Charles Dharapak/AP Photo
Obama speaks about financial reform at the White House, January 21, 2010.
In June of 2008, when it was clear that Barack Obama would become the Democratic nominee, he held a press conference to introduce his campaign economic team. At that moment, those of us who had hoped Obama would be a transformative progressive president knew that it was over before it started.
The team was headed by Jason Furman, a close protégé of investment banker Robert Rubin. But the most senior appointees would eventually be Lawrence Summers as head of the National Economic Council and Tim Geithner as Treasury Secretary. They would make sure that the big banks would be bailed out rather than cleaned out. Michael Froman, another Wall Streeter and Rubin ally, was put in charge of trade policy. Fiscal conservative Peter Orszag got the top budget job. Rahm Emanuel, an investment-banker-turned-congressman who as head of the DCCC loaded the House with corporate Democrats, became chief of staff.
Thanks to these people, even the most catastrophic economic collapse since the Great Depression could not shake the financial industry’s lock on Democratic Party policies. Wall Street–influenced deregulation led to the financial collapse. Their failure to reform the financial system after the collapse kept the economy fragile, as we’re now painfully aware. The premature embrace of fiscal austerity caused the recession to be deeper and more prolonged than necessary. And all these economic policy failures led to the mother of all political failures—the election of Donald Trump.
As John Maynard Keynes famously said, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” Indeed, these worthies failed conventionally, and left office with their reputations intact. Most of them repaired to Wall Street, where they increased their incomes many times over. And several of them would like to return to Washington, in senior positions in a Biden administration. If history repeats itself, the second time as farce, it would be a catastrophe—for the Democrats, for the economy, and for the country.
One of several weird things about the Biden campaign is that there is hardly any policy staff. Reporters looking to profile the campaign kept looking for one, and concluded that it just wasn’t there. So with Biden now the likely nominee, there will be a stampede of people wanting in. And given Biden’s age and cognitive state, he will likely be a far more hands-off president than Obama. Which makes his senior appointees even more crucial for the future of the country. Herewith, as a public service, the Biden DNR List, which could stand for Do Not Resuscitate or Do Not Reappoint.
Larry Summers. Number one on the list has to be Larry Summers, 65. Under Clinton, Summers was a prime architect and huge enthusiast of what proved to be fatal financial deregulation. He was also in charge of Clinton’s economic policy for post-Soviet Russia, and was responsible for pushing for early and catastrophic privatization of state assets, a fire sale that led directly to the creation of Russia’s oligarchs. As president of Harvard, he proved to be both arrogant and sexist, to the point where he got himself fired.
Yet Summers has a paradoxical seductive charm, and he persuaded Obama that he was the right person to lead the economic team. In that job, he not only lowballed the necessary economic stimulus and ended it prematurely, but he successfully fought for rescuing the biggest banks rather than taking them into temporary receivership. Back at Harvard, Summers earns over $600,000 as a university professor but also moonlights at the hedge fund D.E. Shaw, where his compensation is well into the seven figures. (Some would say he moonlights at Harvard.) Summers recently played a back-channel role in blackballing economist Gabriel Zucman from an appointment to Harvard’s Kennedy School. In a recorded vote, Zucman had the support of every other tenured economist on the school’s faculty.
The one career-capper job Summers wants is chair of the Federal Reserve. Thanks to the work of Elizabeth Warren and other Summers critics, Barack Obama was dissuaded from appointing Summers to that post, in favor of Janet Yellen. Let’s hope she also wins the rematch.
Peter Orszag. As Obama’s budget director, Orszag was a prime architect of premature fiscal austerity as a supposed badge of economic virtue. After leaving government, Orszag, another Rubin protégé, got a plum job at Citigroup, where Rubin was a senior executive between 1999 and 2009. Orszag first served as vice chairman of Corporate and Investment Banking and also chairman of the Financial Strategy and Solutions Group. From Citi, he moved to boutique investment bank Lazard in 2016, and is now CEO of Lazard’s Financial Advisory group, with corporations and governments as clients. He also chaired the Hamilton Project, underwritten by Rubin. Orszag’s salary is reported at $15 million a year.
