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

by Ron Suskind

  A few weeks later, he was standing before seventy or so students, mostly upperclassmen, inside one of Princeton’s Gothic stone halls teaching “The Great Recession: Causes, Consequences, and Remedies.” His guest that day was Wendy Edelberg, an economist with the Federal Reserve who’d spent much of the past two years on loan to the Financial Crisis Inquiry Commission.

  Krueger told the students that the class “was an attempt to teach history in real time” and that they’d have to think clearly about distinguishing “contributing factors from root causes.”

  Candidates for the latter, he said, might be the housing bubble, “poor choices by consumers in taking on mortgages they couldn’t afford,” or “money flowing into the financial system and whether the financial system did a bad job of directing that capital.” Edelberg talked about the crisis inquiry’s views of the matter, focusing mostly on the financial industry’s incentives and ultimately destructive activities, while she noted there was general agreement that lack of regulation was a “contributing factor, more than a root cause.”

  However, after the lecture, with twenty students from one of the class’s sections, or precepts, the two teachers themselves were taught a lesson.

  After an hour of discussion, Krueger asked the undergraduates to introduce themselves and say something about their plans or their goals. About half were economics majors, but the other half were spread across many disciplines—history, philosophy, biology. One after another, they said they planned on going to Wall Street. All of them. Finally, one student—the last of them—said he wasn’t sure what he was going to do.

  “You might consider becoming a financial regulator,” Krueger said, anxiously. “We’re going to need a lot of them going forward.”

  “Yes,” Edelberg implored him. “It’s an opportunity to speak truth to power!”

  The student seemed unconvinced. The rest of the class looked on, unmoved, as silence filled the seminar room.

  A few minutes later, Krueger and Edelberg walked in silence to a nearby cafeteria and sat picking at a pair of salads. A clean sweep for Wall Street. They were stunned. “Can we get any more proof that we’re back to the same attitudes of 2007?” Krueger said. Edelberg nodded glumly. Usually a phrase like “speaking truth to power” gets a rise from young adults; at least it once did. “They looked at us like were walking anachronisms,” Krueger said later. “Like we were hippies from the sixties.”

  On the evening of January 30, Tim Geithner walked down the hall from his office on the third floor of the Treasury Department to the stately Diplomatic Reception Room, restored recently to its nineteenth-century grandeur.

  Waiting for him there were six men who understood, better than virtually anyone else on the planet, what it felt like to preside over the U.S. economy.

  They were all former Treasury secretaries.

  There was a practice in the early years of the American government for the outgoing Treasury secretary to host his successor for dinner—a bit of courtliness, amid the often vicious political dialogue, to ensure continuity in the managing of the financial accounts of the United States. Some things were viewed as too important for partisan bickering. By the twentieth century the dinner had grown into more of an official, ceremonial welcome. About a year into each new Treasury secretary’s term, his predecessor buys dinner for all the former Treasury secretaries to celebrate the arrival of a new member into this exclusive club.

  So, on this night, Hank Paulson was the host. He warmly toasted Geithner and treated Bob Rubin, Paul O’Neill, James Baker, Nick Brady, and John Snow to dinner. Federal Reserve chairman Ben Bernanke and deputy Treasury secretary Neil Wolin were asked to attend as well.

  Of course, the only schedule that really mattered in the mix was that of the guest of honor. And Tim Geithner was so thoroughly engaged in the crushing weight of successive crises that the dinner had already been delayed a year beyond custom. It floated on his “to do” list month after month. The decision to go forward, oddly enough, was political. Geithner had been hopeful that the president would include recommendations of Alan Simpson’s and Erskine Bowles’ National Commission on Fiscal Responsibility—which in early December had recommended approximately $3 billion in cuts and $1 billion in added revenues over the coming decade—as part of his grand bargain on the Bush tax cuts and stimulus spending with Republicans. The president, cutting that deal himself, dismissed it as too much to attempt.

  By early January, Geithner was feeling the clock tick: the U.S. government was a few months away from hitting its borrowing capacity. The debt limit would have to be raised in April to avoid a government shutdown—a prospect that was sure to be a matter of pitched combat with the new Republican-controlled House.

  And then he remembered the dinner.

  Most of the Treasury secretaries who would attend were Republicans. On balance, these were men he could talk to—hailing from a Republican Party that, compared to Congress’s many new Tea Party warriors, would be considered pragmatic, even progressive. They’d all been stewards of American’s finances and understood what it would mean for the United States to slip into default.

  He got in touch with Hank. How about that dinner? Then, several of the prospective attendees were contacted by Treasury to engage in the new debt-limit debate, to be spokesmen for probity, writing letters and making calls, especially to congressional Republicans—Treasury secretaries . . . united!

  After Hank’s toast, Geithner spoke casually and assuredly to his kindred about the state of affairs and especially the debt limit. They all needed to speak as one. This is was not something to be left to politics. Anyone who’d have the temerity to “play chicken” with the prospect of the United States defaulting on its obligations was simply irresponsible. Nods all around.

