Paul Nitze: Financier doesn’t know incendiary
December 17, 2011
As sure as midafternoon ice at the top of Little Nell, the holiday crowd will fly in this weekend and next for the annual Christmas blitz. Driveway snowmelt systems will be flicked on, hinges on wood-framed Bayerwald windows will be oiled, and white Burgundy corks will be pulled. Just as surely, at parties down long driveways off Owl Creek Road, talk will turn to the disappointing presidency of Barack Obama.
Choice of phrase may differ, but many of those coming into Aspen from either coast (most staunch Democrats) will agree with Leon Cooperman’s recent open letter to the president. Cooperman’s an ex-Goldman Sachs partner who now runs Omega Advisors, a roughly $3.5 billion hedge fund that has made him exceedingly wealthy. Two weeks he took the president to task in a long letter that’s since gone viral. He’s moderately critical of administration policy, but it’s the president’s tone that has him over the edge.
Cooperman stands as a reasonable proxy for many financiers, investors and others whose careers touch the banking industry. Unlike Jamie Dimon, or other captains of big banks, he isn’t rendered incredible simply by his attachment to the status quo. Hedge funds have not been universally blameless in the financial crisis, but the most perceptive critics tend not to focus on them. By and large they take money from sophisticated investors on transparent terms, and, with rare exceptions, they don’t use the government to shield themselves from the marketplace.
Nor can Cooperman be accused of trying to take a torch to government regulation. He’s not a shill for the Cato Institute. He doesn’t read from Americans for Prosperity talking points. Cooperman says he’s willing to pay a higher marginal tax rate, willing to give up preferential rates on carried interest and ready to take steps to break up the cozy relationship between bankers, lobbyists and Congressional supplicants.
So what’s his big beef? In his words, “To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment. It is also a naked, political pander to some of the basest human emotions – a strategy, as history teaches, that never ends well for anyone but totalitarians and anarchists.” So the president stands accused.
Here is where I wonder exactly which planet Cooperman blasted off from before penning this letter, and which American history he’s reading. I would take it a little less seriously if Cooperman’s sentiment wasn’t shared by a whole cadre that gave heavily to the president in 2008 and feel acridly betrayed by him today. I would laugh, knowing how disinclined this president is toward radicalism, if Cooperman weren’t channeling the zeitgeist.
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By the time Teddy Roosevelt broke up the trusts, William Jennings Bryan had run for president twice, excoriating trusts, monopolists and banks from stump to stump. When Roosevelt negotiated an end to the coal miners’ strike in late 1902 and passed a raft of wage, hour and worker safety laws the next year, John Mitchell had already been organizing the United Mine Workers for five years. Before Roosevelt was McKinley’s vice president, Grover Cleveland had sent in the army to quash Debs’ Rebellion, killing 13 strikers.
If Cooperman thinks the president’s tone is incendiary, he doesn’t know what incendiary rhetoric sounds like. If he thinks that Roosevelt was able to right the ship of American capitalism a century ago through leadership style and force of personality, he ignores the two decades of strikes and other labor conflict that preceded Roosevelt’s presidency and allowed his reforms to flourish.
Cooperman and his sympathizers seem willfully blind to our real political ailments, most of which we have been afflicted with for a long time, but which have taken a turn for the worse of late. At least since the industrial age, crony capitalists have styled themselves as Horatio Algers. They have used government to secure economic advantage while claiming to play by the rules.
The same phenomenon is at work today in our financial sector, which at its peak represented nearly a third of economic activity in this country. The president’s response has been muted. Yes, a financial reform bill did make it through Congress, but that bill is in the process of being stripped and defunded. When someone like Elizabeth Warren makes a forceful case for reform, she’s alone in the wilderness.
If conciliatory language and pragmatic negotiation were the trick to bringing the banking industry to heel, then it would have worked already. That’s the president’s style. Traveling to Kansas to channel Roosevelt goes against his natural instincts.
When crony capitalists are deeply entrenched, it takes a lot of political disruption to chase them out. Why should this time be any different? That Cooperman feels betrayed can be laid at the president’s feet in one sense – he has tried too hard to be all things to all voters. That Cooperman and others so totally misread our political quandary bodes poorly for the future.
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