At 51, Orszag is young enough to want another round in government. He didn’t have any of the top power jobs on economic issues—chair of the National Economic Council, Secretary of the Treasury (both previously held by Rubin and Summers), or chair of the Federal Reserve.
Mike Froman. Yet another Rubin protégé, Mike Froman directed trade policy under Obama as U.S. trade representative. He served on both the National Security Council and the National Economic Council. Froman was prime architect of the failed Trans-Pacific Partnership, and the continued emphasis on corporate rights and privileges in trade deals. He worked in the Clinton administration for Rubin in a number of staff jobs, becoming Rubin’s chief of staff at Treasury. He then joined Citi after leaving government between 1999 and 2008, also raising money for Obama. Froman, while still at Citi, sketched out Obama’s entire cabinet in an email in October 2008, and did the key economic hiring during the transition. Following the Obama years, Froman took senior executive jobs at Citi’s insurance and “alternative investments” (that usually means private equity) businesses. Since 2018, he has been vice chairman and president for strategic growth at MasterCard. His annual compensation is in the tens of millions.
Froman’s career epitomizes the revolving door between government and Wall Street, and the way Wall Street Democrats use fundraising to ingratiate themselves with Democratic candidates. Froman endorsed Biden early, in November 2019. Like Orszag, Froman (at 57) is young enough to want another taste of political power before the door revolves again.
Steve Rattner. At 67, Rattner is the epitome of a corporate Democrat. He has worked at Lehman and Lazard and in 2000 set up his own private equity company, Quadrangle. Rattner has been active with the center-right group Third Way, and currently serves as Mike Bloomberg’s personal money manager. As a former New York Times staffer and current contributing columnist, he has been very active writing op-ed pieces and making media appearances trashing progressive candidates, without disclosing the Bloomberg connection.
Rattner got in big trouble with the SEC in 2010 for a pay-to-play kickback scheme involving placement of New York state pension funds with his company, which he ultimately settled by paying $7 million via Quadrangle and $6.2 million personally. He was barred from the financial industry for five years. The scandal forced him out of his job heading the Obama administration’s auto industry rescue. Rattner has never held a top economic job. “Rattner would cut off his right arm to be Treasury secretary,” says one insider. If Bloomberg personally goes to bat with Biden on Rattner’s behalf, he can probably get something big, though the confirmation would not be pretty.
Jeff Zients. He succeeded Orszag as director of the Office of Management and Budget, and finished out the Obama presidency as director of the National Economic Council, the job once held by Summers. Zients was in charge of Obama’s disastrous “fiscal cliff” budget strategy, in which Obama’s team played a very strong hand badly. Due to sunsetting Bush tax breaks, if Republicans hadn’t met Democrats halfway, the result would have been a massive tax hike, mostly on the rich. But Zients, a big proponent of deficit reduction, let Republicans call the shots, resulting in the damaging automatic budget “sequester.”
Before joining Obama, Zients became very rich taking two David Bradley ventures public, The Advisory Board Company and the Corporate Executive Board. When he was 35, Fortune estimated his net worth at $149 million. He currently heads the Cranemere Group, a holding company on the model of Warren Buffett’s Berkshire Hathaway. Zients today, at 53, is a major fundraising bundler for Biden, and is said by multiple sources to want a top economic post in his administration.
Bruce Reed. Biden insiders say he is in charge of the campaign’s policy operation. Reed, who turns 60 this month, is personally close to the former vice president. He was Biden’s chief of staff between 2011 and 2013. Before that, he epitomized the right wing of the Clinton and Obama administrations. He was head of the Democratic Leadership Council; he directed Clinton’s Domestic Policy Council, and was a key author of the Clinton welfare reform that led to the protest resignations of three subcabinet officials. Under Obama, he was executive director of the pro-austerity Bowles-Simpson Commission. He co-authored a 2006 book with Rahm Emanuel titled The Plan: Big Ideas for America. In short, everything you don’t want in a Biden administration, but a contender for a major role.
