Confidence Men: Wall Street, Washington, and the Education of a President

by Ron Suskind

  The result: everyone was exhausted. Obama offered his own suggestions, interesting but mostly fliers, to bridge the last $20 billion.

  Henry Waxman, chairman of the House Energy and Commerce Committee, feeling an urge to affirm the president’s effort, said, “I don’t speak for the House, but you, Mr. President, have put forward a serious set of numbers.”

  Pelosi just shook her head. “Mr. President, I agree with Henry on two points,” she said acidly, turning to Waxman. “The president put out a set of numbers, and you, Henry, don’t speak for the House of Representatives.”

  Now she glared at Obama, and laced into him over the whole mess: an already stripped-down pair of bills, with Republican proposals, such as the health care exchanges, and competing, maybe irreconcilable models for how to pay for the widened coverage, much less actually control costs. It was another strong woman lecturing Obama.

  “Well, what do you suggest, Nancy?” Obama replied, brimming with frustration.

  Pelosi shook her head. She felt she’d been making suggestions for a year. She’d pushed a proposal through the House nearly six months before and then watched the Senate dither. She’d been waiting for the White House—and, more specifically, the president—to take the lead. He never had.

  Now it was too late. She had nothing to give.

  Obama stormed out of the room, telling aides to clean up the mess.

  On Sunday he flew to Boston and appealed to the crowds to recapture the enthusiasm of the campaign. It was a campaign speech . . . for an office he already occupied. It had little to do with Coakley, who stepped up to the lectern as any enthusiasm rushed from the room. The polls were clear. In two days, Scott Brown would be elected to the U.S. Senate.

  The next morning, Monday, Obama called his senior staff together.

  “What is my narrative?” he all but shouted. “I don’t have a narrative.”

  Of course, he was right. The extraordinary story of Barack Obama—a boy, so truly African American, who was blown between countries and households before finding his solid stance in the United States and then racing upward through its meritocracy—no longer seemed pertinent to almost anything he was doing. It was, no doubt, always a narrative of “up ahead,” a dream of what would be: of how he would bind the country into an enlarged ideal of shared purpose, integrating its dissonant chords into a melody as elegant and surely struck as he, himself, appeared to be.

  Instead, he had vanished into a cloud of endless policy debates and irreconcilable factions, of bold words—still hoping to summon the magic—so often divorced from measurable deeds.

  Bit by bit, month by month, that first narrative had faded, even if plenty of people still felt its presence, like the ghost of a lost limb.

  “He was right,” one of the participants that morning recalled. “He had no narrative. No story. For someone like Obama, that’s like saying I don’t know who I am. That I’ve lost my way.”

  Nature abhors a vacuum, and now the narrative was being written for him.

  The specific issues in Massachusetts were much more than the Tea Party’s involvement, despite what the movement’s cheerleaders on Fox News were crowing. Exit polls showed a desire by independent voters in Massachusetts to stop Obama’s push to bring about health care reform. And this from a state that had a health system that included features from both House and Senate bills: a universal-coverage program that generally received strong reviews from the Massachusetts residents. It was a loss of faith in the president.

  Internally, Joe Biden wisely counseled the senior staff to “take a deep breath”; that once everyone got their bearings, opportunities would present themselves.

  None seemed to. In the days after the election, health care stalled. All sides just stopped, and sat down, trying to figure out where they stood and what, if anything, to do next.

  Almost like a bad joke, what many felt should have been the president’s first priority—financial reform, related as it was to the broader issues of the economic crisis—filled the new hole.

  No news of progress on that score. Financial reform had been stalled in Congress since the late fall, when Barney Frank, charging forward in the weeks after Volcker’s appearance, got a package of reforms through his committee that was then approved by the House and went beyond what the White House had recommended. Now Frank, and everyone else, was waiting on the Senate, which had been left to its own slow-footed devices for six months, without interference from the White House or Treasury. With the filibuster-proof majority gone, financial lobbyists around town were rejoicing. Delay and obstruction had worked, and now it would be that much harder to pass any meaningful financial reform.

  The news cycles, meanwhile, were occupied, as they had so often been, with a hard, over-the-shoulder gaze back at the still-smoking disaster of September 2008. Throughout January there’d been a steady ticktock of disclosures about e-mailed memos written the previous fall by lawyers at the New York Fed. The reason that the release of the memos, which were subpoenaed in October by the Republican’s investigative bulldog, Representative Darrell Issa, was delayed for three months was clear as soon as they were delivered: one of them showed Fed lawyers telling attorneys at AIG to block disclosure of the insurer’s controversial 100 cents on the dollar counterparty payments to Goldman and others—made, of course, with the $182 billion in bailout money. Who was requesting that information? The SEC. Evidence of the Fed telling AIG to hide some of the era’s most controversial financial disclosures from the SEC—in the wake of a financial catastrophe enabled by obfuscations from the very financial firms now being bailed out—was more than even Barney Frank, a friend of the White House, could take. Geithner had to make account.

