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The presidential election is well under way but as President Barack Obama tries to position himself as the defender of the middle-class who will protect the 99% against corporate malfeasance and too big to fail banks, he may find himself in a precarious position. His record does not necessarily reflect his rhetoric and at the same time Wall Street donors have padded his campaign coffers.
Wall Street fell in love with the promise of change and Obama's intellectual approach to governing the country during the 2008 presidential election. Obama raised nearly $16 million from Wall Street, nearly double the amount of his Republican rival John McCain, and eventually won the election on a promise to break the" business per usual" mindset in Washington.
Over the course of Obama's three plus years in office, his tone toward Wall Street has shifted dramatically from the days of the campaign trail. He has routinely spoken out against the big banks and their role in what led to the worst financial crisis since 1929. He has chided the "fat cats" on Wall Street, much to their chagrin, for excessive compensation packages during a time when real wages have fallen to levels not seen since the 1970s.
But as it turns out, Obama's bark has been much worse than his bite on the issue of the big banks. (See: Obama Lashes Out at "Fat Cat Bankers," But Talk Is Cheap)
"Despite his populist posturing, the president has failed to pin a single top finance exec on criminal charges since the economic collapse. Are the banks too big to jail—or is Washington's revolving door to blame?" write Peter Boyer and Peter Schweizer in a new Newsweek article.
Schweizer, also the author of Throw them All Out and president of the Government Accountability Institute, a non-profit think tank, joined The Daily Ticker to talk about the connection between the Washington and Wall Street and how Obama's benign response to the financial crisis could hurt his bid for re-election.
Financial-Fraud Prosecutions at 20-Year Lows
"We are right now in the wake of the large financial crisis....and I think what is interesting is that the Justice Department, by and large, has very much laid off Wall Street as it relates to anything related to the 2008 financial crisis," says Schweizer.
In their article, Boyer and Schweizer highlight findings from the Transactional Records Access Clearinghouse, which show financial-fraud prosecutions are at 20-year lows and down 39% since the Enron and Worldcom scandals of 2003.
That's a stark contrast to the aftermath of the S&L crisis where thousands of prosecutions were brought with a conviction rate of 90 percent.
"During the S&L crisis in the early 1990s there was basically a commitment at the top that said 'look, we have go to go after some of these guys to send a message," Schweizer says. "The largest issue [today], I think, is you have to have the political will at the top" which is why he believes Obama could have issues defending himself against his record with the banks come November.
Schweizer is also "very very doubtful" criminal justice will be served against any large institution for two key reasons:
- The statute of limitations is running out for bringing cases against wrongful-doing.
- The revolving door at the Justice Department is alive and well-oiled. U.S. Attorney General Eric Holder, as well as many Justice employees, came from law firms that represented some of the biggest banks on Wall Street. Holder and these employees will presumably one day want to return to these types of high-paying private sector jobs, but it would be much more difficult to do so if they come out hard against firms they once represented and may one day represent again.
Wall Street's Deep Pockets
In 2009 Obama reportedly told Wall Street executives during a White House summit, "My administration is the only thing between you and the pitchforks."
According to the latest campaign finance figures from The Center for American Progress, it seems Obama's unfavorable slant toward Wall Street has jilted his former campaign donors.
Presumptive Republican presidential nominee Mitt Romney has out-raised Obama among hedge funds and private equity firms by a four-to-one margin ($2.48 million vs. $625,000) and three-to-one among donors at securities and investment firms ($8.1 million vs. $2.8 million).
Obama's ability to raise money from Wall Street has certainly waned. Wall Street now favors Romney, but Schweizer believes the money will start flowing again soon for the president.
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