of the vivid contrast not just between Warren and Obama but between Warren and the front-runner for the Democratic presidential nomination, Hillary Clinton.

Clinton's set of advisers and policy views on finance are right out of the playbook of Obama, and that of her husband, Bill: Raise a ton of money from Wall Street and then appoint top regulatory officials congenial to Wall Street.

If Democrats in 2016 are to stand for something other than the Wall Street-Washington axis, they will need to do a lot better.

Robert Kuttner's latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. He is co-editor of The American Prospect, a professor at Brandeis University's Heller School, and a senior Fellow at Demos.

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