  Anyone in the room who could still conjure images of Geithner from two years back, with his darting eyes of a shoplifter at that disastrous first press conference downstairs in the Cash Room, might have wondered where this man came from. Geithner, the last man standing from Obama’s original team, was now thoroughly in charge and, it seemed, reconstructed around a set of ideas that had prevailed . . . for better or for worse. Among this constellation of ideas, his North Star was continuity: to keep matters moving forward with as little disruption as possible. It was always an “up ahead” focus: who knew, maybe in the near future they’d encounter improved prospects, new opportunities to seize, surprising twists. When dramatic reform or restructuring was proffered—for Wall Street, for jobs programs, for reregulation of all kinds—he’d often say, Let’s assess the “Hippocratic risk.” The risk, in short, of doing harm. For a new president, with a powerful intellect but little experience, this stance was always available as a sensible course. As Obama learned the limits of pure intellect, in hour after hour of frustrating relitigations, Geithner’s posture increasingly felt like a prudential path, rather than a backing away from history’s call to arms.

  For America’s other great center of power—New York and its financial machine—continuity was the path to victory. Wall Street, as it has been constructed in this age of financial miracles, mocks Hippocrates. Doing harm is its business; destruction itself can be quite profitable, properly wrought, especially when the many overwrought parts of the American economy are on the receiving end. Tim Geithner managed, across two years, to win over two constituencies, as both Wall Street’s man and Obama’s. He figured it out: Washington could be fearfully prudent so New York wouldn’t have to be.

  As for his old mentor, Larry Summers, Geithner was coy, sizing up matters from the start, searching out shifts in the key relationships atop the administration. Summers’s pride in leading the most academically accomplished, big-brained team since Kennedy’s “best and brightest” always carried the scent of peril. That was true for Obama, just like JFK. Geithner, the clever pragmatist, could see this from the start. As the months passed, he mostly observed Larry’s debate society, participated only when necessary, and kept his own counsel. Obama
arrived with too much faith in intellect’s power—with the idea that a collection of smartest people kept in one room could solve almost any problem. While the president learned otherwise, and while his frustration with Summers grew, Geithner held firm, offering the sensible path, feet solidly planted. And when the time came, he said the sensible path would be to reappoint Bernanke. Why make a change? Continuity is a virtue. Deep down, Summers never forgave him.

  After Paulson’s toast, as the Treasury secretaries drank wine and stood talking before they took their seats, several of the honored guests noticed that a member of their exclusive club was not present. Several of them crowded around Tim. Where’s Larry? Geithner had just returned that day from the World Economic Forum in Davos, Switzerland, the first time he’d attended in years. Summers must have been at Davos, too? Geithner nodded, yes, of course.

  Then he smiled that coy Geithner smile and offered his trademark shrug, which in no way bespeaks uncertainty. “Larry would rather be in Davos than at dinner with me.”

  Two weeks later, on February 14, the president meditated on the most important things he’d learned as president, the hard lessons he felt would be most valuable in the days ahead.

  “The area in my presidency where I think my management and understanding of the presidency evolved most, and where I think we made the most mistakes, was less on the policy front and more on the communications front. I think one of the criticisms that is absolutely legitimate about my first two years was that I was very comfortable with a technocratic approach to government . . . a series of problems to be solved.”

  This riff about too much policy, too little politics—a point he’d recently made in another interview—he then broadened, searching for a fundamental redefinition of his presidency.

  “The irony is, the reason I was in this office is because I told a story to the American people,” he said, his voice dropping into that distinctive cadence that takes hold when he’s hit a rich vein—slow, steady, but rising to meet the words that matter most. “It wasn’t the specifics of my health care plan or Afghanistan. The reason people put me in this office is people felt that I had connected our current predicaments with the broader arc of American history and where we might go as a diverse and forward-looking nation. And that narrative thread we just lost, in the day-to-day problem solving that was going on, and that wasn’t because of bad execution on any particular issue. I think I was so consumed with the problems in front of me that I didn’t step back and remember, ‘What’s the particular requirement of the president that no one else can do?’ And what the president can do, that nobody else can do, is tell a story to the American people about where we are and where we are going.”

  While his brilliance in understanding a story and its power—so forcefully expressed in that last aria—was what had lifted him to the White House, his difficulty in finding a story to tell, and tell convincingly, as president was surely tied to the burdens of governance. A candidate can tell a story of what will be. A president, after the first few months in office, must tell a story of what is, and what his presence in the White House has changed for the better.

  The “great progress” of the nearly four months since the midterms—a time when Obama’s confidence and, according to polls, the confidence the public had in him, had both risen—highlighted what was so often absent in his first two years. The disclosures of his management struggles in making difficult decisions and demanding accountability of his top advisers, and their seeming loss of confidence in him, further stressed gaps about which he is understandably defensive. No president, after all, can afford to acknowledge a lack of confidence; not in this era, when the projection of confidence—justified or not, earned or willed or manufactured—remains the coin of the realm.