  Which is what he did, after some resistance, on January 27, before the House Oversight Committee, in a pile-on that, again, proved to be a brief, shining moment of bipartisanship. Geithner, denying knowledge of anything in the e-mails or many of the particulars of the counterparty payments, was met with open derision: “It stretches credulity for us to believe that you had no role in this and didn’t know anything about it when your attorneys were sending e-mails around everywhere,” said Representative Dan Burton (R-Ind.).

  But Democrats seemed to carry the strongest ire. Pointing out that while the Treasury Department “scalped the folks at Bear Stearns, 2 cents on the dollar, Goldman got 100 cents!” Stephen Lynch, a Massachusetts Democrat, said it “stinks to high heaven what happened here” and “it makes me doubt your commitment to the American people.” Geithner countered that his choice was between paying in full or having the contracts slip into legal default, which would have caused AIG’s overall collapse, imperiling the entire financial system and millions of insurance policyholders across the globe. Lynch wasn’t buying the legal argument. “You were creating new facilities every week. We were changing the rules day by day. We had leverage, and we chose not to do it!”

  What wasn’t disclosed that day, or at any time since, is that UBS offered to take a haircut—saying it was customary, and only right and what the banks were expecting—but Treasury and the New York Fed literally turned them away.

  The Treasury Department, to shore up their leader’s “knows nothing and never did” position, was busy saying publicly that Geithner had signed a recusal agreement once he was nominated for the Treasury job in November 2008—to screen himself from the messy workings of his lawyers at the Fed. Marcy Kaptur, another Democrat—she, from Ohio—got Geithner to admit he had signed no such agreement. Well, did he or didn’t he? No, he didn’t. So did the secretary instruct his deputies to lie? No response.

  A White House official who was watching the televised hearings—and also attended the seminal March 15, 2009, meeting, when the president said he wanted to “show accountability flows in every direction” by restructuring the banks that caused the meltdown—said, “Watching it, I couldn’t help but think about that big meeting, and Rahm yelling, ‘We have no fucking credibility!’ Seeing Democrats and Republicans g
oing at the same unresolved issues, side by side, highlighted that this might have been the only area of actual bipartisanship—the kind of bipartisanship the president was searching endlessly for. But here was our guy getting pilloried.”

  That guy’s boss, meanwhile, was busy considering, and reconsidering, many of the decisions he’d made, attempting to reset his course by trying out various public statements, just to see, it seemed, how they sounded.

  In the days after the Massachusetts vote, he found himself saying he understood, affirming—and somehow even elevating—the disaster by noting that “Scott is just like me,” as though he’d just glimpsed his successor. On health care, in the first days of February, he seemed to say one thing and then another about the future of health care.

  Several key House Democrats, including Barney Frank, declared the prospects of passing health care reform completely DOA.

  Obama’s approval ratings continued to slide.

  The question: Who was to blame? The first shot across the bow came on February 3, with a piece by Edward Luce, Washington correspondent with the Financial Times. The story—filled with pointed, though mostly unattributed, comments—was the first to begin digging into dysfunction at the White House. The piece said that Obama was captive of the “Fearsome Foursome”—Emanuel, Axelrod, Jarrett, and Gibbs, and more or less in that order—supporting a thesis that “the Obama White House is geared for campaigning rather than governing.”

  A few days later, the New America Foundation’s Steve Clemons, on his influential Washington Note—one of the town’s most read blogs—wrote about the backroom flurry the Luce story had prompted, as the mainstream media mostly ignored it, for fear of losing White House access, even as they were forced to recognize that “this once mesmerizing Camelot-ish operation” may soon be seen, to paraphrase Churchill, as a case in which “never have so many talented people managed to achieve so little with so much.”

  Pete Rouse read all the articles from inside the West Wing. He had been in Washington long enough, nearly thirty years, to have read enough stories of palace intrigue to easily paper his tiny office.

  Rouse had always been the quiet man with a clear sense that it was important for the elected official to receive the attention, hopefully of a favorable cast, and not the adviser—a basic precept often overlooked by ambitious Washington counselors.

  Sticking to this old-school principle in an era when presidential advisers increasingly trafficked in celebrity—with television appearances, speeches, and eventually book contracts—often created gaps between appearance and reality. Rouse, who was generally seen as among the inner circle but not driving events in the West Wing, liked it that way. He could move freely, at the president’s behest, and get done what was needed. His nickname in the White House was Mr. Wolfe, after Winston Wolfe, the character played by Harvey Keitel in the iconic movie Pulp Fiction, whose motto was “I solve problems.”

  And that’s what he did through the first year: quietly solve problems, while attending all the key meetings, starting with the 7:30 a.m. gathering of Obama’s highest-ranking deputies: Emanuel, Axelrod, Gibbs, Jarrett, Biden, Rouse, Schiliro, and, since August, as part of his demands for not getting the Bernanke job, Summers. Rouse didn’t generally say very much, in any meeting. He’d save it for his private sit-downs with Obama. That’s where the two old friends could confide in one another and Rouse could do whatever the president needed to get done.

