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Emanuel pitches regulatory reform at private meeting with top N.Y. investors

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By Jason Horowitz and Michael D. Shear
Monday, April 19, 2010; 5:49 PM

As President Obama prepares to deliver a speech in New York later this week that will attempt to align his administration squarely on the side of American taxpayers furious with Wall Street, his chief of staff, Rahm Emanuel, met privately on Sunday night with some of the city's top investors.

At a private cocktail reception at the Park Avenue home of investors Jane Hartley and Ralph Schlosstein, Emanuel joked about how each of the 60 guests should take a work of art home before speaking seriously about the administration's commitment to regulation reform.

"He was very forthright and frank," said Sarah Kovner, a prominent Democratic donor who attended the meeting, but who would not discuss the details of Emanuel's remarks. "He was citing the need for strong regulation."

Emanuel's comments on regulatory reform were part of a broader discussion about the administration's priorities. Another attendee, who spoke anonymously to discuss remarks that were intended to be private, said the chief-of-staff emphasized that there was a "12-week legislative calendar" to get the administration's main goals accomplished. According to the attendee, Emanuel said the administration intended to confirm a Supreme Court nominee, appoint three members to the Federal Reserve, pass an energy bill and finish financial regulation legislation.

Financial reform is a delicate topic in New York these days, especially in a room with some of Wall Street's leading investors.

"Nobody is thrilled working in a city where you feel you are constantly under siege from the government," said one prominent Obama donor who works in the financial services industry. "So that's a problem."

In the audience on Sunday night were Roger Altman, Chairman and co-CEO of Evercore Partners; Orin Kramer, an investor at Boston Provident who came out early for Obama; Stan Shuman, Managing Director and Member of Executive Committee, Allen & Company, Inc; Robert Zimmerman a public relations executive and prominent Democratic donor; Mark Gallogly a co-founder of Centerbridge Partners; and Blair Effron, a co-founder of Centerview Partners.

But perhaps more than any other firm, the investment bank Goldman Sachs has come to symbolize the excesses and abuses of Wall Street. In 2006, Obama addressed the firms partners and in 2008 candidate Obama participated in a private round-table discussion with Goldman employees. The firm's executives and employees contributed $994,000 to his campaign. That support has almost entirely evaporated since the administration adopted a much more strident line against Wall Street banks whose actions helped precipitate the financial crisis. Obama's address at the Cooper Union in downtown Manhattan on Thursday comes in the immediate wake of a lawsuit filed against Goldman Sachs by the Securities and Exchange Commission, alleging that the firm defrauded clients by allowing a hedge fund to bet against its own investors.

That didn't prevent David Heller, a managing director at Goldman Sachs and a leading fundraiser for Obama during the 2008 presidential election, from attending Sunday's meeting, according to several guests. Heller did not return a call for comment.

White House aides point out that the SEC is an independent agency that chose to file the suit without White House approval or knowledge. But the timing is helpful, to say the least, as the president and his allies in Congress make a final push to bring regulatory reform to the Senate floor this week.

In his speech on Thursday, Obama will take aim at the "multi-trillion" derivatives industry, according to the White House aides.

"The goal here is for the president to remind the American people what's at stake," a senior White House official said, adding that Obama will stress the "trillions in household wealth that has been lost because of the crisis."

Multiple guests at the meeting said Emanuel's comments went well beyond regulatory reform.

One guest pressed Emanuel during a question and answer session about the administration's stance towards Israel, and asked whether its tough approach towards Prime Minister Benjamin Netanyahu was effective.

"People were probing on the Middle East," said Kovner, who said Emanuel expressed support for the two-state solution and the administration's efforts to move the process along.

Another attendee said that Emanuel added that for Israel, "governing means making choices. We have to be really united in dealing with Iran." The implication, according to several attendees, was that Israel needed to reassess it's priorities from a tight focus on settlements to shared concerns with the United States about security.

Asked about the Supreme Court candidates, Emanuel gave no indication of where the administration might be leaning, though he did note that "the Republicans seem to be most comfortable with Merrick Garland," according to several attendees. But, Emanuel added, "It wasn't the minority's choice, it was the president's."


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