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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.

By Ezra Klein  |  December 14, 2009; 11:10 AM ET
 
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Comments

I basically agree and think the problem is that it is really difficult to believe just how dysfunctional our legislative branch has become. On CNBC this am Tom Friedman was talking about global warming with Marc Haynes and Erin Burnett, not exactly a clutch of flaming liberals, and they agreed that the US Congress was basically playing "dumb as we want to be" while the country faces very, very, severe problems.

I don't agree with everything Obama is doing by a long shot. But at least he and his people are adults trying to solve problems, while Congress is a collection of spoiled, ignorant, corrupt children with a few adults who understand the problems but are exasperated by the rest of them. How do you govern with a Joe Lieberman? A whole bunch of Melissa Beans? And then there is the other party: Grassley, Inhofe and those dumb-as-a-sack-of-hammers GOPers like Mike Pence and Trent Franks and even Boehner and Cantor.

It is hard to see how the US isn't more or less doomed to sink into a mediocrity approaching that of its leaders.

Posted by: Mimikatz | December 14, 2009 11:30 AM | Report abuse

you best be careful, Ezra, you'll be shredded by raving loons on the left calling you a DLC traitor next. Don't you know that it's all Obama's fault?

Posted by: homeruk | December 14, 2009 11:36 AM | Report abuse

Here is my problem with your analysis: the current political situation is about as favorable to liberal legislation as we are ever going to get. When was the last time we had such large majorities and a president elected with a popular majority opposed by a discredited opposition? 1964, right? The reason I and others like me are so frustrated is that the Democratic leadership have been given a once-in-a-generation opportunity and they are making a dog's dinner of it. Obama is the leader of the party, and hence he gets the blame. Perhaps it's because he didn't take the institutional constraints seriously enough. Perhaps there's nothing else that could have been done. But if that's so, then liberal legislative accomplishments are simply impossible. Blaming Obama and Reid is actually the optimistic interpretation of events, because the alternative is utter despair.

Posted by: valeskoi | December 14, 2009 11:37 AM | Report abuse

Tabbi does focus interest on the financial bailout and regulations that are flying under the radar. His problem is that he focuses on the personalities and not substantive commentary on the policies and how likely they are to pass congress. My biggest problem with the Obama administration is that they never laid out the case for a real progressive solution and said "This is what will really work. If congress doesn't like it here is plan B, a compromise that won't work as well, but I can live with it." Instead he starts with the compromise position and it gets watered down to nothing (see public option). Obama didn't do this with the stimulus. He proposed 900 billion when he should have proposed 1.5 trillion, the amount that would really stop job losses and jumpstart the economy, or passed separate tax cuts and been able to use all 900 billion for stimulus. Now we have a stimulus that is too small and it looks like it is what Obama wanted instead of what he had to settle with.

Posted by: srw3 | December 14, 2009 11:50 AM | Report abuse

Clearly, Obama did not realize that Congress was as inept as it is when he decided to make health care reform an early priority.

The 2010 election cycle will now be fought in the light that Congress and Obama have failed on health care reform, cap-trade, wall-street reform, Afghanistan (Karzai has said Obama's surge goals are impossible), Gitmo (still open), and Iraq (we're still there).

It's not enough that Obama understands our problems and what fixes are needed. The fact is, he can't get nothing done, and that's his fault, not Congress's.

Posted by: Lomillialor | December 14, 2009 11:52 AM | Report abuse

The problem with your analysis is that you completely ignore the leverage the executive branch had over financial reform in late 2008 and early 2009. If Obama and his advisors wanted real financial reform, they would have tied it to the bailouts/guarantees/loans. This was a calculated decision by Obama and his advisors; to assume otherwise means that they were complete fools, which is obviously not the case.

Obama gave away the milk for free (government assistance), so of course he could not sell the cow (financial reform). He knew it.

Posted by: catalystoffire | December 14, 2009 11:55 AM | Report abuse

catalystoffire - As I remember, Ezra did point out this issue some time back - the biggest 'missed' opportunity by Obama Administration when they did not bring legislation while bailing out banks.

No matter how much President barks and keep calling these as 'fat cats'; it really does not matter as long as he is not ready to act.

Today, if President and Congress put a bill to cap banker bonuses (single item only); it will get bipartisan support and a fantastic tool to effect a change as well as gain popular support. We do not know why President does not want to adopt such a simple, clean but effective line. Not everything needs to be complex. In any case, his job is to make 'change simple' so others can adopt it.