  On their agenda was the “annual review.” This was something Rouse had done, under different rubrics, from his first days with Obama in 2004. He was suited by disposition, education, and experience to be a powerful memo writer. With graduate degrees from the London School of Economics and Harvard’s John F. Kennedy School of Government, the self-effacing Rouse also shared what were frequently cited as Obama’s cool-eyed, Zen sensibilities; his grandparents came from Japan and spent time in an internment camp during World War II. His ability to step back and assess complexity nourished two particular memos—“the Strategic Plan” written in 2005, which had astutely guided the new senator through the halls of Congress, and 2008’s “Campaign Plan,” which had helped shape Obama’s electoral rise—that were sure someday to have their own glass cases in the Obama Presidential Library.

  Now Rouse was facing his weightiest and most delicate task: turning the annual review into a treatise that looked back, assessing the past year, in order to look forward. The problem: the White House. The solution: reshape it into one that his friend, formerly Senator Obama, needed to run the country most effectively.

  Rouse decided to do it in parts over the coming weeks and months. It could be kept largely between him and the president, though Emanuel, at least, would have to get “read in.” They’d have to work carefully, and of course he’d be able to discuss privately his findings and recommendations with the beleaguered president.

  He knew Obama wasn’t made of stone or ice, and that he wasn’t some incarnation of King or Gandhi, as his fan club, including Axelrod, would often suggest. He was, in fact, a man wrestling with enormous burdens—a weight he felt getting up each morning, a pressure not to show doubt, or uncertainty, or lack of appropriate knowledge, even to his senior-most staff. What Rouse knew was something presidents often learn slowly—in some cases, against their will: good process creates good outcomes. When a staff of thousands is designated to express the will of a single man, bad process can spell disaster, no matter the clarity of best intentions.

  As Anita Dunn said, “The President is such a capable guy, he thought he could master these organizational issues. I don’t think he understood how important they were.”

  He was understanding now.

  Beginning a memo dated February 11, Rouse laid out his plan to save the Obama presidency.

  This memo addresses management/personnel and structural issues that affect White House operations. The purpose is to stimulate discussion of organizational refinements that may be advisable as we enter the second year of the Obama administration. The observations and ideas outlined are in no way meant to suggest criticism of the work ethic or commitment of individual staff but rather are aimed at improving the efficacy of the collective operation.

  This organizational exercise can be broken into two categories, process challenges and structural response. The objectives of our process review are to tighten the policy development process across disciplines inside and outside the white house. Two: To redefine the relationship between the White House strategic planning process and day-to-day tactical execution including definition of what we want to convey to the American people. Three: To improve the communication of decisions among the senior staff. Four: To enforce accountability of the implementation of the policy and message decisions. Process adjustments will impact White House personnel and structure, they will require changes in operating procedures that will likely cause some discomfort within senior staff, thus the various potential ramifications of specific adjustments should be thoroughly thought through and the views of effected [sic] senior staff should be solicited before organizational changes are finalized.

  All four items struck directly at responsibilities—coordinating policy development, creating a strategic plan to guide and shape day-to-day tactics, communications between top advisers, and the crucial task “to enforce accountability of the implementation of the policy and message decisions”—that amount to a job description for the chief of staff.

  Though many actors had contributed to the current state of affairs, including the president, each area had fallen into disarray under Rahm Emanuel’s watch.

  Rouse’s second memo, on February 17, lowered the boom on Emanuel’s partner in shaping both policy and politics, Larry Summers, as well as the other key player in the economic realm, Tim Geithner.

  Domestic policy far overwhelmed foreign policy in the first year—in terms of both the president’s time and the nation’s priorities—and virtually all domestic policy was, in some way, related to the economy. The memo, desi
gned “to lay out and enforce clearer operating procedures for the economic team,” cited how “tension within the economic team and philosophical differences within the White House have often frustrated our policy process.”

  Rouse had been taking notes, unobtrusively, in meeting after meeting for more than a year. In four sentences, he laid out his findings:

  First there is deep dissatisfaction within the economic team with what is perceived to be Larry’s imperious and heavy-handed direction of the economic policy process.

  Second, when the economic team does not like a decision by the President, they have on occasion worked to re-litigate the overall policy.

  Third, when the policy direction is firmly decided, there can be consideration/reconsideration of the details until to the very last moments.

  Fourth, once a decision is made, implementation by the Department of the Treasury has at times been slow and uneven. These factors all adversely affect execution of the policy process.

  In the lean, bloodless prose of management consulting, Rouse articulated what would traditionally be seen as insubordination, certainly in terms of the second and fourth items. The idea of an adviser working to reopen and “relitigate” policies because he disagreed with a presidential decision, or, as was the case with Citibank, ensuring that “implementation” was sufficiently “slow and uneven” to kill a presidential decision—or, in Rouse’s terse term, “adversely affect execution”—amounted to fireable offenses. They had been willful.

  The memo went on to discuss various remedies for the problems, including replacing Summers, and laid out the case both for and against:

  Larry Summers’ large personality and intellectual brilliance lies at the core of any analysis of this problem. He occupies unique and important space within the administration. A former Secretary of the Treasury, Larry accepted the NEC job, essentially a staff job, with the understanding it would be a short-term appointment. His persona, credibility and expertise are extraordinarily helpful to the new president, and the president relies heavily on Larry’s intellect and economic council [sic].