The Big Fix
Despite the dire talk on the U.S. economy coming from President
Barack Obama and his economic advisers, many
inside what was then the economic transition team, including
Lawrence Summers, the head of the White House
National Economic Council, have been telling Obama that the
economy—and, more important, consumer sentiment—should begin to see
some improvement by early spring, with the U.S. emerging from the
recession by summer 2009. "We want full credit for the economic
recovery, that's the bottom line," says a former Obama campaign
staffer due to start work at Treasury after the inauguration.
"There's the political part of this, which is the talking down of
the economy and talking up the dire situation, and then there is
the basic economic part, which is that internally, we see the
fundamentals of the economy gaining traction in late spring, after
the first quarter."
The future Treasury official says there had been debate within
the economic transition team about just how aggressive Obama and
his economic surrogates should be in pushing the "greatest economic
crisis of our time," but the political team, led by presidential
adviser David Axelrod and the congressional
Democratic leaders, set the message.
"Axelrod is thinking about 2010 and the re-elect. He's not
thinking about the economy the way we are."
Another concern of the Obama economic team is that while core
U.S. economic sectors like manufacturing may see some uptick from
what is expected to be a trillions-dollar federal stimulus package,
the larger and broader service economy may not see the same growth
in new jobs.
"The service sector has been hit perhaps harder than even
manufacturing, and those jobs aren't going to be coming back
anytime soon," says another Obama economic adviser. "We are
expecting that many companies will become more efficient, and won't
require many of those old jobs to be filled. That's one part of the
equation a lot of us haven't factored in."
Another Anointed One
Denver public schools chief Michael Bennet, who
is scheduled to take Sen. Ken Salazar's seat once
Salazar is confirmed as interior secretary, is a good example, some
Democrats say, of what the party does far better than Republicans.
"This is a guy who has been groomed from his time at Yale for big
things, and the Democratic establishment has done everything it can
to help," says a veteran Democratic operative in
Washington.
Bennet was an acolyte to longtime Democratic standard-bearer
Lloyd Cutler, and served briefly as a partner at
Cutler's firm after spending time at the Department of Justice as
counsel to deputy attorney general Jamie Gorelick,
now a partner at Cutler's former law firm. Bennet rode those
Clinton and Democratic ties to the chief of staff job with Denver's
mayor, John Hickenlooper, which led to the school
superintendent's job.
"Bennet is a good example of what the Clinton Democrats do and
have done just about better than anybody," says the Democrat
operative. "We identify talent early on, and then help that talent
get to where we need them. And we already have talent in Denver
ready to fill the void that Bennet is creating."
Looking Good
If Ken Blackwell, former Ohio secretary of
state, wins the chairmanship of the Republican National Committee,
he owes a great deal not only to his conservative roots, but also
to the social conservative RNC party apparatus and conservative
party members like Michigan's Chuck Yob, who
refused to surrender the party to moderates like former governors
Mike Huckabee and Mitt Romney.
Blackwell's entry, which garnered less attention than other
high-profile chair candidates who have sputtered of late—moderate
and Huckabee stalking horse Chip Saltsman and
former Maryland lieutenant governor Michael
Steele—surprised some, but filled a needed gap left when
former Sen. Fred Thompson declined to enter the
race after his name was floated by some party leaders.
Blackwell was able to quietly build a team of solid
conservatives who weren't willing to surrender control of the party
to an individual with ties to a future presidential candidate, such
as Saltsman or Michigan state party chair Saul
Anuzis, who has some ties to Romney.
Further, Blackwell gained the endorsement of Texas party chair
Tina Benkiser, who herself had been mulling a run
for the chairmanship. Her support broke the social conservative
bottleneck that was created by the presence of Saltsman, and to a
lesser degree, South Carolina state party hair Katon
Dawson. At press time, it was believed that Blackwell had
more than half of the 85 votes needed to win the chairmanship
(there are 168 voting national committee members). Some press
reports had Blackwell with only 30 votes, but RNC insiders say that
had Chuck Yob remained in the race and not endorsed Blackwell, he
would have held about 30 votes himself. "Blackwell has more votes
than he's being given credit for," says one RNC insider. "The
Benkiser deal has given him more votes than folks want to talk
about because my guess is that about 40 to 50 votes on that
committee are socially conservative."
Rubin, It's You
The Obama transition team was aware of New Mexico governor
Bill Richardson's relationship with CDR Financial
Products, the firm currently under investigation, because
Richardson had introduced the firm's founder, David
Rubin, to Obama fundraisers during the Democratic
convention in Denver last August. Richardson withdrew his name from
nomination for commerce secretary due to a grand jury investigation
into possible financial dealings between his New Mexico
administration and Rubin's firm. But it isn't just Obama and
Richardson that Rubin has ties to.
According to federal law enforcement officials familiar with the
investigation, federal officials are also looking into CDR's
political and financial ties to Pennsylvania governor Ed
Rendell, as well as to Democratic state and local
officials in Illinois, California, Florida, and Pennsylvania.
Rendell placed Rubin on a political patronage commission in
Pennsylvania, and Rubin was also given a seat on a Los Angeles City
commission back in 2002, both seemingly as the result of monetary
contributions to political action committees. Rubin has also been a
financial supporter of Rev. Al Sharpton. CDR also
had close business ties to Freddie Mac and Fannie Mae, marketing
and selling financial instruments created through low-income
housing "lease to own" programs across the country. "If someone
wants to understand just how deep Democrats are into the housing
bubble and the economic crisis, they should look at some of the
financial wheeling and dealing around some of those 'lease to own'
programs," says a former Freddie Mac lobbyist based in Washington.
"It's a veritable 'who's who' of Democratic state and local
politics from New York to Los Angeles."
Rubin, founded the firm known for many years as Chambers,
Dunhill, Rubin & Co, though there is no Chambers or Dunhill
associated with the firm. It appears that after a number of
embarrassing IRS investigations into alleged back-door deals
related to municipal bond financing in Atlanta and other localities
in the late 1990s, the firm's name was changed to CDR
Financial.
According to a Bloomberg News report and New Mexico records,
between 2003 and 2004, CDR made $951,566 advising the New Mexico
Finance Authority on $420 million of interest rate swaps. By
comparison, when New York City offered $900 million in derivatives,
it paid its adviser about $400,000.
"Long before Bill Richardson was governor, New Mexico was known
to be one of the most corrupt states in the country," says a
current Federal Bureau of Investigations official who has overseen
criminal investigations related to drug trafficking and organized
crime in the state. "If there is anything to this investigation, it
appears that it's just politics as usual for New Mexico."