  “I have to say this, though,” he added, a touch defensively. “I actually felt very confident through the first year. And if I hadn’t felt confident in my second year we would never have gotten health care passed, because after Scott Brown in Massachusetts, people around here were pretty depressed. I was still confident that doing that [health care] was the right thing to do and was right for the Congress.”

  But he backed away from this “to be sure” defense after a bit. It didn’t suit him at this moment. He was struggling to express himself honestly, from a deeper core. Obama, after all, always felt that he was different from the others, from politicians, or Wall Street CEOs, or pitchmen all over America, who met challenges to the country’s spirit and capabilities with a smile and a handshake and a feel for saying whatever their audiences wanted to hear.

  “Part of what was important in the tax deal was not that my mind was changed around the Bush tax cuts. I still think they were a bad idea. What I think I was able to recognize was that, at this juncture, the country will feel better about itself and that will have important ramifications. If they see Democrats and Republicans agreeing on anything . . . Because right now they are just exhausted with the partisan wars that are taking place. In addition, it turns out that, technically speaking, the most important antipoverty program I can initiate, the most important deficit reduction program I can initiate, is to get the economy growing again.”

  Ever competitive, Obama’s first urge was to try out this fresh construction of a sort of meta-confidence on his peer group, his competitors. At this point it was a mere handful of men, an all-but-extraterrestrial group of a few other presidents he emulated and measured himself against.

  “You think about FDR and the New Deal. Three-quarters of the things he did didn’t work. But what he was able to project was ‘we are going to get through this.’ Nobody remembers Kennedy’s economic policies. They remember Peace Corps, and they remember a few other New Frontier programs, but basically this job is not about just getting the policy right. It’s about getting the American people to believe in themselves, and in our capacity to act collectively to deliver for the next generation.”

  He sat for a moment. It was all working, integrating nicely, with Kennedy and FDR. But there were other presidents he never wanted to be compared to. “Carter, Clinton, and I all have sort of the disease of being policy wonks,” he said, clearly citing this shared characteristic as a liability. But now, with his new self-definition, this improved view, he could distance himself from them. “I think that if you get too consumed with that you lose sight of the larger issue.”

  This “larger issue”—a larger and ostensibly more effective model of leadership—would be a star to guide him in the years ahead. And, he said, he now had the team to do it: “The reorganization that’s taken place here is one that is much more geared to those functions.” Almost reflexively, he snapped into a quick take-back, that his old team was “exactly the right team to get a lot of laws passed through Congress,” and that he’s “incredibly proud” that financial reform has “made the system more stable” and health care reforms “have started what will be a long path toward a more sensible health care system.” Then he just swept them, and all the sound and fury, away with a one-liner: “But I have very much internalized the fact that my job is not legislator in chief.”

  There was one president whom Obama seemed to be speaking directly to, though not yet mentioned. Ronald Reagan’s ability to project optimism when there may be no defendable reason to be optimistic was his particular genius, his specialty, and a subject of controversy every day since he left office over twenty years before. Reagan was instrumental in defining confidence, and its many uses, in the modern era. Some say he allowed America to move forward in an age of limits. Others, that he was a charming agent of destruction.

  “He was very comfortable in playing the role of president. And I think part of that really was his actor’s background,” Obama said, betraying, in his tone, a hint of envy. As he edged closer to Reagan, though, Obama seemed to squirm a bit in his chair, trying to get comfortable. Looking back over his life, the president said, Reagan always took pride “in pushing against artifice” and “not engaging in a lot of symbolic gestu
res, but rather, thinking practically . . . And I think that the evolution that happened in the campaign was me recognizing that if I was going to be a successful candidate, then the symbols and the gestures mattered as much as what my ideas were.”

  And who could deny Reagan’s mastery, his actor’s grasp, of symbols and gestures?

  No one can know what it’s like to be president until they are one, and then they have to decide how much of what they feel, sitting in that lonely cornerless room, they ought to reveal. People, deep down, suspect that the life of a nation, like that of each of us, is shaped by forces well beyond our control, beyond earnest efforts and best-laid plans, just as we all tend to learn at some moment of discovery that those grown-ups who once seemed so assured and certain were neither. As the nation wrestled through a period of maturation, Obama considered how to reconcile his era’s hard truths with a working definition of confidence in a world that often merits anything but. The age-old fear, after all, is that we are in fact “home alone,” that there is no one responsible in charge. The role of government is to make a convincing case to the contrary, so everyone can get on with their lives and manage a good night’s sleep.

  Obama, a brilliant amateur, arrived to power’s pinnacle believing he’d make his case with a show of demonstrably correct answers to complex problems, solutions he’d competently execute to launch a new “era of responsibility.”

  It hadn’t worked quite as he’d hoped, bruising the preternatural confidence—quite real—that, more than anything, is what got him elected.

  Now, firmly along in a more dynamic “I’ll just do it myself” model of leadership, he reached for a compass for the course ahead.