Further, Taibbi did point out the way Congress has watered down many terms of financial regulation bills. Congress is responsible for that and Admin. too since this Admin never talks about 'veto'.

Ultimately, Reid and company in Congress are one of the most incompetent bunch of Democrats and that reflects in the mess of every regulation this gang is sponsoring (HCR being the prime and next Financial Regulations too). However, as long as Admin does not want to put their stakes on the line, Taibbi has a point; this Admin is culpable too.

Posted by: umesh409 | December 14, 2009 12:18 PM | Report abuse

umesh409 - don't recall Ezra pointing that out in prior posts, but he certainly doesn't make the case for that now.

The point I think is that the Obama Administration made a calculated decision not to tie financial reform to government assistance. This lays at the feet of the Obama administration. The fact that Congress is not willing or unable to pass meaningful financial reform now is a separate issue. This does not let the Obama administration off the hook.

Posted by: catalystoffire | December 14, 2009 12:32 PM | Report abuse

catalystoffire - Your first sentence is a bit silly:

"The problem with your analysis is that you completely ignore the leverage the executive branch had over financial reform in late 2008 and early 2009."

Really? I guess I can't disagree, but Barack Obama wasn't President of the United States in 2008 or the first three weeks of 2009. You're right of course -- the Bush Administration should have used its leverage over financial institutions to exact specific guarantees concerning regulatory reform -- but your argument is mostly with the last guy.

Posted by: charlie14 | December 14, 2009 1:56 PM | Report abuse

Charlie14 - Thats a quite disingenuous.

I mentioned 2008 because Obama's advisors were involved in bailout pre-Obama, and their overall approach to the financial industry hasn't changed. TARP was passed under Bush, but Bush only presided over the use of the first half of the TARP money. Obama had a choice to more wisely use the remaining $350M.

That being said, TARP only represents a small portion of the total.

Also, if Obama pursued real financial reform on 1/20, there would have been significantly less resistance in Congress. The financial industry had both of its legs cut off at the time.

Posted by: catalystoffire | December 14, 2009 3:05 PM | Report abuse

catalystoffire - No, what's disingenuous is claiming that the Obama administration existed in 2008. You're the one who used the language, not me -- probably because "late 2008 and early 2009" sounded more damning than "February and March 2009." I correct your error and you call ME disingenuous? Neighbor, please.

You appear to be suggesting that, this error notwithstanding, Obama's advisors had some sort of influence in how the Bush administration carried out the bailout. Please provide evidence of this. As I recall, President-elect Obama was always careful to say that America has but one President at a time. But you may be privy to some evidence about the transition that has escaped my notice, so please educate me if you can.

Listen, I fault the President for many mistakes in judgment and execution during his first 11 months in office. From civil liberties to the conduct of the was in Afghanistan to detainee policy, the Obama administration has made a number of bad choices. But your criticism here is factually and demonstrably wrong. Just admit it and move on.

Posted by: charlie14 | December 14, 2009 3:23 PM | Report abuse

Ezra Klein: "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 ..."

Are they? See "door, revolving".

Rubin, to cite one of many examples, was at Goldman-Sachs, become Secretary of the Treasury, then made tens of millions more helping to drive Citi into insolvency. Summers has moved back and forth between academia and government, and picked up a few million on Wall St (for part time work). Emanuel has spent almost his whole career in government, but took a few years off to make millions in banking.

Do you think these career moves are just a series of coincidences?

Ezra Klein: "They may represent intellectual capture, but that's not the same thing as what Taibbi is implying."

What he's implying? How about what he explicitly stated: "The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers [but that] virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy"

There's no difference between what Taibbi said and your notion of "intellectual capture".

Ezra Klein: "Now the villain is Barney Frank, whose committee has watered down the reform bill."

Yes, which is Taibbi's point. To quote him: "with one or two exceptions, they [Obama's appointements] collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century".

Taibbi's obvious point isn't to vilify everyone who's ever met Robert Rubin, but that the Democratic Party as a whole has been subject to "intellectual capture". The inbreeding of Rubinites is one approach to that, but he never claims it's the whole story.

Funny, when Taibbi was ripping into Goldman Sachs he was everybody's darling. When he starts criticizing Obama and the Dems, not so much.

