What Obama Should Tell Wall Street
The president comes to New York for a fundraiser tonight, and Charlie Gasparino says it’s time for him to give the bonus billionaires tough love and end bailouts.
By most press accounts, President Obama’s friends on Wall Street— those brilliant minds who helped him get elected by funneling millions of dollars to his campaign while they were setting the stage for last year’s financial meltdown—are boycotting tonight’s fundraiser in Manhattan.
And who can blame them? It’s not that they don’t have the $30,000 to purchase a table given all the bonus money sloshing around Goldman Sachs and the other big banks this year. But why bother throwing away good money when your guy has already delivered as much as he can anyway?
Our financial titans don't need to give more money to Obama because they already have their man locked down.
After all, Wall Street is Wall Street again. The banks are making money; the bonuses are in the billions.
Amid all of this, why would anyone on Wall Street, except those few brave souls still on the Obama bandwagon, want to listen to what’s destined to be a boring speech about the need for responsibility and restraint in risk taking to prevent another meltdown? That was so yesterday; risk taking is allowing Wall Street to recover.
More than that, our financial titans don't need to give more money to Obama because they already have their man locked down, proof being that amid all the hoopla about those unseemly bonuses at Goldman Sachs and elsewhere, there was barely a peep from the White House about all those subsidies being in danger of disappearing anytime soon.
• Read an exclusive excerpt from Charlie Gasparino’s new bookIt’s a simple fact of life on Wall Street that perhaps Treasury Secretary Tim Geithner or his chief economic policy adviser Larry Summers, who know the Wall Street crowd well, should have explained to their boss early on: When the Street doesn’t need you anymore, or they think they don’t need you anymore, they just ignore you. You become like an old investment banker who loses the perks of his job the minute his best clients go somewhere else.
But alas there's hope for Obama. One of the hallmarks of being a Wall Street executive—or a president, for that matter—is harboring a certain degree of arrogance. Some of these guys have it more than others, but they all have it. And why not? Their arrogance made them think their risk came at no cost—and in the end, they were right.
So here's a way to tell Wall Street there's a cost to being arrogant by putting these guys on notice and feeding following points tonight into his teleprompter and letting it rip as only he know how:
“To my former friends on Wall Street, who somehow forgot that Hope and Change are worthy attributes, I say the following: The bailout days are over. Pay yourself whatever you want; take as much risk as you want, but don’t expect the Federal government to pay for your sins. We’ve been doing that for the last 30 years; each and every time you’ve embraced risk, you expected the government to bail you out, and you were right.
“It began slowly at first—you didn’t lose really big money back 25 years ago when mortgage bonds and other risky debt first blew up. But each time the market cratered your losses got larger and larger until your risk taking was so huge, were it not for the mother of all bailouts last year, your recklessness would have caused financial Armageddon.
“I would like to lay the blame for last year's mess on your greed and arrogance, but I really can’t. The government allowed you to act like idiots; we supported you’re risk taking, and it was a bipartisan effort that spanned three decades, and included some very smart people—from Robert Rubin, the former Treasury Secretary for Bill Clinton and later a top executive at banking basket case Citigroup, to alleged free-market Republicans, like our former Fed chairman Alan Greenspan.
“But those days are over; Being Too Big To Fail is a thing of the past. With that in mind, by Presidential decree, I’m enacting the following:
“Citigroup must once and for all sell its various businesses and no longer remain a functioning company because its management has proven itself to be too dysfunctional to be trusted in the event that my stimulus package doesn’t work, unemployment shoots to 11 percent, and consumer loans begin to sour at a faster rate. The last thing I want to do is put another taxpayer dime into this money pit.
“Morgan Stanley and Goldman Sachs have no reason being considered commercial banks and protected by the Federal Reserve, so I am hereby revoking their charter. Do all the high frequency trading you want, fellas, but do it with your shareholders’ money, not America’s.
“A message to my friend Jamie Dimon: You dodged all the bullets so far and you've been brilliant, but If this economy tanks further you’re going to be in a world of hurt as well since J.P. Morgan holds so much consumer-related debt on its balance sheet. If that happens, you’re going to be treated no differently than Citigroup going forward, which means don't come crying to me for help.
“Bank of America. To be honest, I don’t know where to begin with you guys. But I am giving you just a few more days to replace your CEO Ken Lewis with someone with half a brain. I am also using all my pull in Democratic party circles to let New York Attorney General Andrew Cuomo know that his investigation into Lewis better come up with something more than a few emails showing that he was asleep when he purchased Merrill last year or else I’m going to throw my support to David Paterson in next year’s gubernatorial election.
“Oh…and one more thing—no more bailouts!”
Mr. President, make those points, and watch Wall Street embrace Hope and Change in ways you never dreamed.
Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for the Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His forthcoming book about the financial crisis, The Sellout, is scheduled to be published later in 2009.