Other Wall Street worthies often mentioned as possible top Biden economic officials are Tom Nides, vice chair and managing director of Morgan Stanley, and Jamie Dimon, CEO of JPMorgan Chase. Mike Bloomberg has just about everything he wants (except the presidency), but given his key roles in both endorsing and bankrolling Biden, if he wants to top his career as, say, head of the World Bank or even chair of the Fed, it could be hard for Biden to refuse.
Some lesser names include Sarah Bianchi, an Obama veteran who worked at BlackRock and lobbied for Airbnb, and had a hand in Biden’s health care policy. She’s currently a managing director at bank advisory firm Evercore. Terrell McSweeny, who rotated from the Federal Trade Commission to top corporate law firm Covington & Burling, has also been a key Biden adviser. Austan Goolsbee, who endorsed Pete Buttigieg in the primary, has plenty of Obama economic-team experience. And longtime Rubin aide Jason Furman, former chair of the Obama Council of Economic Advisers now teaching at Harvard and a close collaborator of Summers, is said to want in. Furman, in an email to me, disclaims any interest in returning to government and says he loves his life at Harvard.
A good rule of thumb is that nobody who has spent much of their career at the largest banks or hedge funds—Morgan Stanley, Citi, Goldman, JPMorgan Chase, BlackRock—should be considered for a top economic job in the next Democratic administration. We’ve had far too much experience of how that works out. By the same token, as antitrust enforcement belatedly begins to catch up with the big-tech platform monopolies, people from the executive/lobbyist/bundler world of Silicon Valley, and their academic allies, should be kept out as well. Biden has always viewed himself as a mainstream Democrat. To the extent that Wall Street dominance of all the key economic posts has been all too mainstream under both Clinton and Obama, we are in big trouble if Biden looks to that mainstream.
WHO OR WHAT might save America from this fate? One possible counterweight is Ted Kaufman, Biden’s longtime chief of staff, who replaced Biden in the Senate for two years when Biden became vice president in 2009. Kaufman is more committed to regulating Wall Street than his boss, and, liberated from Delaware’s financial elite by promising never to run for re-election, he played a surprising and important role in the financial-reform debate. Working closely with progressives Sherrod Brown, Pat Leahy, Elizabeth Warren, and others, he urged a much tougher stance by the SEC, secured successful anti-fraud legislation, and introduced the Brown-Kaufman amendment to the Dodd-Frank Act, which would have limited the size of large banks (it failed).
Kaufman remains close to Biden. He helped organize his 2020 run for the presidency. If anyone can serve as an internal firebreak against a Wall Street takeover, it’s him. Kaufman turns 81 this month, though he is said to be all there cognitively, and he remains in the inner circle.
The most important possible firebreak is Elizabeth Warren, who has a decent personal relationship with Biden. They even discussed teaming up as a ticket in 2016. When Warren went after Bloomberg, Amy Klobuchar, and Pete Buttigieg full throttle in her final debates, she largely spared Biden.
Some in the Biden camp, flush with victory, conclude that he can win the presidency without accommodating Bernie Sanders, Warren, or their supporters. But there are now millions of very unhappy Democratic voters. They did not support Sanders because they liked his Brooklyn accent, or Warren because of those cute selfies. They supported progressives because economic life is going to hell in America for ordinary people. Health security, relief from student debt, decent jobs at decent wages—these are not just ideological fancies but life concerns that will not go away just because Joe Biden is the nominee. And with the coronavirus epidemic, life prospects just got worse.
Whether or not he and his handlers know it yet, Biden will need the support of disaffected progressives in November. One of Warren’s favorite expressions is “Personnel is policy.” If ever that aphorism applied, it applies in 2020. Warren is in a position to broker the deal she attempted with Hillary Clinton in 2016: If Biden appoints more progressives and pursues more progressive policies, both Sanders and Warren will vigorously campaign for the ticket and urge their supporters to turn out.
Alternatively, Biden could strong-arm progressives and appoint the third succession of Wall Street Democrats. And even if he managed to win election, business as usual would just seed more right-wing nationalism.
This story has been updated.
