A lot of progressive leaders and writers, yours truly included, have expressed concerns about Bill Daley's appointment as COS. One of the most depressing pieces was written by Simon Johnson, the former IMF chief economist who has written brilliantly and compellingly over the last couple of years about banking issues. His entire piece is well worth reading, especially in light of the mess these uber-powerful big banks have made of the housing, mortgage, and foreclosure situation. With judges increasingly incredulous and angry at the fraud and shoddy record keeping of the banks and their lawyers, and an ever wider spectrum of economists and bank analysts increasingly alarmed by the implications of the foreclosure crisis, and the size and economic dominance of the big banks, it is not surprising that folks like Simon are expressing these concerns.
Simon's basic argument, which as he writes is shared by many other major economists across a wide ideological spectrum, is that the big banks' size, fundamental business model, and political clout are both preventing a stronger economic recovery and virtually guaranteeing another major financial crisis in the near future. He points out that the 6 biggest banks now control assets worth 64% of GDP, up dramatically from the 55% they controlled before the crisis at the end of 2006, and up overwhelmingly from the 17% they controlled in 1995- only 16 years ago. Economic changes that massive are unprecedented and terrifying.
Simon's fear is that since Bill Daley comes from one of the big banks, any hope of taking the banks on in terms of these big issues is gone. As he writes:
Bill Daley now controls how information is presented to and decisions are made by the president. Daley's former boss, Jamie Dimon, is the most dangerous banker in America - presumably he now gets even greater access to the Oval Office. Daley is on the record as opposing strong consumer protection for financial products; Elizabeth Warren faces an even steeper uphill battle. Important regulatory appointments, such as the succession to Sheila Bair at the FDIC, are less likely to go to sensible people. And in all our interactions with other countries, for example around the G20 but also on a bilateral basis, we will pursue the resolutely pro-big finance views of the second Clinton administration.
Top executives at big U.S. banks want to be left alone during relatively good times - allowed to take whatever excessive risks they want, to juice their return on equity through massive leverage, to thus boost their pay and enhance their status around the world. But at a moment of severe financial crisis, they also want someone in the White House who will whisper at just the right moment: "Mr. President, if you let this bank fail, it will trigger a worldwide financial panic and another Great Depression. This will be worse than what happened after Lehman Brothers failed."
Let's be honest. With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout. The risk inherent to our financial system is now higher than it was in the early/mid-2000s. We are set up for another illusory financial expansion and another debilitating crisis.
I think Simon is right on the economics of the financial system, that the big banks are way too big and powerful, and have a stranglehold on both our economics and politics. But I am a little more optimistic on the political dynamics with Daley, simply because by the President appointing a JP Morgan Chase banker, I think the administration will have to bend over backwards to look like they are not doing sweetheart deals for the bankers. Anytime they do something to help the big banks, or even just to defer to them on something, activists, analysts like Simon, media people like Dylan Ratigan and Eliot Spitzer, and maybe even Republicans for political advantage will be jumping all over the administration. In an odd sort of way, Daley's appointment could be the best thing for the progressive organizers and media people on the banking issues, because it gives us a hook we can use in our organizing. Anytime Elizabeth Warren is being messed with, we can push back and ask why. Any attempts to help bail the banks out again, or help them out of the legal problems they have created for themselves on foreclosure, we can raise hell and ask what the hell is going on. Bill Daley is a smart enough guy to understand this dynamic, and will not want to be seen favoring the banks with the access he provides or appointments that are made.
Here's the other thing to remember, though: White House Chiefs of Staff, while of course very powerful players, are not the end-all and be-all in terms of administrative decisions. I worked with all 4 chiefs of staff in the Clinton White House, and they ranged from Erskine Bowles at the most conservative to John Podesta at the most liberal, but there were no appreciable differences as far as I could tell in the kinds of policy decisions being made by Clinton. Or look at Rahm in this White House: his advice got ignored a lot of the time, including on the biggest decision of Obama's presidency so far, whether to push forward on comprehensive reform after Scott Brown won. The fact is that Presidents make decisions for all kinds of reasons and are influenced by all kinds of factors. Chiefs of Staff organize decision flow and staffing operations, but don't tend to drive Presidents to do things they wouldn't ordinarily do. The COS is important, but not determinative. What is more important by far than the Chief of Staff's personal views on issues are the outside political dynamics that drive the debate. That is why progressive activists need to redouble our organizing efforts, and use the political dynamics that are in our favor.
