The most critical battle in this election year is the battle over Wall Street. Candidates all over the place, from the high profile candidates like Elizabeth Warren to a slew of others all over the country, are battling over who is on Wall Street’s side, who wants to keep bailing them out, and who is pushing them to go to jail. But nowhere is this battle being played out more prominently than in the race for the White House.
The Obama campaign is doing a major push in the coming weeks on Mitt Romney’s sordid history at the helm of Bain Capital. His fellow Republicans called it vulture capitalism, and they were right. Mitt bought companies (many of them doing just fine at the time he bought them), loaded them up with massive amounts of debt that Bain could write off on their taxes, in many cases destroyed and outsourced jobs and cut pay and benefits, and then frequently carved them up and sold off the pieces to maximize short-term profits. A few of these companies ended up surviving this brutal process and becoming more profitable, and we will hear a lot from Mitt about those examples. But way too many times, Mitt and Bain left these companies, and especially their workers, far worse for the wear, leaving behind a lot of shattered lives in the process, while Mitt and his fun-loving pals stuffed money in their pockets and walked away. High School wasn’t the only place Mitt brutalized those weaker than him, and he enjoyed doing it.
Bain Capital was Wall Street at its worst. But the cutthroat, anything-goes-in-the-pursuit-of-one-more-dollar culture at Bain has infected our entire banking system. The Obama campaign is right to attack on Bain and on the culture of Wall Street; it is in my view their single most powerful attack line. However, that attack will be undercut unless they buttress their own credibility on taking on Wall Street. Republicans aren’t going to hesitate coming after Obama hard on his ties to Wall Street (ironically with a lot of Wall Street money) in order to weaken the campaign’s credibility when they attack Bain, and we are seeing signs of that right now.
Look at how the issue has played out in recent days. Over the course of the last week, we have seen Jamie Dimon twisting himself into a pretzel trying to explain why his bank’s dangerous and irresponsible trades don’t merit any regulation, stories on how the Obama campaign is being hurt by not being tougher on Wall Street, like this one from Politico, a major new ad campaign by a Republican group attacking Obama for his ties to Wall Street, and new polling paid for by an anti-Wall Street coalition showing Obama’s numbers on housing/banking issues in swing states being pretty bad. These issues are clearly going to be huge in this campaign, and the Republicans will do everything in their power to exploit any Obama weakness in this area.
The Obama team, in the White House and in the campaign, in order to win on the Bain attack, needs to face—and turn around —the perception that the administration has been weak on Wall Street. They need to be willing to shed past caution and take Wall Street titans head on.
One of the toughest problems they have to work through is that the most visible vehicle for action on holding Wall Street accountable is the financial fraud task force announced with great fanfare at the State of the Union. This task force raised hopes that an aggressive investigation was forthcoming, that perhaps some of the big bankers who intentionally pumped up the housing market and then dumped the securities, would be brought to justice. But the best case scenario (and that is only if things really start moving) is that indictments won’t start rolling out until September, and that is a very long time to wait given the narrative being written as we speak on the Wall Street issue. And even in terms of that best case scenario, unfortunately questions continue to be raised by sources I am talking to about whether the DOJ is slow-walking this investigation, whether enough resources are being given to the task force, and whether key staff at the White House are paying enough attention. Those questions ultimately won’t be answered until the task force starts to produce something tangible, and if we have to wait until the fall, these questions are going to keep building. The administration should act right now to give the DOJ much more in the way of staff resources to the task force, and the President and White House senior staff need to send signals that they care about what is going on and that this is a high priority for them. If, for example, the DOJ is slow-walking, the White House needs to lean hard on the DOJ to make sure they aren’t. It seems like politics 101 to me to make sure the task force has the person-power to be successful in its work, but they are failing the test.
Given that (even with extra resources, by the way) the task force isn’t going to be moving fast enough for any of us who care about the political calendar, the entire Obama administration needs to show every day that they are willing to take on the big banks on behalf of homeowners, students, credit card consumers, and everyone else who is getting taken advantage of every day by bankers. Their reaction to the JP Morgan news, for example, has been far too low key. They should be banging away on Dimon and the other speculative bankers every single day, using this news to drive and build a narrative about reckless bankers rather than being restrained in their messaging about it. When a retiring bank CEO mentions in passing that the repeal of Glass-Steagall had something to do with the banking collapse, they should have used that as part of their narrative, too. Same when a trader at Goldman Sachs quits because the ethics at the firm have gone so far south. In every case, these were tailor-made opportunities for the White House and campaign to jump in with both feet and build that narrative about how this is why we need a President willing to take on bankers rather one who was the worst kind of one at Bain Capital.
Speaking of message restraint, though, there is some major restraint they do need to employ, and that is on their lame duck Treasury Secretary. In recent weeks, Geithner has stabbed the task force in the back by downplaying banker fraud, has rejected the idea that the repeal of Glass-Steagall was a problem in the 2008 collapse, and has similarly dismissed credit default swaps as a big problem. He seems more like a spokesperson for Wall Street than a member of the Obama administration. He needs to be shut up or eased out before he destroys any chance of the President getting re-elected.
Team Obama is on the knife’s edge right now. The economy is still too slow, with too many bridges out along the way, to build up much if any speed as we head down the home stretch to the election. Even if it does pick up a little bit, voters are still in a very bad mood because things have been so slow for so long. Focusing voters’ ire on the people who set off this crisis, the Wall Street pump-and-dump gang, is our best shot at winning this election, most especially with one of their ultimate homies, Mitt Romney, as the Republican candidate. But for that to work, the White House and campaign need to be focused like a laser beam at telling the story of how Wall Street greed brought us down, and how putting Wall Street’s guy in the White House would be the ultimate mistake—and they need to have their own credibility in terms of holding Wall Street accountable built up considerably. Getting resources to the fraud task force and making sure everyone at the DOJ knows it is a priority is a huge deal in that regard. Bottom line: Team Obama needs to be focused on the Wall Street credibility dynamic every single day.
Bain Capital shows that Mitt Romney’s high school career was no fluke: He has proven himself to be the ultimate pick-on-the-weak bully. His Wall Street values are definitional about the kind of man he has always been. Obama needs to show that his values are the opposite by being tough on Wall Street, while Romney is shown to be the personification of it.