While it is widely recognized that the banking meltdown has left enormous economic pain and political upheaval in its wake, it is amazing that the folks who created this mess are rewarded with ever more important positions in our government. Yet the recent appointments of Gene Sperling and William Daley, key Wall Street-connected perps of this crisis, to the most critical positions in the Obama White House have not generated much controversy.
The justification for the media's indifference appears to be that the new appointees can hardly be worse than the hustlers they replaced. From its beginning, the Obama administration has been flooded with veterans of the Clinton White House who pushed through the radical deregulation that Wall Street had long sought and were rewarded with fat fees from the big banks when they left government.
Sperling was a key proponent, back in the Clinton Treasury Department, of the deregulation of the financial industry that precipitated this crisis, but his then-boss, Lawrence Summers, the man he will now replace as Barack Obama's top economic adviser, was certainly even more culpable. Both were well rewarded for their efforts. Summers received $8 million in Wall Street compensation back in 2008 while he was an adviser to candidate Obama, and during that same year Sperling got $2.2 million from his various consulting activities, mostly for banks that ran into trouble. His main employer was Goldman Sachs-which paid him $887,727 for advice on, of all things, charitable giving while Goldman's dubious business practices were leaving many around the world more desperately in need of charity.
So, too, the case of Daley filling the shoes of Rahm Emanuel as White House chief of staff. Both are Democratic Party operatives with long histories of parlaying political influence into private wealth. But Daley, a scion of the Chicago machine that was so instrumental in the rise of Obama, is an even more persistent combatant on the side of Wall Street against the pubic interest. After serving as commerce secretary in the Clinton administration, where he developed a particularly strong connection with Enron before that company's implosion, Daley went into the private sector, where he played a major role in making the large corporation's case against the Sarbanes-Oxley Act of 1982, designed to prevent another Enron debacle.
Later in the decade, as most Americans were reeling from the dire consequences of the unfettering of Wall Street greed that Daley had supported in the Clinton administration, he himself was profiting mightily, earning $5 million a year from JPMorgan Chase and half a million more as a director of defense contractor Boeing and health industry giant Abbott Laboratories. Back in the 1990s, Daley was a director of Fannie Mae as the housing agency began its steep slide into massive mortgage debt, but he showed no caution at JPMorgan when he was a top executive and the bank took on so much of that toxic debt.
Despite the banking meltdown, Daley has remained a fierce believer in keeping unregulated the financial markets that have caused so much turmoil. He was JPMorgan's point man in Washington in blunting the already limited financial regulation proposals of the Obama administration. As The New York Times reported: "Mr. Daley, or the corporations he has served in recent years, have worked aggressively behind the scenes to water down or defeat central elements of Mr. Obama's agenda, opposing the creation of the Consumer Protection Bureau and elements of the health care bill."
Clearly Obama has responded to the electoral reversal he suffered after his first two years in office just as President Bill Clinton did, by shunning the more populist wing of his party and embracing financial and corporate titans in an effort to prove he is pro-business. The tactic will not work nearly as well for him because, thanks to the financial mess that Clinton enabled and Obama inherited, it will be difficult to paper over the deep problems in this country with easy credit and centrist-sounding policy nostrums.
With 50 million Americans holding "underwater" mortgages, there can be no solution to the housing crisis unless the banks that got us into this wreck are forced to accept cramp-downs and other painful adjustments to help folks stay in their homes. If the economy remains in the sorry state that the Fed predicts for the next two years, Obama will not be re-elected, no matter how much money he is able to raise from his newest best friends on Wall Street.