One thing people should not forget is that the single most progressive populist Presidential campaign in the last 35 years, the Gore campaign in 2000, (remember "the people vs the powerful"?) was chaired by Bill Daley. That wasn't because of Bill, but because of the political dynamics of that race and the political instincts of the candidate.
Progressives cannot afford to take the attitude that with Daley as COS, all is lost and we should just give up on trying to influence policy and politics in regards to economics and other issue areas. We need to keep pushing the administration to listen to us, but also use every other leverage point we have to influence the political dynamics around us.
Now that Bill Daley is the new White House Chief of Staff, there are two directions relations between progressives and populists with the White House can go. And no, those directions are not worse and worser. But worse is definitely one of them.
Let me start by saying something that will surprise a lot of readers from this lefty populist: I actually like Bill Daley personally. I've known him for almost a quarter century, and he has always treated me with respect in spite of our many disagreements. He has a steady no-drama manner about him which makes it easy to understand why the President likes him. I think he is an effective manager. Now you would think a DC guy like myself who had warm feelings and a long and positive history with someone would be delighted that he just got the COS position, but it is pretty hard to feel that way. I lobbied against Bill being the guy to get this job, and I encouraged my friends to lobby against him as well, for two reasons.
The first is optics: 35% of voters in the 2010 election said that Wall St was primarily to blame for our economic class, more than any other entity or politician, but Democrats lost those economic populists 56-42. The big Wall St banks are the single most hated institution in America. People already tend to think of Obama as being on the side of Wall St- they think he is a big government "Wall St liberal" in EJ Dionne's classic phrase. Obama needs to show middle class voters he is on their side, and hiring a top exec at JP Morgan Chase as his COS is not the way to get that done. It is a political mistake with both swing working class voters and base voters, both of whom strongly dislike the big bankers on Wall St. This appointment was a classic "which side are you on" moment, but the side taken was not the right one.
The other reason I don't like the appointment is that I fear it is a sign that Obama is coming down firmly on the side of DC centrism, rather than where the country actually is. As I discussed right after the election, the exit polls and other post-election polls were completely clear that the swing voters who turned against the Democrats in 2010 were working and middle class populists: they don't like the big banks, they don't like TARP, they don't like the idea of "NAFTA-style trade deals", they hate outsourcing, they hate cuts in Social Security and Medicare. But the President seems to believe the views of these middle class voters, as well as his own base voters, don't matter much, and that the better political path is picking an Democratic establishment guy from Wall St who led the fight in the Clinton administration for NAFTA. It's what I would call trickle down politics: make the DC establishment happy and hope their pleasure trickles down to everyone else.
Enough said on that, though. Bill Daley is the new COS, and progressives aren't going to change that. The arguments of people like me did not carry the day. The question now is what happens next. If the White House soaks in the applause of the DC establishment and the business community, and decides they don't need to court those pesky working class voters or their base, I fear it will be a very long couple of years with a sound drubbing in November of next year. If they turn away from populism at every point in order to court big business and the elites, this Presidency is in deep trouble. But if the White House is smart, they will realize that by appointing Daley, now it is incumbent on them to actually be far more aggressive in reaching out to progressives and populists. They could appoint a strong progressive populist as a senior White House staffer; they could announce sooner rather than later they will adamantly oppose Social Security, Medicare, and Medicaid cuts; they could empower Elizabeth Warren and give her a bigger role, and they could far more aggressively push the big banks to write down mortgages, since with Daley as COS the presumption will be that the White House has become all pro-Wall St, all of the time; they could send a clear signal that they aren't going to bow to hostage taking on the debt ceiling issue. If they did these kinds of things, progressives and those swing vote populists would not fear having Bill Daley as COS.
Having appointed a COS like Bill Daley, the President could take this opportunity to say to the progressives who aren't very happy today that he understands their disappointment, but still shares their values, and then go out and prove it. Or he can send a signal that he just doesn't care what they think. And Bill Daley himself could do Obama a great deal of good by sitting down with some leading progressive populists in the party and seeing if we can get to common ground. We'll see what path they take.
STATE BLOGS
Powered by: SoapBlox