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.