The revival of the U.S. financial system after the crash of 2008 is arguably the Obama administration’s biggest domestic policy success. But Sen. Elizabeth Warren (D-Mass.), in her jihad against Wall Street, seems determined to devalue this accomplishment — and to make financial expertise a mark of shame for Democrats, rather than a source of pride.
Warren’s current target is Antonio Weiss, the president’s nominee for Treasury undersecretary for domestic finance. Weiss’s chief defect, in the eyes of Warren and other liberal critics, is that he worked as an investment banker at Lazard and, in that role, appears to have advised Burger King on how to reduce its U.S. tax liability.
“Enough is enough,” Warren wrote last month for the Huffington Post. “The over-representation of Wall Street banks in senior government positions sends a bad message.” She told a New York Times reporter that, while she had sometimes supported nominees who had worked on Wall Street, “the Antonio Weiss nomination is a mistake, and that’s why I’m fighting back.”
Never mind that Weiss is a liberal Democrat who advocated tax hikes for the rich and is publisher of the progressive literary journal the Paris Review. What offends Warren is the Lazard connection. “Time after time in government, the Wall Street view prevails,” she argued in a speech this month.
Warren’s enemies list includes Timothy Geithner and Lawrence Summers, the key architects of the administration’s Wall Street rescue. They had never worked as private bankers but were suspect because they managed the bailout plan known as the Troubled Asset Relief Program.
Warren criticized TARP in 2009 and 2010, arguing (incorrectly, as it turned out) that it would be a taxpayer giveaway to the banks. She hectored Geithner in 2010 to redo his “stress tests” of U.S. banks after a first round indicated that TARP had been effective. “How could you be confident of these financial institutions without rerunning the stress tests?” she asked. As it turned out, TARP made a $15 billion profit, Treasury announced last Friday.
Has Warren apologized for getting this wrong or conceded that the financial recovery program engineered by Geithner, Summers and then-Federal Reserve Chair Ben Bernanke was a success? Not to my knowledge. But in the process, she disowns a Democratic president’s historic achievement.
To be fair, President Obama sometimes seems embarrassed about taking ownership of his financial rescue effort — leaving Geithner and Summers in the crossfire of critics. This certainly seemed the case in the summer of 2013, when Obama floated Summers as a replacement for Bernanke at the Fed — and then let him twist in the wind while enemies took potshots. Summers (who privately had been promised the Fed job by Obama) finally withdrew his name from consideration.
In the Summers debacle, the fact that he was a former Treasury secretary, former president of Harvard and a distinguished economist proved less important than the fact that he had toxic political enemies. The outcome weirdly had the effect of distancing Obama from his own economic policies.
Making economic policy isn’t a popularity contest, especially when financial markets are in a panic. Helping Wall Street regain confidence and stability was the last thing an angry public wanted in 2009 after the markets crashed. But without such support, markets can buckle and liquidity can disappear, often for decades as has been the case in Japan. “Our job was to fix it, not to make people like us,” Geithner told Andrew Ross Sorkin of the New York Times for a May profile.
When historians look at the Obama presidency, they’re likely to credit the president especially for doing the politically unpopular things that were needed in 2009 to salvage the financial wreckage. The strength of the U.S. financial recovery since then has surprised analysts from Beijing to Brussels. But for Warren, it seems to be an embarrassment.
Warren and the neo-populists are right that the recovery hasn’t benefited Main Street as much as it has Wall Street and that the fruits of American prosperity are skewed toward the wealthy. Changing the structural problems that limit job growth may be the country’s biggest economic challenge, as Summers has argued persuasively. But fixing this problem will surely be harder if liberal Democrats such as Weiss, who understand the financial world enough to challenge it, are barred from government for the offense of working on Wall Street.