Obama greets JPMorgan Chase CEO Jamie Dimond
Bestselling investigative reporter Charles Gasparino’s latest tome Bought and Paid For: The Unholy Alliance Between Barack Obama and Wall Street commences not with a scene from the much-ballyhooed first one hundred days of the new Administration, but at a hush-hush 2007 pow-wow at Johnny’s Half Shell in Washington, D.C. between then-Senator Barack Obama and executives from Wall Street’s top firms — Lehman Brothers, Merrill Lynch, BlackRock, Goldman Sachs, Bear Stearns — which went so swimmingly the only warm fuzzy it lacked was the ghost of Humphrey Bogart intoning, “Barry, I think this is the beginning of a beautiful friendship.”
From there the Fox Business Network senior correspondent and Daily Beast columnist lays out in gobstopping detail just how well both sides have since profited from this extended dalliance, combining fiery outsider indignation with hard-won insider knowledge, narrative prowess, and a true knack for the telling anecdote — disgraced Bear Stearns hedge fund manager Warren Spector spending his days knocking on Florida doors as a volunteer Obama campaign worker and nights bedded down at luxury hotels while his preferred candidate ceaselessly derides Republicans as the party of Wall Street is but one among many doozies.
Bought and Paid For is, in short, required reading for anyone interested in the obscured behind the scenes machinations of the economic maelstrom we currently find ourselves mired in. Gasparino was recently kind enough to speak with TAS about his book.
TAS: What compelled you to write Bought and Paid For?
Charles Gasparino: The notion of Big Government and Big Wall Street colluding to do bad things is something I’ve covered for a long time. I’ve always been interested in the conflicts between public policy and finance. What I’ve seen over the years is this seemingly bizarre anomaly of how Wall Street, which is allegedly the epicenter of capitalism, in reality thrived on something that is very anti-capitalist, which is Big Government. Crony capitalism. And these guys aren’t doing it just to make money on fees selling government bonds to finance the deficit or government programs. The people at the top have political beliefs that are strongly aligned with progressivism.
TAS: Reading your book I was surprised to learn how kindred a spirit the big players of Big Finance saw in Barack Obama, particularly at first. They weren’t supporting him simply as a pragmatic, strategic move. David Axelrod joked about Obama having a “man crush” on JP Morgan CEO Jamie Dimon and you write financial executives saw the future president as “a guy who could have easily worked at a big Wall Street law firm if he hadn’t gone into community organizing first.”
Gasparino: I think a lot of the country was projecting something onto Obama they wanted to see but maybe wasn’t there. Here was one of the most far left politicians I have ever seen — based on his record, based on his associations, everything. People forget Reverend Wright, aside from his racially charged language, taught liberation theology, which basically says the Bible is infused with Marxism. That’s his spiritual mentor. And all these Wall Street guys were lining up to support him.
Gasparino: Well, first, McCain couldn’t stand them. It was oil and water. He screamed at Hank Paulson any chance he got. He’d spent five years in a prisoner-of-war camp, crashed a couple planes — not exactly the type of guy who’s gonna kiss a banker’s ass. McCain was foreign to them and his campaign doubled down on that foreign-ness by picking Sarah Palin. When they looked at Obama they saw a guy who went to their schools, who shared their manners, who didn’t break their chops. Obama was just so personally charming that something like Reverend Wright or Bill Ayers didn’t have any effect. They believed at heart Obama was a moderate who understood them. And it panned out. If you look at one line of work that’s done very well under Obama it isn’t construction, it isn’t small business or entrepreneurship. It’s all the big banks that started making a ton of money the minute they got bailed out, and all those bailout mechanisms Bush put in place have been carried over and doubled down on under Obama.
TAS: Do you think the difference between the media caricature of Wall Street as a militant free-market bastion and its limousine liberal reality will ever be cleared up in the general public’s mind?
Gasparino: I think it already has been. That’s why the President started attacking Wall Street like a minute after Scott Brown won Teddy Kennedy’s seat. The public has definitely started to put it all together. I’m not a member of the Tea Party by any stretch of the imagination, but I will say one of the good things about that movement is that they understand this inside game, they don’t like it, and they want it to end. They understand how corrupting it is for the entire system when Big Business can exploit the growth of Big Government. They instinctively know there is huge hypocrisy in Obama calling these guys fat cats when Wall Street is just exploiting what he presented them to exploit. Now, Wall Street shouldn’t be commended for that, but let’s be honest about it: this was a partnership…. This country is in desperate, desperate straits because government has skewed the incentives. The free market, which has been demonized, wouldn’t have given these guys a bonus. It would have destroyed all of their businesses.
TAS: Could there be Big Government on the scale we’ve recently seen it without the complicity of Big Finance and Wall Street?
Gasparino: They feed off each other. If there were no bailout, I guess you could say there’d be no opportunity to make money off the bailout. But what we can say is you need someone to underwrite Obamacare. Wall Street is there to do that. BlackRock managed all the toxic assets of Bear Stearns. When they do cap-and-trade, they’ll be creating a new commodity to be traded on some exchange somewhere. The Fed, urged on by the White House, went in and bought $1.3 trillion mortgage backed securities, artificially propping up the market with taxpayer money. All the Wall Street firms that bought for pennies on the dollar are benefiting from the appreciation of a market that is only appreciating because of taxpayer money. Forget financial reform. The banks have made a killing since the bailout. And the average American? They’re stuck with the wonderful stimulus package that gave us 9.6 percent unemployment.
TAS: The last chapter of your book sums up this collusion between Big Finance and Big Government, sarcastically, as “Money Well Spent.” Does the failure of recent government intervention — diehard, never-could-be-convinced-otherwise defenders notwithstanding — signal that we’re on the verge of this sort of alliance no longer being money well spent?
Gasparino: Look, I think crony capitalism hurts the system. It basically allows a few privileged, wealthy, connected people to do well exploiting the spoils of government that the rest of us can’t. It’s getting worse, it ain’t getting better. The small business lobby is not as strong as the fat cat lobby in Washington. The bailouts of the last 30 years are how Wall Street got used to taking so much risk, and the latest bailouts? The government thought by creating a market of mortgage-backed securities somehow that whole shadow banking system that allowed the banks to make those loans in the first place would come back, but it never did because banks think logically about this: “Why should we be extending loans when we can just make money off this one program?”
Unintended consequences. That’s the problem when government gets involved in this stuff. When will banks start making loans again? Well, you need the mortgage market to deflate. It’ll only deflate when we have more pain. Now, there was no easy answer. But if you let natural forces take control in the financial crisis…firms go under, they stop lending, prices of securities drop dramatically, lots of losses. A tremendous amount of pain. And then the ones that survive pick up the pieces. But look what happens when you bail them out. They limp along for two years. Instead of the immediate pain you have a dead man walking. That’s what we have right now. The bailouts just postpone the inevitable.