President Barack Obama and congressional Democrats
are promising a climactic clash with Wall Street, but there's a
complication in their battle plan: The Democratic Party is closer to
corporate America - and to Wall Street in particular - than many
Democrats would care to admit.
Former White House counsel Greg Craig has just signed on as an
institutional Sherpa for Goldman Sachs, the iconic financial firm
facing fraud charges from the Securities and Exchange Commission.
Former House Democratic leader Dick Gephardt lobbies for Goldman Sachs,
Visa and the coal industry. Former Senate Democratic leader Tom Daschle
- Obama's first choice to head Health and Human Services - is an
adviser for a lobbying firm that represents Charles Schwab, Comcast,
Lockheed Martin, Verizon and a host of other corporate interests.
Attorney General Eric Holder
once lobbied for Global Crossing - sometimes described as the
Democratic Enron - and White House chief of staff Rahm Emanuel made
eight figures in a little more than two years as the Chicago-based
managing director at Wasserstein Perella & Co. between jobs as a
senior aide in President Bill Clinton's White House and as the
congressman representing Illinois's 5th District.
And the Democrats rode to their majorities in the House and the Senate
on a wave of cash Emanuel and New York Sen. Chuck Schumer helped them
raise from Wall Street. Earlier this month, a hedge fund manager at the
center of the Goldman Sachs fraud case held a fundraiser for Schumer in
"It's pathetic," Sen. Bernie Sanders, a liberal Vermont independent who
caucuses with the Democrats, said of news that Goldman Sachs has hired
Craig. "But it's what goes on around here."
The Republican Party
is still emphatically aligned with business, but in most cases
unapologetically so. For Democrats, the dance is trickier: How do you
reap the financial rewards of corporate America without offending your
core political beliefs - or your party's committed base?
Democrats say their willingness to tackle Wall Street with a tough
regulatory reform bill is the best evidence that they aren't
compromised by their corporate connections. But the regulatory reform
push is also evidence that they know just how hard the political winds
have shifted against a pro-business wing of the party that gained
influence when Democrats were out of power.
The sensitivity is so great that, when a little-known aide to House Financial Services Committee Chairman Barney Frankjumped ship for K Street earlier this month, Frank took the unusual step of vilifying him in public.
"I wanted to make clear I share the unhappiness of people at this, and
my intention [is] to prohibit any contact between him and members of
the staff for as long as I have any control over the matter," Frank
said in a press release. "I am therefore instructing the staff of the
Financial Services Committee to have no contact whatsoever with [the
former aide] on any matters involving financial regulation."
Sensing partisan advantage, Obama - a onetime Wall Street favorite who
raised nearly $1 million from Goldman Sachs employees for his 2008
campaign - has been blasting away at Republicans, most notably Senate
Minority Leader Mitch McConnell (R-Ky.), who opposes the current Senate
version of an overhaul of financial services regulation.
"Now, the Senate Republican leader, he paid a visit to Wall Street a
week or two ago. He took along the chairman of their campaign
committee. He met with some of the movers and shakers up there," Obama
said at a Monday night fundraiser for Sen. Barbara Boxer (D-Calif.). "I
don't know exactly what was discussed. All I can tell you is when he
came back, he promptly announced he would oppose the financial
National Republican Senatorial Committee Chairman John Cornyn
said the president had "demeaned himself and his office" by issuing
"political attacks" against Cornyn and McConnell for "doing what Rahm
Cornyn was referring to a report in The Washington Post noting that, on
the same night Obama was blasting McConnell for visiting Wall Street,
Emanuel attended a private cocktail reception with Democratic donors
Emanuel, in the unusual role of good cop, appears to be working to
assuage the fears of investors with less strident language than that
used by his boss.
"This is important for America's leadership in the world. We lead in
the financial sector. It's one of the parts in the economy we lead. But
if people don't trust our market, we can't maintain that leadership.
That's why this regulatory reform is not against Wall Street; it's
fundamentally in the interest of the economy," he told television
interviewer Charlie Rose. "Wall Street, though, has advanced beyond the
regulatory supervision, and we need to catch up in a way that ensures
that we don't have the crisis we had in the past and we're prepared for
Schumer's taking heat back home for not protecting the lifeblood of his
state's economy, but standing up for Wall Street could cost him dearly
in a future bid to be the Senate majority leader.
Some Democrats acknowledge that the legislation - and the harsh anti-Wall Street rhetoric
- could cost them campaign contributions from the financial services
sector in what is already shaping up to be a tough election year. But
that's a price they say they are willing to pay.
"This is a time when politics has to take a back seat to what's good
for the American people," said Pennsylvania Gov. Edward Rendell, a
former chairman of the Democratic National Committee. "If that means we
can't raise money on Wall Street, so be it."
One congressional Democrat said the financial meltdown has forced the party to address regulation.
"It's not as though Democrats got elected and decided, ‘We're going to go after the financial services industry,'" he said.
Craig's hiring shows that even as the Democratic political leaders
abandon the Wall Street ship, the party still has people on board.
And though he's getting a cool reception from elected Democrats, Craig has defenders within the party, too.
"Lawyers have a particular degree of latitude in this regard because we
still believe that every client is entitled to a defense," said Jack
Quinn, chairman of Quinn Gillespie & Associates, who served as
counsel to Clinton from 1995 to 1997. "Greg is a superb lawyer, and
Goldman is fortunate to have him on its team."
The White House says its rules prevent undue influence from former
administration officials, even though former officials can work as
advisers rather than as lobbyists to circumvent them.
"The president thinks that he does have tough rules in place, and he's
going to continue to make sure that people abide by that rule," White
House spokesman Bill Burton told reporters Tuesday.
A senior Senate aide disagreed.
"Barack Obama has done his best to demonize lobbyists. [But] we can
pretty much predict that [National Economic Council Director] Larry
Summers will be making millions working for some hedge fund in two
years. And Rahm Emanuel made millions working for Wasserstein Perella.
But it's a distinction without a difference: All these folks are
cashing in on their contacts to make tons of money. ... We all become
more valuable after we serve in government," the aide said.
For liberals, many of whom remain skeptical of Democratic Party ties to
the corporate world, the jury won't be in on the regulatory overhaul
until the fine print is set.
Only then will they know "whether the Congress has the ability to
regulate Wall Street or Wall Street continues to regulate the
Congress," Sanders said.