Testicular Politics: Obama and the Big Dogs

The big dogs of banking and finance are playing a rough game of
bump-and-run with our president, trying to knock him off balance and
demonstrate their dominance. The best names in Wall Street--Goldman
Sachs, JPMorgan Chase--pumped out happy talk about quarterly earnings,
then announced that they intend to give back the government's money
(more than $50 billion, if counted honestly). The crisis, they announce,
is over for them. They want to be free of official meddling in their
private affairs. The arrogance is breathtaking, even for Wall Street
bankers.

Forget the financial numbers. What we are witnessing is a high-stakes
melodrama of glandular politics. This rival power center, though gravely
weakened, is contesting for control with the president. Think of dogs
circling one another to establish who will be leader of the pack. For
three decades, the Wall Street guys in good suits have ruled the
economy, demanding deference from the political system and from
corporate managements, too. Those who failed to follow them were
punished, either through stock prices or election financing. Despite
their catastrophic failure, the surviving bankers and financiers are
trying to hold on to their thrones.

For the last couple of weeks, they have poked the kid in the chest and
mocked his economic advisors with condescending gestures. Jamie Dimon of
the Morgan bank handed Treasury Secretary Geithner a
fake check for $25 billion. They threw complicating wrenches into
the government's financial rescue plan. Their essential message, crudely
colloquial, was intended for Barack Obama : "You don't have the balls to
take charge of us."

The question is: Are they right? Obama seems cowed by their bluster. He
certainly looks reluctant to take them on in a public way or refute
their version of reality. This president wants to govern through
public-spirited cooperation. The financial titans play hardball in
return. I say "seems" because we do not yet know about Obama and how he
will resolve this mess. The administration has been stalling action on
the troubled banks, as if it believes in its own wishful forecasts about
an early recovery for the economy. The bankers trumped him by
announcing, hey, things are already better for us. So back off.

The bankers think they have the president cornered. His rescue plan
cannot possibly succeed without much more money--hundreds of billions
more--that Congress will be extremely reluctant to provide (Obama hasn't
yet had the nerve to ask for it). The bankers' offer to return their
welfare checks is a cute gesture, but a bluff. They know Obama's
government is committed to save them, whatever it costs. As usual, the
big dogs want to have it both ways--take the public's money but promise
nothing in return.

Roughly speaking, that has been Obama's posture, too. He acts as though
the old order must be restored with public money, but without forceful
government direction. He can call their bluff if he has the
courage--shut down a couple of big banks, take control of the
system--and the public would cheer. During the campaign, Obama
demonstrated he is a great teacher--his political vision changed the
country. But we do not yet know if he is a confident political leader
willing to use his power against formidable adversaries in order to get
his way. Every potential rival is now taking his measure. Weakness would
doom him.

The financial crisis poses the first great moral dilemma of the Obama
presidency. Sometime in the next few months, he will be compelled to
choose between his technocratic inclinations--rescuing certain financial
institutions deemed "too big to fail"--and the obvious moral wrongness
of his policy of rewarding the very players who caused our national
disaster. The broad public does not doubt that this is morally wrong. I
saw a Zogby opinion poll the other day that said only 6 percent of
the public supports the financial bailouts. Obama is on the wrong
side of that bipartisan consensus.

The moral dilemma in the financial crisis is oddly parallel to Obama's
reluctant approach on the torture issue. The president bravely made
public the
sickening documents from the Bush administration that reveal how CIA
and Justice Department officials rationalized their illegalities and
authorized crimes against humanity. Yet the president said it would be
wrong to prosecute (or even investigate) any of the CIA agents or
military officers who committed these crimes. Likewise, we are told it
would be wrong to punish the financial malefactors or look too closely
into how they engineered the gross fraud and false valuations that
destroyed trillions of dollars in American wealth. Let's not dwell on
the past, the president says, let's look forward.

But everything Obama does now--or fails to do--becomes an inescapable
precedent for the future, defining the true meaning of law and moral
principle. The president's rationale on government-led torture sounds
dangerously close to the line of defense invoked by Nazi war criminals
at Nuremberg. We were only following orders. CIA barbarians are invited
to hide behind that excuse.

So in a sense are the bankers from Wall Street. They were merely doing
what the financial markets wanted and what the government allowed.
Rescuing these players now, while declining to force fundamental
structural changes on the banking system, would essentially ratify the
bankers' arrogant beliefs. They are too important to fail. The
government will never let it happen. Despite their destructive behavior,
they will be allowed to remain in power and free to do it all again.

I do not doubt the president's good intentions, but if he is not
vigilant, the "Obama precedent" could prove to be an ugly legacy. His
name might someday be linked to wilful evasion of misdeeds and the
degradation of law and moral principle. When great crimes are committed
in the future by government or by powerful private interests, people in
authority might decide to let them go by, citing the national interest
and recalling how Barack Obama dealt with similar events.