(From Forbes, October 14, 2009)
By DAN GERSTEIN
President Obama took a break from health care and war planning Oct. 9 to finally take a public stand against the corrupt capitalism that spawned last fall’s financial crisis. After nine months of legislative passivity, interrupted by a few high-minded speeches, Obama held a White House press event to call out the big-moneyed interests gumming up his regulatory reform plan in Congress. Normally I’d say it’s better late than never. But judging from the gap between the president’s tough tone and the meager measures he is now prepared to fight for, it seemed like Obama was doing little more than salvaging the terms of his (our) surrender.
The Changer-in-Chief long ago gave up on the idea of dismantling and remaking the crazy-quilt regulatory system that Wall Street (along with its Washington enablers) rigged for its own enrichment at everyone else’s expense. Rigged, that is, to allow banks to buy their own credit ratings, choose their own federal regulators, peddle mortgages to home buyers they knew could not afford them, repackage those junk loans into what they knew were junk securities and pawn off the risk on taxpayers for their botched bets.
Instead, Team Obama opted to move around the deck chairs within the existing bureaucracy, daftly hoping this conformist approach would be enough to prevent another titanic meltdown. The piece de lack of resistance? Making the Federal Reserve–which failed miserably in preventing the housing bubble from blowing up and protecting the economy from Wall Street’s gambling binge–the primary line of defense against systemic risk.
But now that Wall Street’s lobbying machine has watered down much of the president’s already inadequate reform plan on Capitol Hill, the White House has scaled back its insufficient ambitions even further. To wit: On Friday, Obama chose to draw his one line in the quicksand our markets have become around the one big, new idea his team has proposed–creating a Consumer Financial Protection Agency to, as the president said, “look out for the financial interests of ordinary Americans.” His prime villain: the Chamber of Commerce, which is running an ad campaign against Obama’s new consumer agency. His main message: The American people “cannot afford ‘business as usual’ any longer.”
From a purely political perspective, this tact makes all the sense in the warped world in which we live. The new agency, which would focus on stopping the kind of predatory practices that helped fuel the subprime meltdown, fills an obvious hole in the system. It’s easy to explain and hard to attack. And the chamber, which is also opposing Obama on health care and climate change, makes for a convenient bogeyman. But by limiting its aim to this lowest common denominator, the administration seems to be engaging in the same cynical, self-interested behavior that created the whole mess in the first place. That’s a sure way to perpetuate business as usual, not pulverize it.
Even if we give the president the benefit of the doubt and presume he and his team honestly believe this is the best they can expect to get passed through the stacked decks of Congress, it’s still enough to confirm most Americans’ worst suspicions about Washington’s ability to fix our broken financial system and the economy as a whole. Here was “the change president” conceding in code, saying “no we can’t.” His real message: No matter our anger, or their intent, our leaders are incapable (for a host of reasons) of reforming their own ways, let alone saving American capitalism from its worst self-sabotaging tendencies.
This leads me to the point I left off in my column last week–that nothing is really going to change on Wall Street or in Washington until the public demands it. Indeed, the president’s unintentional concession speech Friday proves that, contrary to his own words, we cannot depend on our elected officials to be our voice in this case. Our only hope to restore some sanity and accountability to our financial system, re-level the playing field and renew the promise of American capitalism is to reassert our claim on the levers of political power. Which is to say, we need to mount our own hostile takeover to beat back the banks and other financial firms that are blocking reform.
This is not nearly as daunting as it might seem. Just look at what Ross Perot was able to accomplish in his first run for president in 1992. Perot was a seriously flawed (some would say seriously unbalanced) messenger. The Internet didn’t exist, so there were no networking tools to use to organize people, distribute information or raise money. In fact, Perot had no real bricks-and-mortar organization either, relatively speaking. Yet just by spending several million dollars of his own money and speaking truth to the powerless in common-sense terms they could understand, Perot managed single-handedly to force the deficit to the top of the national agenda.
Given the huge political advantages the Internet provides today, it would be exponentially easier to launch a similar cause-driven campaign next year to coincide with the 2010 congressional mid-term elections. All it would take to create such a leveraged cry-out would be: early money ($10 million or so in seed capital to fund the initial organizing and promotional efforts); credible moguls (respected businessmen and experts to serve as spokesmen and validators; smart messaging (a crisp, compelling and inclusive pitch that will connect across partisan lines); and policy muscle (a clean, robust reform around which agenda voters and advocates could rally).
I’d start this campaign to take back capitalism by recruiting the moguls, because the money would soon follow. The ideal leaders for this kind of advocacy initiative would offer all of Perot’s leadership assets–in particular his business credibility, independence and plainspokenness–with none of his personal liabilities. Two public figures that come to mind immediately are Warren Buffet and Pete Peterson, former chief executive of Lehman Brothers ( LEHMQ – news – people ), founder of Blackstone Group ( BX – news – people ) and Nixon commerce secretary. Both are used to the public spotlight and have instant legitimacy as capitalists and financiers–and neither are tied to either major party.
For this campaign to get traction, the message must be every bit as pro-capitalism as the messengers. Outside of the two ideological extremes–the anti-regulation zealots on the right and the anti-business zealots of the left–most Americans like profits but hate cheats. They know after last fall’s collapse and the AIG ( AIG – news – people ) bonus scandal that the American capitalism they believe in has been fundamentally corrupted, making it ripe for rip-offs.
So the only way the reformers could lose this debate would be to let Wall Street marginalize them somehow as job-, wealth- and competition-killers. If this is a fight for honest capitalism–and to free our markets from fraud–we win, invisible hands down.
The difficult part will be coming up with a policy agenda that is clean enough to unite and energize the frustrated middle, while robust enough to actually solve the deep-seated structural problems with our regulatory system. In my view, the most practicable approach would be to do the opposite of what the Democrats tried on health care: Start with a no-nonsense consensus of no-brainer reforms and then build from the center out. If a bank is too big to fail, it’s too big to approve. If a derivative is too complicated to regulate, it shouldn’t be sold. If a private equity firm runs a company like Simmons into bankruptcy, it should not subsequently profit from the failure.
In the end, though, the key to success will be countering Wall Street’s influence and putting the politicians’ feet to the ire. Members of Congress need to know there will be consequences for sticking with the status quo. The quickest and most effective way to do that, as successful political action groups like Club for Growth and Democrats for Education Reform (a former client) have demonstrated, will be to inject the reform agenda into the 2010 congressional elections. Then force candidates to choose sides. Make clear to every incumbent: Endorse our plan and we’ll give you money and public support; back the banks, and we will run ads against you telling voters you are for corrupt capitalism.
As I have said before, this is all about power. Right now, Wall Street has the political playing field to itself; it has the money, the access it buys and the fear it implies. And the public is on the outside, looking incredulous that this rigged system is still in place more than a year after it was exposed. But if the frustrated middle can organize and mobilize a focused, non-partisan revolt of the revolted–as opposed to the inchoate and polarizing tea party movement–that whole dynamic will quickly change. And so too, I’m confident, will the voting habits of our elected officials.
Dan Gerstein, a political communications consultant and commentator based in New York, is the founder and president of Gotham Ghostwriters. He formerly served as communications director to Sen. Joe Lieberman, I-Conn., and as a senior adviser on his vice presidential and presidential campaigns. He writes a weekly column for Forbes.