Posted by: alex50 | December 14, 2009 4:49 PM | Report abuse

Ezra,
You are a very young man with not much experience in the world. You are smart and gravitate towards some interesting information but your judgment about these matters starts to falter when you editorialize.

All the more reason that you fall prey to this difficulty that I have noted among a generation of young, ostensibly left of center, reporters in Washington:

http://www.openleft.com/diary/16486/taibbis-blasphemy-against-the-church-of-the-savvy

You and some of the people you reference and together hope to form a "climate of opinion" like Yglesias are all over-impressed with "savvy" and attempts to show the world and the inside the Beltway crowd that you are "savvy".

In this case you folks SERIOUSLY discount the power of simple and powerful narratives that are largely TRUE. The President has the most discretion and power in the land as a single individual...he is after all the leader of the executive branch. One of his powers which he has continually DISOWNED since entering office is the power to MOBILIZE the people in support of him and his policies. To mobilize people in favor of Democratic policies, Obama needed simple powerful narratives. Taibbi is pointing out how Obama went the opposite way of simple powerful mobilizing narratives from the start. It is ALARMING.

Because you very young reporters sited in Washington have no memory of mass movements that affected change, you make a great deal of savvy internal politics and maneuvering. You do not understand that Obama left much of his power and the power of the Democratic party on the table in the very first months that he was in office. It is also interesting to speculate as does Taibbi backed by some interesting research about what happened before the inauguration.

So Ezra, study how REAL change has occurred in the past, then maybe you can start editorializing as if you know something about it.

Posted by: michaelterra | December 14, 2009 5:41 PM | Report abuse

Put another way, the American people is WAY more important than either Rubin or the Congress and Obama and the Democrats led by Obama have in almost every major issue failed to use the American people and their anger.

Posted by: michaelterra | December 14, 2009 5:43 PM | Report abuse

extra applause line for michaelterra!!!!!

Posted by: goadri | December 14, 2009 7:16 PM | Report abuse

In fact, picking up on michaelterra's point, Ezra's sincerity in covering the democratic proposals for healthcare reform are often at odds with the realities of the actual legislation. For Ezra, the proposed HCR legislation is, ultimately, good enough and he will hail it as historical. However, it's not nearly as groundbreaking as legislation passed during eg administrations of FDR or LBJ. Obama had people power when he came into office that no other politician in congress had. He continues to not use that power and, as a result, legislation so far from his administration continues to be relatively conservative and certainly not indicative of the strength behind the powerful "yes we can" campaign.

While I'm kicking Ezra, I want to mention again the arrogance of writing a post last week attacking physicians which was entitled "first do no harm." Ezra, it's fine if you're a progressive liberal; I am, too. But, it makes no sense for someone with no medical background to say something like that. Stick to talking points about how much waste is in the system since you have no ability to speak knowledgeably about specific waste from different physician specialties.

Posted by: goadri | December 14, 2009 7:32 PM | Report abuse

I agree with your analysis and the dysfunction of Congress. However, I still think Obama has been too timid in his initial proposals. He seems to pre-compromise (stimulus, 900M Healthcare as two stark examples) and then it gets moved back from that. I think there could have been value in him staking out a more firm position. He seems to give up something for nothing in return. Would he get what he asked for - no for all the reasons you highlight, but could he get more than we get - maybe ...

Posted by: iag4 | December 15, 2009 12:50 AM | Report abuse

First - three cheers for michaelterra. Couldn't have said it better myself.

And ezra you state;
"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."

Why doesn;t that logic apply to all the other appointees cited in Taibbi's piece?

Posted by: The3rdMan | December 15, 2009 3:30 AM | Report abuse

...and why all the defensiveness about Obama in this article and this board. I voted for him and like him too. But Jesus, time to spend your well earned popularity on doing the right thing in a big way. you are the President after all.

Posted by: The3rdMan | December 15, 2009 3:34 AM | Report abuse

Ah yes, the realities of power in Washington and the need for "savvy". Everything is in the vote totals. Klein and Yglesias both give us this pitch. So ... let's step back and parse Obama's campaign rhetoric in that light. "We will restore civil liberties, roll back unchecked executive powers and government secrecy, establish proper financial reform -- [and here we add the unspoken clause] -- IF Joe Lieberman and Olympia Snowe get their votes right." Gee, it loses a little zing doesn't it?

Posted by: sadtosay | December 15, 2009 11:21 AM | Report abuse

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