Is Robert Rubin more important than the U.S. Congress?
Matt Taibbi's latest piece in Rolling Stone is attracting a lot of attention (Digby, Drum, Yglesias, Fernholz, Salmon), which is testament to Taibbi's talent for breathing life and urgency into topics that too many consider dull. But in this case, Taibbi chose a swift-moving narrative at the expense of an accurate picture of how -- and more importantly, where -- Wall Street is capturing the political process.
Taibbi begins by selling Robert Rubin, who led both Citibank and Goldman Sachs, as the Johnny Appleseed of the Obama administration. Rubin worked with Michael Froman, who advised Obama during the transition, and mentored Larry Summers, Peter Orszag and Jason Furman, along with a handful of others. There's something to this, actually, though Taibbi takes quite a while to say exactly what it is, and then gets it wrong.
Before he gets there, though, he lays down a couple of misleading signposts. For one thing, he makes much of the fates suffered by Austan Goolsbee and Karen Kornbluh. Goolsbee and Kornbluh were campaign advisers whose administration gigs were considerably less influential than some had expected. Goolsbee is staffing Paul Volcker's Economic Recovery Advisory Board, which has proven a pretty sleepy outpost (though Goolsbee, in practice, has his hand in a lot more pots -- he was heavily involved in the auto bailout, for instance). And Kornbluh wound up the ambassador to the OECD in Paris.
Whether Goolsbee and Kornbluh are happy in their jobs, they're not the "populists" Taibbi sells them as. For instance: When Taibbi assails Furman, he does so because Furman is "a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports." That same sentence could've been written about Goolsbee, a fairly orthodox free trader who hails from the University of Chicago and ended up in hot water after telling the Canadians that Obama would never touch NAFTA, or at least something that was interpreted to that effect.
As for Kornbluh, I'm a great admirer of her work, but it's orthogonal to the financial regulation debate. Kornbluh focuses on domestic policy and is particularly interested in updating the safety net to better fit the modern family. The obvious spot for Kornbluh would have been the Domestic Policy Council, which is chaired by Melody Barnes and never mentioned by Taibbi, as it's not heavily involved in financial sector regulation. That said, if Kornbluh had gotten the gig, you can bet she'd be featured in this article: She formerly served as deputy chief of staff to Robert Rubin, a detail Taibbi doesn't mention when he's explaining her ouster as a triumph of Rubinism.
As the Kornbluh example suggests, there are a lot of ways to win a game of six degrees to Bob Rubin. Taibbi lists four: "Through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project." But rolling all those folks together doesn't make much sense. Wall Street titans are different from career bureaucrats, who are different from academic economists, who are different, sort of, from think tankers. Hank Paulson knew Bob Rubin at Goldman Sachs, and Karen Kornbluh worked for him at the Treasury Department, but Paulson does not equal Kornbluh, even in Taibbi's article.
Eliding those differences, however, helps Taibbi to the conclusion of his first piece: "The point," he says, "is that an economic team made up exclusively of callous millionaires ... has absolutely zero interest in reforming the gamed system that made them rich in the first place." It's an appealing moral, not least because a relatively simple problem promises a relatively simple fix: Stop stocking the government with Rubin's familiars. Even better, it's pretty easy to see how you get there: Make the offending appointees unpopular, and then wait for Rahm Emanuel to fire them.
Simple as it may be, it manages to be false both conceptually and specifically. The financial system made Michael Froman rich, and Rubin, too, but neither is working on financial regulation. You can argue that Larry Summers skimmed a few million off the top, but he's spent a lot of time in academia and government for someone so concerned with money. But Orszag? Furman? Geithner? Christina Romer? They may represent intellectual capture, but that's not the same thing as what Taibbi is implying.
Worse than being unfair, though, it actively misses the point. What unites not only Obama's economic team, but his whole White House, is not its emphasis on rich people. It's the emphasis on people accustomed to dealing with Congress. You've got a former Treasury secretary, CBO director, DCCC chairman, chief of staff to the Senate majority leader, chief of staff to the chairman of the Energy and Commerce Committee, chief of staff to the chairman of the Senate Finance Committee, and on it goes. It's rather difficult to say what these people do and don't believe, as their whole world is finding 218 in the House and 60 in the Senate, and every word, action and policy brief is squarely aimed at that goal.
That leaves two questions worth asking about them: First, are they more or less liberal than the 218th most liberal congressman and the 60th most liberal senator? Second, are they good at their jobs? That is to say, are they good at bringing 218 congressmen and 60 senators into line behind reasonably good policy?
This becomes obvious in the second section of Taibbi's piece, an overview of the ways in which financial regulation is being chopped up as it travels through the House and Senate. This marks the end of our time with Summers and Orszag and Furman and Froman. Now the villain is Barney Frank, whose committee has watered down the reform bill.
But Frank isn't an associate of Rubin, nor was he employed by a Wall Street bank. Most everyone I talk to seems to believe Frank wants a stronger bill but can't find the votes. You can blame that on the massive lobbying campaign launched by banks both big and small, and on the ceaseless obstruction of a Republican minority that wants to attract Wall Street's money while hanging the banks around Nancy Pelosi's neck. You could even blame Frank himself. But you can't blame Jason Furman.
On Friday, financial reform, or something called financial reform, passed the House without a single Republican attached. That is to say, regulating the banks attracted fewer Republicans than health-care reform or cap and trade. And it's not because Republicans were joining with Brad Sherman and Maria Cantwell. Indeed, the Kanjorski amendment, which Taibbi identifies as the sort of thing the White House "should be doing," passed on a party-line vote. A party-line vote of Democrats.
But Taibbi lets Republicans, and conservative Democrats, totally off the hook. He quotes Rep. Cliff Stearns, a Republican from Florida, saying, "you can't expect these people to do anything other than protect Wall Street." It's a good quote, and it fits well with Taibbi's story, but it's destructive to the readers' understanding of what's going on.
The issue here is not that Taibbi should be nicer to the Obama administration, which is how he's framing most of the criticism of his article. Quite the opposite, actually. Taibbi is being much too nice to the Obama administration. He's imbued them with a lot more power than they have.
If the result of the 2010 election is that Obama fires his economics team and moves his administration to the left, but the Republicans pick up 60 seats on the House and move the body to the right, then American public policy outcomes move to the right. Conversely, if Obama brings Bob Rubin back as his vice president, but Kanjorski picks up 65 allies in the next election, then outcomes move to the left.
"At a minimum," Taibbi concludes, "Obama should start on the road back to sanity by making a long-overdue move: firing Geithner." I'm actually among those who think Obama should probably fire Geithner, but I believe that because Geithner's presence is a liability for moving better bills through the Congress. The power resides in the legislative branch, not the executive branch. But so long as the media keeps telling the story of American policy outcomes primarily in terms of the opinions and skills of the executive branch, it's going to be very hard to make anything better.
December 14, 2009; 11:10 AM ET
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