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.
TAS:
Why?
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.
