By Alec MacGillis
Washington Post Staff Writer
Thursday, February 5, 2009
President Obama, who swept to the White House on a message of hope and inspiration, is struggling to contend with a different emotion among Americans -- anger.
Livid about their own vanished jobs and decimated retirement accounts, people across the country are being subjected to story after story about the excesses of the wealthy: the $18 billion paid out in Wall Street bonuses last year, the $35,000 chest of drawers for the Merrill Lynch chief executive's office, the planned Wells Fargo retreat in Las Vegas. This week, they got a new target: an Obama Cabinet nominee who had earned millions and failed to pay all of his taxes.
"I think everybody needs to be held to task right now," said Keith Igoe, 46, a roofer in suburban Denver who was an Obama campaign volunteer. Referring to Thomas A. Daschle, who stepped aside Tuesday as Obama's nominee for health and human services secretary and White House health policy czar, Igoe said: "I don't know I'd hold him any less accountable than anybody else."
Obama has searched for the right tone for taking the transgressors to task while not crossing into glib point-scoring that could spook the business class. And his indignation has ratcheted upward in recent weeks. He made passing mention at his inauguration of "greed and irresponsibility," then declared last week that the Wall Street bonuses were "shameful."
Yesterday, he announced that companies getting future bailout funds would have to cap executive compensation at $500,000 and place limits on stock options. Decrying a "culture of narrow self-interest and short-term gain at the expense of everything else," Obama said that while "we believe success should be rewarded . . . what gets people upset, and rightfully so, are executives being rewarded for failure."
Some of the biggest decisions of Obama's administration -- on the next round of Wall Street bailouts, on financial regulation, on tax reform -- will be defined by how aggressively he decides to come down on the financial elite, many of whom supported his campaign.
But even as Obama seeks to direct the currents of public anger with his rhetoric and policy, he has found them threatening his administration. Daschle and Treasury Secretary Timothy F. Geithner are not billionaire Wall Street titans, but the questions surrounding their failure to pay taxes were more acute, given the uproar against a privileged upper echelon perceived as having profited this decade at the expense of others.
On one level, Daschle's troubles were the result of a typical Washington tale of the revolving door between elected office and the influence industry, which Obama has pledged to rein in. But the symbolism -- the car and driver provided by a financier friend, the millions in pay since leaving the Senate, the flight to the Bahamas on a student loan company's plane -- tapped into the broader ire unleashed by Wall Street's collapse.
In a string of interviews Tuesday, Obama said he only belatedly appreciated the disconnect between his rhetoric about a "new era of responsibility" and the fact that his nominees were adding to the resentment building in the country. "I take responsibility for this mistake," he told Fox News. "We can't send a message to the American people that we have two sets of rules: one for prominent people and one for ordinary people."
Obama himself set a life course that skirted easy money. After a year at a business job in Manhattan, he took up community organizing on Chicago's South Side. A few years later, instead of following his Harvard Law classmates to big firms, he returned to Chicago to prepare to enter public office.
But as a result of his Ivy League education and his time in New York and Chicago, he is on more than passing terms with the financial elite. The finance, real estate and insurance sector was Obama's second-largest source of campaign contributions after lawyers, giving him $37 million, according to the Center for Responsive Politics.
His supporters in the financial world included executives such as UBS Americas' Robert Wolf and Citigroup Vice Chairman Louis Sussman, as well as younger hedge fund managers who felt a kinship to the youthful and urbane Obama.
His administration is full of disciples of former Treasury secretary and Citigroup executive Robert E. Rubin, such as Michael Froman, a managing director of Citigroup and law school friend of Obama's who has been named to a joint position with the National Security Council and the National Economic Council.
Early in his campaign, Obama signaled that he was willing to call out Wall Street excess, declaring in a September 2007 speech at Nasdaq that "a mentality has crept into certain corners of Washington and the business world that says, 'What's good for me is good enough.' " On the stump, he called for raising taxes on the wealthy and fixing the private-equity loophole that allows money managers to pay a much lower tax rate than other workers do.
But he never came close to the high-pitched populism used by his rival John Edwards, the former senator from North Carolina, or, later in the campaign, by Hillary Rodham Clinton. Even after the markets collapsed in September, Obama's response tended to be more sober and morally disapproving than laden with full-throated righteousness.
The starkest contrast may be with President Franklin D. Roosevelt, who at his 1933 inauguration accused the financial elite of "stubbornness," "incompetence" and "false leadership" that had been "rejected by the hearts and minds of men."
"The money-changers have fled their high seats in the temple of our civilization," he declared.
In 1936, Roosevelt said the "economic royalists" are "unanimous in their hatred of me, and I welcome their hatred."
Obama's inaugural was mild by comparison, framing the recession as a "collective failure to make hard choices."
And the day before his "shameful" comments, Obama met with 13 chief executives and offered no scolding. "We really didn't get off into any side things about car company guys taking jets or stuff like that," said Michael R. Splinter, chief executive of Applied Materials in Silicon Valley. "Because he knows that, you know, we're all working hard to improve our companies, and if we improve our companies, it will be a big part of the economy improving. A lot of the GDP was represented in the room today."
In Manhattan, opinions are divided about Obama's gradual shift to tougher rhetoric. Manish Vora, 29, who left his lucrative Wall Street job last year to launch a networking service for artists, said Obama's language resonates with younger bankers who have developed misgivings about their business, with its 80-hour workweeks and eye-popping bonuses.
"There's always been this kind of dissatisfaction with the job, even though people were getting paid a lot -- this sense from young people that it was kind of absurd," Vora said. "Most people are thinking that the rage, the anger against the executives is pretty justified."
But lawyer Robert Schwed, a partner in the corporate practice at WilmerHale, is more skeptical. Schwed attended Obama's speech at Nasdaq and remembers being struck by its moralistic edge. While Obama's warnings were prescient, Schwed said, there is some hypocrisy in the "high dudgeon these political leaders are in."
"Obviously, folks on Wall Street tend to have a tin ear from time to time, but I don't think [the rhetoric] appreciates what the deal is on Wall Street -- people make a minimal salary, and the bonus is what it is," he said. "Heaven forbid someone earns $400,000 from a company getting TARP money. Well, maybe leaders in Washington should be paying their taxes?"